Companies of all sizes are starting to realize the significance of reducing their emissions and being proactive in climate change mitigation. JPMorgan Chase & Co is one of the corporations supporting climate efforts, in particular addressing its carbon footprint and taking part in the development of an effective voluntary carbon market.
The global leader in financial services published a white paper called Carbon Market Principles outlining its own approach to navigating the voluntary carbon market as well as its set of core principles that it uses when evaluating carbon credits to support its sustainability commitments.
JPMorgan has been purchasing carbon credits since 2007, preliminary nature based until a few years ago when it started looking into new carbon removal approaches that have appeared on the carbon markets.
Even though some of these solutions present real potential and promise in locking away historic emissions back under the ground, they do face challenges with scaling as fast as needed and meeting the high demand for carbon credits. The voluntary market also faces several challenges like a lack of unified guidance and low trust in some of the credits that have been purchased to date.
According to JPMorgan, corporations with experience in de-risking, financing, evaluating practices, sustainability consulting, and others can play a key role in supporting the nascent carbon market to address some of its pressing challenges so that it can scale in a more robust and sustainable way for the long run. It also needs to scale as fast as the world needs to not exceed its threshold of 1.5°C of warming.
In its white paper, the company breaks down the role of the voluntary carbon market in the green transition, the participants in it, explains the difference between avoidance credits and removal credits with examples of types of projects. It also demonstrates how JPMorgan Chase leverages its role as a global financial institution to participate in the voluntary carbon market.
One of the key pieces of information revealed in the paper is the Core Criteria prioritized when evaluating the quality and credibility of the carbon credits JPMorgan purchases. The criteria are:
- Real – emission reductions and removals should be proven to have genuinely taken place.
- Measurable – emission reductions and removals should be quantifiable, using recognized measurement tools against a credible emissions baseline.
- Additional – the project would not have been undertaken without the carbon credit revenue, and the impact would not have been realized if the project had not been carried out.
- Unique & Traceable – no more than 1 carbon credit may be associated with a single emission reduction or removal as 1 metric ton of carbon dioxide equivalent.
- Independently Verified – the purchased credit should be certified by a recognized GHG crediting program or verified by an independent third party to reduce risk of low-quality credits.
- Leakage Avoidance – projects should not create carbon reductions in one location by displacing the high-emitting activity to another location.
- Durability/Permanence – carbon credits should represent durable sequestration of carbon from the atmosphere.
- Climate Equity – project should support and elevate frontline, indigenous or other marginalized communities, where feasible.
Additional criteria to look out for are cost, scalability, innovation and co-benefits – the project may result in additional sustainability benefits.