Climate change is an existential threat that requires collective effort – amongst nations, corporates and individuals – to mitigate.
Thus far, the world’s great superpowers have managed to reduce greenhouse gas output with mixed success. The Kyoto Protocol, first adopted in 1997, was the very first legally binding climate treaty, and required developed nations to cut emissions by an average of 5% below 1990 levels.
However, by 2012, global emissions rose by 44% from 1997 levels, driven primarily by developing nations, who were not compelled to hit any specific targets by the Protocol.
Then came the Paris Agreement in 2015, this time requiring all countries’ governments to set pledges to reduce emissions; the ultimate goal was to keep the global average temperature from rising over 1.5 °C above preindustrial levels by 2030.
One more aim was also tabled: Net Zero by 2050. Can we remove as much greenhouse gas from the atmosphere as we emit?
The severity of the climate emergency requires the deployment of every high-quality tool at our disposal. Reduction is key and goes first in the mitigation hierarchy, but there is much credence also in the offsetting of residual emissions.
This is where carbon markets come in.
What are carbon markets?
As a starting point, a credible corporate climate commitment begins with setting an emissions reduction target aligned with a 1.5-degree pathway according to the latest climate science.
When other feasible means for achieving reductions are exhausted and there remain residual emissions, voluntary carbon markets allow corporates to undertake further action.
There are a couple of major differences between regulated and voluntary carbon markets:
Regulated carbon markets are established by governments as a vehicle to meet their emission reduction targets, with participating corporations bound by law to hit them.
Voluntary carbon markets are independent from regulated markets, with any carbon credits traded unable to be used to meet obligations placed on organisations by the mandatories.
This said, while there is indeed an absence of regulation, this market is often governed by international standards like Verra, Gold Standard or The American Carbon Registry (ACR), who issue their own methodologies which can be applied to projects focused on reducing or avoiding greenhouse gas emissions.
In addition to reducing emissions along a science-based trajectory, purchasing high-quality carbon credits through these markets – each representing a standardised unit of carbon either being removed from the atmosphere, or avoided altogether – is key to accelerate the transition to net zero emissions at the global level.
High-quality carbon credits are such because of the robust criteria the offset qualities are held to. To be classified as high-quality credits, offsets or reductions must be, according to the GHG management institute: additional, not overestimated, permanent, not claimed by another entity and not associated with significant social or environmental harms.
Scaling at a rapid pace, the voluntary carbon markets are achieving ever-more prominence. But while any action to offset carbon emissions can justifiably be seen as a net positive contribution to the overall effort, there are trains of thought that suggest drawbacks are present, suggesting other solutions like carbon tax, more regulation and more transparency.
Santander’s acquisition of WayCarbon
Santander CIB’s aspiration has always been to support its clients in achieving their climate and environmental goals by supplying value added solutions. As a result, in March 2022, Santander acquired 80% of the leading ESG consultancy WayCarbon, in a deal that has furthered the bank’s environmental, social and governance (ESG) expertise.
The Brazil-based firm has been advising organisations, both public and private, on climate change, and helping to develop strategies that increase their sustainability. WayCarbon has been advising public and private organisations on their energy transitions for over 15 years across 18 countries, and offers three core services to help clients implement strategies and increase sustainability: ESG consultancy, management software to support the tracking and implementation of ESG strategies, and carbon credit trading.
One such strategy involves the structuring and developing of high-quality carbon credits projects that will be distributed to Santander’s clients.
This acquisition also allows Santander CIB, as well as the Retail and Commercial Banking divisions, to integrate advisory capabilities for global clients, allowing WayCarbon to accelerate and grow its portfolio of high-quality carbon certificates.
Moreover, a new global client platform is also aiding clients in their energy transitions as part of an enhanced suite of offerings.
Following the partnership with Santander, the specialised products and services presented by WayCarbon have been offered to a wider range of clients, increasing their overall impact in green energy transition advisory and implementation.
At the time, José M Linares, global head of Santander CIB, said: “WayCarbon will help us with our own objectives and our clients’ in their transition to more sustainable business models. Santander has vast experience in sustainable projects and is a global leader and pioneer in renewable energy finance. This deal will help maintain Santander at the forefront of this critical space.”