Came across this interesting article. It does talk about some really relevant issues. In summary its a huge market, big banks and trading desks are seeing the opportunity to support project developers, with good economic projects but too small balance sheets to do it alone (KPO doesn't get much smaller!!!). I think this is exactly the sort of deal that PwC will broker for us. Its a matter of whether anyone will jump ahead of the regs being finalised or deal with the higher competition when they are.....hopefully by the end of Q1.
As Andy has posted, obviously Ross is brimming with confidence given what he has thrown at it now.
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As the carbon offset market gets a new lease on life from the COP28 climate summit in Dubai, bankers from Wall Street and the City of London are positioning themselves to get a chunk of the dealmaking they say is coming.
Banks that have been building up carbon trading and finance desks include Goldman Sachs Group, Citigroup, JPMorgan and Barclays. They’re looking to finance the development of carbon sequestration projects, to trade credits and to advise corporate clients buying offsets. They’re also keen to support local projects in emerging markets that currently lack the financial clout to scale up their work.
“A lot of project developers don’t have huge balance sheets and have difficulty raising money,” said Sonia Battikh, Citi’s global head of carbon offsets trading. “Working out how to bridge that financing gap and channel money to projects is where a bank like Citi can play a role.”
Wall Street is racing to get a foothold in a market that has the potential to reach as much as $US1 trillion ($1.5 trillion), as offsets offer a way for companies to hit net zero without actually eliminating all their emissions. Rich Gilmore, the chief executive of investment manager Carbon Growth Partners, said it’s already clear there’ll soon be an acute under-supply of high-quality credits, given the demand.
Against that backdrop, “the Wall Street giants will need to balance speed to market with a deep understanding of the rules, norms and expectations” of how the voluntary carbon market is evolving, he said.
For now, it’s a market that’s still trying to emerge from a long list of controversies.
Many of the credits generated have drawn criticism from climate scientists for their ostensible failure to live up to the environmental claims made by those selling them. Last month, the chief executive of South Pole – the world’s biggest seller of carbon offsets – stepped down as the company pledged to look into allegations of greenwashing and “learn from the experience.”
Bankers studying the market say such episodes can’t be allowed to erode confidence in the future of carbon offsetting. “It would be a shame if the criticism, though well-meaning, undermines money flows to these projects,” said Kiru Rajasingam, head of European power, gas and emissions trading at Citi.
And speaking at the COP28 summit in Dubai, John Kerry, US climate negotiator, described himself as “a firm believer in the power of carbon markets to drive ambition and action.”
(20min delay)
