The London Stock Exchange will establish listing rules for companies that finance CO2 reduction projects with an aim to grow the market and make it more transparent, the bourse’s chief executive told Reuters.
The demand for carbon credits is expected to increase as organizations are looking to meet net-zero emissions targets. Yet, the global market for CO2 offsets is still largely unregulated.
The London Stock Exchange’s listing rules aim to encourage investment funds and companies to raise billions toward funding projects that advance climate goals.
The rules, which were released on Oct. 10 after a public consultation, come at a time when the UK pushes to make London a center for green finance.
Following those new rules, a fund or an operating company will have to issue a prospectus vetted by the Financial Conduct Authority that provides details of the carbon-reducing project it plans to finance.
According to the London Stock Exchange, this will make sure that standards are met.
“What this brings is proper transparency, proper due diligence and proper disclosure, so corporates and other investors truly know what they’re buying,” LSE Chief Executive Julia Hoggett told Reuters. That’s something that the voluntary carbon markets haven’t had before.”
One investment fund supporting the voluntary carbon market is expected to list in 2022, and others will follow next year, she said.
The yearly global market for voluntary carbon credits was worth around $2 billion in 2021, according to Ecosystem Marketplace. It may reach $50 billion by 2030, according to estimates by McKinsey.
Common examples of carbon offset projects include land restoration, reforestation, and building renewable energy. Once an offset project generates CO2 credits, shareholders could receive a dividend in the form of CO2 credits, or the fund could sell them and use the money to pay a dividend.
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