Temasek's GenZero, an investor in South Pole, launches whitepaper addressing 'misconceptions' around carbon markets

Temasek-owned investment firm GenZero has launched its inaugural whitepaper to address common “misconceptions” around carbon markets and highlight ways to drive climate mitigation at scale.

Launched at the COP28 Singapore Pavilion in Dubai, the “Carbon Markets 2.0 — Addressing Pain Points, Scaling Impact” whitepaper comes at a “critical inflection point” for carbon markets, says GenZero on Dec 2. 

“After a rapid phase of growth in recent years, the carbon market has been buffeted by macroeconomic conditions and heightened scrutiny and is experiencing multiple headwinds,” says the company, which launched in June 2022 with $5 billion from Temasek. “Questions around the integrity of the carbon markets, especially in terms of the quality of carbon credits and their legitimate use as part of corporate decarbonisation efforts, have also emerged.”

The 30-page report explores the state of the carbon markets today, along with obstacles from both the demand and supply sides. GenZero also offers eight recommendations to “unleash the full potential of carbon markets”, including refining carbon credit taxonomies and incentivising corporate participation.

GenZero’s whitepaper was developed with support from MSCI Carbon Markets, and input from industry stakeholders Calyx Global, Climate Impact X, Environmental Defense Fund, Gold Standard, the International Emissions Trading Association (IETA) and Verra.

Frederick Teo, CEO of GenZero, says it is important to confront “shortcomings” in the carbon markets and adopt approaches to make them “more robust and credible”. “This will require radical collaboration across different stakeholders to develop consensus around quality benchmarks and agree on the nature of claims corporates can make to catalyse private financing into climate solutions.”

Teo adds: “The whitepaper synthesises the views of industry partners, along with GenZero’s experience, which we hope will support ongoing industry initiatives to develop meaningful solutions and scale the carbon markets in a credible and constructive manner.”

South Pole’s interim CEO speaks

Carbon credits are among GenZero’s three focus areas, which are nature-based solutions, technology-based solutions and carbon ecosystem enablers. GenZero is a minority shareholder in Swiss carbon finance consultancy South Pole.

Earlier this year, media exposés called into question the methodologies used by South Pole and Washington-based carbon credit verifier Verra. Dutch investigative journalism publication Follow The Money claimed South Pole — reportedly the world’s largest seller of carbon offsets — had overstated the impact of its carbon credits when closing deals with clients like EY.

Renat Heuberger, former CEO and co-founder of South Pole, stepped down on Nov 10, a fortnight after the company terminated its contract with Carbon Green Investments, which owns and develops the now-controversial Kariba carbon offset project in Zimbabwe.

John Davis, South Pole’s commercial director for Asia Pacific, is currently interim CEO of the Zurich-based company.

Founded in 2006, South Pole has been involved in the carbon markets for close to 20 years, says Davis on a Dec 2 panel at the Singapore Pavilion. Now, he hopes governments will play a supportive role.

In response to an audience question about whether the voluntary carbon markets would benefit from a floor price, Davis thinks a “well-functioning market” should not require one. “We’ve had ups and downs; we’ve seen these curves. I think what we’re about now [is] building where the carbon market needs to be going, and that has to include much bigger investment from governments”.

The financial players are “ready to go”, and the “mechanisms” of the carbon markets are in place, he adds. “You will see prices absolutely move in the right direction; I’m very positive about that. The question is getting the market operating correctly.”

Read GenZero’s whitepaper in full

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This article was first published in The Edge Singapore and is republished with permission granted by The Edge Singapore.