The forestry sector is a central actor in Natural Climate Solutions (NCS) to climate change, and New Forests is at the vanguard of the evolution of the industry. The firm is a real assets investment manager, but they’re also stewards of over 1 million hectares of forests, and rural land. As such, they have a central role to play in the growth of the carbon credit market.
There’s more demand than ever before for carbon credits, growing pains are inevitable, and as the debate continues about the integrity of the global proliferation of offset models, New Forests has taken the lead to define their position on not only the supply-side of offset generation, but also the demand-side.
They’ve published a positioning statement that lays-out the expectations they have around the credibility of the climate strategies as defined by the companies that seek to buy their credits.
Their ‘Carbon Credits Integrity’ position statement explains their place in the industry, as well as their view around the importance of the ‘supply’ of carbon credits being legitimate and verified to ensure their projects to ‘deliver real and credible climate change mitigation’.
Taking this further, they’ve also integrated a ‘demand-side’ approach, that defines expectations around the integrity of the strategies that buyers of their credits have committed to. Essentially, they want to know that the companies buying their offset are using them to contribute to a strategy that is targeting a realistic net-zero by 2050 target.
“We are advocating for a clear, globally accepted, and practical guidance for companies on the usage of carbon credits as part of their voluntary emission reduction commitments. While it is challenging for a single asset manager like us to monitor and enforce behavior around demand-side integrity, particularly at a time of great flux and uncertainty in policies, frameworks and standards, it is critical for building trust in the market.” says Radha Kuppalli, Managing Director, Impact & Advocacy.
“We have integrated a supply side quality position on carbon credits for many years in our environmental management system. It’s part of an overall framework for responsible investment that we take very seriously.”
New Forests have taken the step to define these expectations because the voluntary markets for offsets are nascent, and so far, there are no definitive frameworks to adhere to.
The model aims to assure integrity of buyers of credits from projects managed by New Forests. It carries out three key processes:
- An assessment of the credibility of a company or investor’s climate action plan;
- Engagement with a company or investor on their climate action plan; and
- An assessment of the impact of selling carbon credits to our own reputation and that of our clients and stakeholders.
The New Forests Demand Side Integrity Assessment is a risk-based scoring methodology and it includes key elements of the Climate Action 100+ Net Zero Company Benchmark.
On the topic of selling credits into a secondary markets, the firm recognises the imperative around liquidity and price discovery, but until the trading market is more thoroughly developed, they will aim to sell their credits to purchasers who intend to retire them to meet their own voluntary needs.