Achieving a sustainable roadmap for net zero by 2050 has become a top priority for policymakers and market participants across the world in recent years.
Regulation Asia co-founder Brad Maclean sat down with ISDA CEO Scott O’Malia to discuss global net zero objectives and how carbon markets and derivatives products can facilitate the transition.
The USD 1 trillion in sustainable investments in 2022 needs to grow seven times larger to get to 2050 goals, O’Malia said, adding that derivatives products can provide an important risk management tool to help drive this investment.
O’Malia discussed ISDA’s work to establish best practices, standardisation, and legal clarity for sustainability-linked derivatives and voluntary carbon markets, as a way to help to address transition risk and greenwashing.
“Greenwashing is another term for fraud. There’s no acceptable level of fraud in any investment markets,” he said. “If we want this market to be a viable and successful market that helps us price carbon and send the right signals around long term investments, we have to make sure there is absolutely no greenwashing or fraud going on.”
O’Malia also talked about challenges around the capital treatment of carbon credits under the Basel framework, noting that European authorities have “successfully” set a more appropriate risk weight in the EU framework to avoid disincentivising carbon trading.
Watch the full discussion below:
