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.”

The subject of green finance has come to prominence on a global stage and become a huge talking point in the investment banking world, even more so since the COVID19 pandemic began. Today, as climate change climbs the ranks in both the political and news agendas, there is a huge rising demand for ‘responsible’ investment products and practices.

Governments have also increasingly appealed to the banking and investment industry to show leadership in the economic and societal journey to a more environmentally friendly future.

Competition in the investment world is also rising fast with Fund Managers rallying to showcase their green credentials to appeal to a new investment audience just beginning on their investment journey. They have been working at pace to develop sustainable approaches that put ESG at the heart of their working practice in order to tailor their investments to their values.

As green issues continue to grab headlines and governments look towards sustainable solutions for the future, our industry has a unique opportunity to highlight ways to achieve a sustainable banking future. However, as sustainability grows in popularity within the private and banking industry, another key consideration is the opportunity we have as an industry to build understanding of meaningful approaches and actions that are capable of effecting lasting and sustainable change.

Green issues have never been more pressing. The climate crisis has taken the world by storm in recent years and, in response, governments have placed even greater importance on the UN’s Sustainable Development Goals. The European Union, for instance, initiated The European Green Deal, which aims to transform the 27-country bloc from a high-to-low carbon economy and achieve climate neutrality by 2050.

In order to meet these ambitious targets, governments must rely on the banking and investment industry to help allocate capital to new technologies and businesses that place sustainability at the heart of their initiatives. Green financing which increases the level of financial flow from the public, private and not-for-profit sectors to sustainable development priorities will play a critical role in achieving green goals. Banks that place green finance at the forefront of their strategic planning will be the leaders in fostering a sustainable carbon economy and building more balanced and inclusive societies.

Santander: the most sustainable bank in the world

As the most sustainable bank in the world, Santander CIB is a driver in global transformation towards climate neutrality. Our strategy takes into account the social and environmental risks and opportunities in our operations, and actively contributes to a more balanced and inclusive economic and social system.

Thanks to our longstanding commitment to Responsible Banking and our emphasis on Environmental, Social, and Governance (ESG) initiatives, we are proud to be ranked as the most sustainable bank in the world by the Dow Jones Sustainability Index (DJSI)- the main international benchmark on company sustainability in regards to environmental, economic and social policies.

We understand that as the globe embarks on a coordinated effort to support urgent environmental needs, it’s the banking sector that must emerge to enable initiatives aiming to mitigate the effects of climate change. That’s why we focus on inclusive and sustainable growth:

• by meeting all our customers’ needs, helping entrepreneurs start companies and create jobs, strengthening local economies, improving financial empowerment, and supporting people get the education and training they need.
• by financing renewable energy, supporting smart infrastructure and technology to tackle climate change (such as agrotech and green tech).

€120 billion in green finance by 2025

Santander provides genuine solutions through various financial products and services aligned with the UN´s Sustainable Development Goals that drive tangible change.

As a starting point, Santander has issued two €1 billion green bonds as part of a global sustainable debt plan. The funds will be used to finance and refinance existing renewable projects in wind and solar energy in SCIB´s portfolio, and to fund future projects. This way, we contribute to initiatives that create an immediate impact, while simultaneously stimulating demand in green bonds and promoting a longstanding commitment to future green initiatives.

Additionally, this plan – led by Santander CIB – supports the Group´s responsible banking targets, which include the commitment to provide more than €120 billion in green finance by 2025 and financially empower more than 10 million people.

At Santander CIB, we are advocating for meaningful and longstanding changes, and ensuring that our products and services really create an impact in the battle against climate change.

By adopting sustainable development principles into our strategies, we ensure services and products cater to this generation’s needs and simultaneously preserve future generations’ opportunities.