SSFA was featured in the paper through remarks by Director Kavitha Menon, who emphasized the growing importance of high-integrity carbon markets and the role of financial institutions in supporting carbon projects. She highlighted the paper’s valuable contribution to the ongoing dialogue on emerging opportunities and challenges, and reaffirmed SSFA’s commitment to continued engagement with VCMI to support the development of Singapore’s sustainable finance ecosystem.
Executive Summary
The financial sector is facing accelerating threats from the physical impacts of the climate crisis – but will also be fundamental to addressing those risks, by directing finance to the companies and projects we need to reduce greenhouse gas emissions. At present, only a fraction of the capital needed is flowing to these companies. High-integrity carbon markets will be a critical tool to help direct that capital, and are projected to grow from just $1.4 billion in 2024 to somewhere between $40 billion and $250 billion by 2050. However, they face a number of interlinked barriers to deliver that growth. These include: perceived credibility issues and reputational sensitivities around carbon credit use; regulatory and policy uncertainty; uncertain corporate demand; and the limited availability of capital for carbon emissions reduction and removal projects. Some of these issues require action and direction from policymakers. Some relate to market standards and infrastructure that have been addressed by initiatives such as the Integrity Council for the Voluntary Carbon Market (ICVCM) Core Carbon Principles and the Voluntary Carbon Markets Integrity Initiative (VCMI) Codes of Practice. But to address other barriers, particularly around access to capital, the financial sector has a key role to play. This paper makes the case for greater involvement by private financial institutions in high-integrity carbon markets, setting out how financial institutions can become more involved and so enable the market to reach its potential.
