BNP Paribas, UBS and Standard Chartered have joined the four founding banks of a group aiming to create a settlement platform for carbon credit trading, which has been renamed Carbonplace.
The trio join CIBC, Itau Unibanco, National Australia Bank and NatWest Group, who set up the Project Carbon initiative in July 2021. All seven banks have been named as founding members.
The banks are developing a platform to provide settlements infrastructure and systems for marketplaces and exchanges in the voluntary carbon market. It is expected to be fully operational by the end of 2022.
Rivals include global trading platform Xpansiv, and more infrastructure is being created by players including London Stock Exchange Group (which owns IFR) as the new asset class continues to attract interest and investment.
The trading of carbon credits could be an important step in helping companies shift to net zero greenhouse gas emissions. Companies can buy carbon credits to compensate for emissions they may be unable to reduce or remove. They can buy the credits from companies that have negative greenhouse gas emissions, such as renewable energy firms.
“When launched, Carbonplace will give greater transparency on the pricing and material climate impact of carbon credits, and supports corporates and investors to access quality projects as part of their multi-action carbon management strategies,” said Constance Chalchat, head of company engagement and chief sustainability officer for BNP Paribas global markets.
The group of seven banks said they want more financial firms to join to increase the number of potential users of the service. The aim is to create a liquid carbon credit marketplace with price certainty and transparency.
Project Carbon completed its first trades in October during its pilot phase.
Many banks are ramping up efforts to provide new financial products in the market for offsetting carbon emissions, although it is a controversial area. The market for voluntary carbon offsets was estimated to reach about US$1bn last year, and could mushroom to US$50bn by 2030. But the fast pace of expansion has raised accusations of greenwashing amid the emissions-reducing products that banks are looking to package and sell.
The banks in Carbonplace said only carbon credits verified according to internationally agreed standards will be processed on the platform. It will provide the IT infrastructure to facilitate reliable, secure, and scalable trading of carbon credits. The group said it is aligned with the Taskforce on Scaling Voluntary Carbon Markets, which was set up by Mark Carney, the former governor of the central banks of Canada and the UK, and now the UN special envoy for climate action and finance.