Means&Matters
Stories of Money and sustainability

Lessons from COVID-19 Could Boost the Carbon Market

BY Cody Gildart

Aug 24th 2020

Up until early 2020, the carbon offset market was gaining momentum. A growing number of individuals and enterprises were choosing to make carbon offsetting part of their sustainability efforts through the voluntary carbon offsetting market. After decades of criticism and reinvention, this market hit nearly $300 million and offset almost 100 million metric tons of CO2 in 2018. Industry insiders were reporting significant year-over-year growth in 2019.

And then, COVID-19 struck, setting off an economic emergency that turned many corporate decision-makers’ attention away from carbon emissions and toward survival. But even as economies around the globe shut down, Sébastien Nunes, founder and CEO of ClimateSeed, a wholly owned subsidiary of BNP Paribas, the parent company of Bank of the West, saw positive signs for the future. ClimateSeed operates a platform where organizations can offset their carbon emissions and contribute to the UN Sustainable Development Goals by funding emission reduction projects.

 

Rather than jeopardizing the carbon offset market, Nunes believes that the lessons learned from the COVID-19 crisis could prove timely in the growing global effort to fight climate change.

“The current crisis has shown the world that we can take extreme measures to tackle the problems that threaten our lives,” Nunes says in an interview. “This pandemic will help raise awareness for climate action in order to avoid an environmental crisis.”

Recovery from the pandemic is an opportunity to reshape the global economy in responsible, sustainable and equitable ways.

—Sébastien Nunes, ClimateSeed, CEO

An afforestation program in Kenya.

Market Forces Push for a New Offset Solution

ClimateSeed—founded with guidance from Nobel Laureate Muhammad Yunus—grew out of Nunes’ personal passion to tackle the climate crisis. In 2016, his growing personal interest coincided with trends he noticed in his role leading the Pension Fund Client Segment team at BNP Paribas Securities. He saw increasing stakeholder calls for companies to take climate action. Public and private institutions alike were starting to feel the financial impacts of climate change, with weather-related disasters costing governments and key industries tens of billions of dollars per year. Investors had a growing appetite for environmental and social responsibility, with total assets in sustainable investing more than doubling from $13.3 trillion in 2012 to $30.7 trillion in 2018.

“The business case was evident,” Nunes says. “More and more companies wanted to contribute to the preservation of the environment.”

What was less evident was how to help them do that. Carbon offsetting was a promising solution, but one with clear pain points. The power of carbon offsetting lies in its ability to create economic incentives for reducing emissions that can’t otherwise be eliminated. Putting a price on CO2 emissions in the marketplace creates economic pressure to minimize emissions, and creates a funding structure for environmental projects that would otherwise go unfunded.

But the carbon offsetting process was plagued by problems—a lack of transparency, faulty reporting, and fraud led to a lack of trust in the outcomes. It could also be a cumbersome process that was difficult to access, both for those wanting to purchase carbon offsets and for organizations seeking funding by generating carbon credits.

Building a More Accessible, Transparent Market

The carbon market needed a next-generation solution to make purchasing offsets easier and more trustworthy.

“I had the idea to facilitate access to the voluntary carbon-offsetting market by making it more efficient and transparent for companies and allowing them to take part in the development of sustainable projects,” says Nunes. The result was ClimateSeed, which launched in 2018 with BNP Paribas.

To tackle the issues of trust, Nunes baked sustainability into ClimateSeed’s business structure. As a social business, its core mission is to solve social and environmental problems and reinvest all profits into those goals.

“ClimateSeed combines the operational strengths and credibility of BNP Paribas, the flexibility of a startup, and the legitimacy of a social business,” Nunes says. An effort to build that legitimacy led Nunes to work with Muhammad Yunus. The Nobel laureate helped structure the organization to maximize its environmental and social impact.

To address transparency, ClimateSeed utilizes a unique, triple-verification process (project certification, banking due diligence, and validation from the internal Sustainability Committee) to ensure each project can be trusted to deliver the promised emission reductions and co-benefits. On the accessibility front, its user-friendly digital platform enables investors to review, connect with, and monitor projects.

Carbon Offsetting’s Role in a Sustainable Recovery

As of May 2020, ClimateSeed featured 33 projects in 21 countries and had avoided or captured more than 4.9 million tonnes of CO2 carbon emissions. Despite anticipating budgetary constraints and decreased carbon offsetting volumes on the heels of COVID-19, Nunes still considers ClimateSeed to be in growth mode—and the carbon offset market along with it.

“Recovery from the pandemic is an opportunity to reshape the global economy in responsible, sustainable, and equitable ways,” says Nunes. “Lower emissions have dramatically improved the environment and air quality in cities in a very short time. This pandemic reveals the importance of sustainability and shows the world that we can come together and take on the problems that threaten our social and economic growth.”

The current crisis has shown the world that we can take extreme measures to tackle the problems that threaten our lives.

—Sébastien Nunes, ClimateSeed, CEO

Nunes projects the momentum of the voluntary offset market will return, not just as a result of businesses starting up again, but because of the role of carbon offsets in rebuilding a more resilient world.

“We are optimistic that once we overcome this health crisis, organizations will be more committed and really focused on making sustainability a business priority,” he says. “We believe that sustainable business practices can help relaunch the economy after this crisis and can innovate and reshape different sectors. “

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