Resilient LLP (formerly DeMarco Allan LLP)
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CFTC Seeks Comment on Climate-Related Financial Risk

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The U.S. Commodity Futures Trading Commission (CFTC) has released a Request for Information seeking public comment on climate-related financial risk (the RFI). The CFTC notes that the RFI will inform its understanding and oversight of climate-related financial risk relevant to the derivatives markets, underlying commodities markets, registered entities, registrants, and other related market participants. This bulletin briefly summarizes the RFI. The RFI is seeking comments on questions posed by the CFTC around the following topic areas: data; scenario analysis and stress testing; risk management; disclosure; product innovation; voluntary carbon markets; digital assets; financially vulnerable communities; public-private partnership/engagement; and capacity and coordination. The CFTC indicated that it may use the responses and comments received through the RFI to inform potential future actions including the issuance of new or amended guidance, interpretations, policy statements, or regulations, or other potential action by the CFTC. All of the CFTC’s commissioners voted in favour of the RFI. However, Commissioner Mersinger, in a concurring statement included in the RFI, indicated that several of the questions in the RFI were beyond the jurisdiction of the CFTC. Commissioner Mersinger asserted that the CFTC does not regulate commodity markets and does not have statutory authority to create a registration framework for participants within voluntary carbon markets nor the authority to regulate digital assets or distributed ledger technology outside of activities related to derivatives. In addition, Commissioner Pham stated that the CFTC should seek to harmonize any climate risk management framework with existing prudential and other regulatory regimes for registrants already subject to such regimes. The RFI follows the CFTC’s first Voluntary Carbon Convening (the Convening) which discussed issues related to the supply and demand for high quality carbon offsets, including product standardization and the data necessary to support the integrity of carbon offsets’ greenhouse gas emission avoidance and claims.…

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TSVCM Launches New Phase II Report

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The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) today launched its Phase II Report (the Report), setting out an accelerated roadmap to a scaled, high-integrity voluntary market for the trading of carbon credits. The TSVCM is a private sector-led initiative working to scale an effective and efficient voluntary carbon market (VCM) to meet the goals of the Paris Agreement. The TSVCM was launched by Mark Carney, UN Special Envoy for Climate and Finance and former governor of the Bank of Canada and the Bank England and is chaired by Bill Winter, Group Chief Executive, Standard Chartered (read our earlier bulletins on the TSVCM here and here). Resilient LLP’s Lisa DeMarco is a member of the Legal principles and contracts Working Group of the TSVCM and Resilient LLP is a proud signatory of the TSVCM endorsement letter. This bulletin briefly summarizes the Report’s key points:   Objectives and focus of the TSVCM. The Report indicates that the TSVCM’s primary focus is to raise public awareness of the climate and co-benefits of VCMs and engage with stakeholders to drive both demand and supply in these markets.   Governance. The Report summarizes the Terms of Reference of the new umbrella governance body, which will have a mandate to (i) mitigate climate change and accelerate the transition to net zero; (ii) establish Core Carbon Principles (CCP) eligibility guidelines and additional attributes, an assessment framework for standard setters, and eligibility principles for suppliers and validation and verification bodies (VVBs); (iii) oversee standard setting organizations adherence to the CCPs; (iv) coordinate the work of, and manage interlinkages between, governance bodies; and (v) serve as a steward for the VCM. In addition, the TSVCM is seeking recommendations on the following five topics ahead of establishing the new umbrella body: • Modalities and procedures for the Board of Directors; • Transparency mechanism; • Grievance mechanism; • Transversal…

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CIBC Announces Voluntary Carbon Market Pilot

