Review of ESG credentials and integrity standards in carbon project financing
Voluntary carbon markets and carbon finance are complex and rapidly evolving sectors. They have also been subject to considerable scrutiny amid claims of greenwashing, and doubts about the credibility and quality of some of the methodologies used and credits awarded.
To support its mission to deliver the highest quality environmental commodities, one of the leading players in carbon markets asked GoodCorporation to review its ESG credentials with a focus on its practices and procedures related to its carbon offsetting and carbon finance products. The company’s aim was to ensure that their policies and procedures conform to high ESG standards and underpin their carbon solutions, in particular integrity of their project developments they finance.
Project Scope
The project involved four key strands:
- A gap analysis of the company’s compliance with regulatory requirements and industry best practice, including internationally recognised voluntary market standards such as the Verra Carbon Standard, The Gold Standard and the ICVCM principles
- Benchmarking the company against the publicly available policies and procedures of industry peers to identify how the company’s ESG credentials perform against market competitors
- Development of a risk-assessment tool to evaluate new and existing investment projects
- Development of a roadmap to address any gaps identified.
The GoodCorporation approach
Phase 1 - Gap analysis: GoodCorporation worked alongside the client to identify the regulatory requirements (?) and voluntary carbon standards that reflected best practice to identify where the ESG credentials of the projects invested in could be improved. The company’s existing policies and procedures were also benchmarked against these criteria to identify any gaps that needed to be addressed.
Phase 2 – Benchmarking: Desktop research was carried out to identify and evaluate the publicly available policies and procedures of the client’s key competitors and peers. The company’s own policies and procedures were then benchmarked against those of their peers to rank the company’s practices alongside its closest competitors.
Phase 3 – Risk assessment tool: Using the findings from the gap analysis which identified best practice, a risk assessment tool was designed that could be applied to existing and future carbon financing and investment projects
Phase 4 – Roadmap for improvement: A set of recommendations were prepared drawing on the gap analysis and benchmarking exercises. This was shared with senior management through a series of presentations and workshops.
Commenting on the project, GoodCorporation director Gareth Thomas said, “The carbon finance and trading sectors have been under the spotlight for a number of years, facing allegations of greenwashing and false assertions about some of the credit schemes on offer. Committed to contributing to a sustainable and decarbonised world, our client wanted to ensure that it was operating to the highest standards of integrity, delivering carbon solutions and financing development projects that are demonstrably beneficial to both the environment and the communities in which they are implemented.
“Our independent analysis of their practices and procedures, benchmarked against industry standards and established practice, will provide assurances that they are operating to the highest standards. Taking such a rigorous approach to evaluating their processes will help the company meet its goal of delivering the highest quality environmental commodities and in doing so, help raise the bar across the industry as a whole.”
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