Carbon-trading markets and exchanges were the rage in 2008 particularly during the heated U.S. presidential campaign when even right-of-center candidates were embracing the concept.
However, the Great Recession, right-wing and left-wing extremists, and strident groups of all kinds stopped any positive movement on the carbon-trading front. No realistic alternatives to carbon-trading venues and systems took hold, so a lot of hot air from humans did little to resolve the climate change problem.
Well, everything that is old is new again. We now have lots of talk about Environmental, Social and Corporate Governance (ESG) concerns, which includes carbon-trading related issues.
Turning that talk into action will be the real test of the ESG regulations, guidances, and other pressures that are justifiably on their way. We’ve lost a lot of ground on the climate change and ESG fronts since 2008.
There may be hope down under as the Commonwealth Bank of Australia (CBA) has decided to act.
The CBA just announced that it will be investing $15 million in Xpansiv Ltd., a provider of global marketplaces for ESG commodities, to build a trading infrastructure “and grow Australia’s voluntary carbon market.”
Xpansiv is described as “the world’s liquidity hub for ESG-inclusive commodities — such as carbon offsets, renewable energy certificates (RECs) and differentiated fuels — providing a centralized platform for buyers and sellers seeking to fulfil their ESG commitments.”
The CBA’s strategic relationship agreement with Xpansiv will focus on “opportunities including enhancing liquidity, market marking, improving efficiency and transparency of carbon markets,” according to bank officials.
“Xpansiv has built a leading marketplace for ESG commodities, and we are pleased to be able to invest in the next phase of its growth,” says Andrew Hinchliff, the CBA group executive for institutional banking and markets, in a prepared statement. “This includes its launch of Australian Carbon Credits Units (ACCU) trading next year as the company continues to build out its platform.”
The effort is targeting CBA clients and others “in all sectors of the economy to transition and achieve their sustainability targets,” Hinchliff adds. “As the world transitions to a more sustainable future, voluntary carbon markets will play a critical role in the economies of tomorrow. As Australia’s biggest bank, we have an important role to play in its development.”
The group executive adds that while global and Australian voluntary carbon markets “are nascent today,” they are likely to grow rapidly via the “increasing net-zero commitments from companies, rising demand for carbon offsets and more private sources of capital entering the market.”
The carbon market in Australia will take off “progressively drawing in partners and building critical mass. We are meeting with many other organizations interested in this space and are exploring opportunities where we can work together to help develop and grow Australia’s voluntary carbon market,” Hinchliff predicts.
“We anticipate Australia’s voluntary carbon market will grow quickly in both size and trading volumes given the country’s position as one of the world’s largest producers of natural resources,” says Ben Stuart, chief commercial officer for Xpansiv, in a prepared statement.
It will be fascinating to see if the CBA-Xpansiv experiment will take off as they expect and if it could serve as a model for financial services firms in the rest of Asia-Pacific, North and South America, and Europe that need to go beyond lip service and take action to reverse global warming.