A robust regulatory system for carbon trading that establishes clear rules and guidelines for the buying, selling, and trading of carbon credits or allowances.

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An Investigation Reveals that Rainforest Carbon Credits from the World’s Largest Supplier are Largely Ineffective.

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The transition to a more sustainable economy requires trillions of dollars of investments to fund projects, infrastructure, and technology. To ensure capital gets to where it’s needed, financial markets must play a critical role. For companies that may struggle to reduce their carbon emissions organically, a voluntary carbon market offers a viable way to reduce net emissions and support green initiatives. To make the market work effectively, a robust legal and regulatory framework is needed. ISDA has published standard documentation for trading verified carbon credits (VCCs), which have been designed with the ability to support trading across carbon standards and registries. Additionally, the Integrity Council for the Voluntary Carbon Market has developed core carbon principles to protect the integrity of the market. Other financial instruments, such as sustainability-linked derivatives (SLDs), also have a valuable role to play. ISDA plans to develop standardized terms and clauses to document SLDs, which will help to build greater efficiency into the trading of this product. The development of legal frameworks for these products is essential to helping firms safely scale up their participation in these increasingly important markets as the drive to net zero continues.

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