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DBS, SGX, StanChart, Temasek plan global carbon exchange using blockchain

wetlands carbon credit climate change

Yesterday Singapore’s DBS Bank, the Singapore Exchange (SGX), Standard Chartered and Temasek unveiled plans for a joint venture to tackle climate change. Together they are setting up the Climate Impact X (CIX) to trade carbon credits.

One of the challenges with carbon credits is ensuring the underlying projects are valid. A 2019 ProPublica report found that some forests were cut down after receiving offset funding. It gives an example of a forest that started selling credits in 2013 and satellite imagery four years later showed only half the area was still forested.

CIX plans to focus on just this type of project, Natural Climate Solutions (NCS), which aims to conserve or restore natural ecosystems such as forests, wetlands, and mangroves. It will address some of the shortcomings identified by ProPublica with technology such as satellite monitoring, machine learning and blockchain for transparency.

Looking at the big picture, the 2015 Paris Climate Agreement aims to limit global warming to 1.5 degrees Celcius. Achieving that requires net-zero emissions by 2050. A recent Boston Consulting Group reports states that current technologies such as renewable energy can reduce global emissions by about two-thirds. Hence one of the other avenues is to invest in NCS projects.

“Climate Impact X will provide a solution for corporates to address unavoidable carbon emissions in the near term and propel the development of new carbon credit projects worldwide,” said Mikkel Larsen, Interim CEO of Climate Impact X and Chief Sustainability Officer at DBS. “With an initial focus on Natural Climate Solutions, the carbon credits will also create impetus to address another grave risk of biodiversity loss and help serve local communities.”

By the end of 2021, CIX aims to provide two offerings. One is a standardized carbon credit exchange targeting large enterprises and institutions, mainly where companies are required by law to buy carbon credits to offset their emissions. The other is a marketplace for green projects for companies that wish to invest for ESG purposes. Both solutions are targeted at businesses, not retail.

DBS, SGX and Temasek have numerous ventures together. We noticed that Standard Chartered CEO Bill Winters is also chair of the Taskforce on Scaling Voluntary Carbon Markets. The Taskforce was initiated by Mark Carney, former Governor of the Bank of England.

In terms of those other joint ventures, DBS has its DBS Digital Exchange for digital assets in which SGX is an investor. DBS, Temasek and JP Morgan have a joint venture Partior for a blockchain-based interbank payments system. And SGX and Temasek have a digital asset joint venture.

Blockchain is being used extensively for sustainability. The Interwork Alliance has a working group focused on standardizing carbon credits. At a much smaller scale than CIX, climatetrade has created a blockchain-driven marketplace that has attracted companies like Spanish renewables firm Acciona.

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