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CIBC, IItaú Unibanco (the largest bank in Latin America), National Australia Bank (Australia’s largest business bank), and NatWest Group (a leading banking and financial services group in the UK and Ireland) today announced the launching of Project Carbon (the Project), a carbon offset platform which will seek to increase transparency in the voluntary carbon markets. The Project aims to provide carbon offsets to clients of the four banks with clear and consistent pricing and standards and aligns with the Mark Carney led Taskforce on Scaling Voluntary Carbon Markets (TSVCM) (read our earlier bulletins on the TSVCM here and here). Key features of the Project: Represents the book of record for ownership of carbon credits; Allows owners of credits to clearly demonstrate possession, reducing risks of double counting and simplifying reporting; Supports price discovery through the posting of executed trade sizes and prices to the market; Promotes project investment through the transparent demonstration of market demand; Provides full traceability and linkage back to source of the credit; Assists Registries by facilitating the rapid scaling of client base; Takes care of post trade settlement, allowing all market participants including exchanges and marketplaces to offer additional value added services;  Aligned with the objectives of the TSVCM;  Pilot built on a private Ethereum platform developed with ConsenSys.  The Project seeks to increase the delivery of high-quality carbon offset projects, facilitate a liquid carbon credit marketplace, create a strong ecosystem to support offset markets, and develop tools to help manage climate-related risks. The Project is launching as a pilot in August. Institutions interested in advancing the objectives of the of TSVCM are invited to join the Project. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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Report Indicates Forest Carbon Finance Has More Than Doubled in Last 4 Years

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The Ecosystem Marketplace, an initiative of Forest Trends, in collaboration with the Forest Carbon Partnership Facility of the World Bank, yesterday released its report on the state of forest carbon finance in 2021 titled “A Green Growth Spurt: State of Forest Carbon Finance 2021” (the Report). The Report indicates that forest carbon financing remains inadequate to support increased climate ambition and counter global deforestation, noting that 23% of all anthropogenic GHG emissions are a result of the inefficient and destructive use of forests, farms, and fields. This bulletin summarizes the Report’s key findings:   Funding for forests. Funding for forests through carbon markets and results-based payments for REDD+ has more than doubled since 2017, including $5.9 billion to forest carbon offset projects and an additional $1.3 billion for “REDD+ readiness” in developing countries.    Compliance-driven forest carbon markets. Compliance carbon markets have provided over $3.9 billion to forests and sustainable land use. This is expected to further increase as a result of new compliance mechanisms such as CORSIA and the still-to-be-finalized markets provisions under Article 6 of the Paris Agreement.   Natural climate solutions. From 2017-2019, approximately $400 million was generated in transactions through global voluntary carbon markets (VCM), representing 105 MtCO2e of carbon credits from forest and land use natural climate solutions (NCS), as well as generating an overall transaction value of over $1 billion in demand for NCS offsets.     Voluntary carbon markets. The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) estimates that VCMs must grow 15-fold by 2030 and 100-fold by 2050 to meet the goals of the Paris Agreement (read our earlier bulletins on the TSVCM here and here). The Report notes that most forest carbon offset buyers in VCMs are concentrated in Europe and the US, with companies in France and the UK accounting for almost a third of all offsets purchased in 2019.  …

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Taskforce on Scaling Voluntary Carbon Markets Launches Public Consultation

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The Taskforce on Scaling Voluntary Carbon Markets (the TSVCM) today released its Phase 2 Public Consultation Report (the Report). The Report provides background on TSVCM activities and current thinking in support of consultations launched today to help inform and provide stakeholder feedback for the Phase 2 Final Report, to be published in July (read our previous bulletin on the TSVCM’s Phase 1 Final Report on creating large-scale carbon credit trading markets here). The TSVCM is conducting public consultation between May 21 and June 21, 2021 on the proposed governance design and preliminary recommendation guidelines from interested parties, particularly those interested in being a Founding Sponsor, Independent Board Member, Expert Panel Member or Executive Secretariat Host for the new governance body. Interested parties are encouraged to contact Lisa DeMarco at lisa@resilientllp.com to discuss opportunities for engagement with the TSVCM. Background. The TSVCM was launched in 2020 by Mark Carney, UN Special Envoy for Climate Action and Finance and former governor of both the Bank of Canada and the Bank of England, and is chaired by Bill Winters, Group Chief Executive, Standard Chartered, and sponsored by the Institute of International Finance (IIF) through the leadership of Tim Adams, President and CEO, with Annette Nazareth, former Commissioner of the US Securities and Exchange Commission, serving as TSVCM’s Operating Lead. Objectives and focus of the TSVCM. The Report provides the objectives and focus of the TSVCM, which include increasing public awareness of the climate and co-benefits associated with voluntary carbon markets (VCM). In addition, the TSVCM focuses on: High-integrity carbon credits and robust, transparent, and liquid markets; Addressing the oversight needs for an at-scale market; Legal principles and contracts through harmonization and liquidity by streamlining standard Terms of Use and developing general trading terms; Credit level integrity with respect to Core Carbon Principles (CCPs)…

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