Together, OCBC Bank and MetaVerse Green Exchange (MVGX), a digital green exchange licensed and regulated by the Monetary Authority of Singapore (MAS), are to develop green financing solutions that will aim to accelerate large corporates’ journey to carbon neutrality.
Scheduled to be launched later this year, the financing solutions that the partnership plans to produce will include tokenised carbon credits in the form of MVGX’s carbon neutrality tokens (CNTs), for large corporates to offset their carbon emissions.
An independent party will verify the expected carbon emissions from projects utilising these financing solutions, to calculate the corresponding carbon credits required.
MVGX’s CNTs will be supported by MVGX’s proprietary non-fungible digital twin (NFDT) distributed ledger technology, providing participating corporations with a verifiable and accurate record of the carbon performance of the climate-action projects that they have invested in through these digital carbon credits.
Carbon credits are becoming an increasingly popular solution for corporates over other decarbonisation options that claim to achieve carbon neutrality. This is particularly important for companies in hard-to-abate industries such as shipping, steel and energy.
“With the recently released report by the United Nations‘ intergovernmental panel on climate change (IPCC), there will be increased urgency in corporates’ transition to a low carbon future by cutting down greenhouse gas emissions,” explains Elaine Lam, head of global corporate banking at OCBC Bank.
By purchasing carbon credits, corporates are also investing in green projects such as reforestation and renewable energy that contribute to future decarbonisation. The Institute of International Finance’s task force on scaling voluntary carbon markets estimates that the global demand for carbon credits could increase fifteen-fold by 2030.
“Despite the best intentions, governments and businesses around the world have come to realise the limitations of the current systems for tracking and neutralising carbon emissions,” comments MVGX executive chairman and co-founder Bo Bai. “Thankfully, there is now a greater urgency to embrace new solutions that leverage technology to promote carbon reduction and finance green initiatives.”
The ability to properly account for and track carbon credits under existing systems has resulted in challenges that have prevented uptake and impact at scale, such as double counting and the difficulties involved with cross-border carbon trading.
The CNTs provided in the new green financing solutions will seek to mitigate said challenges by providing businesses with a reliable and accurate view of their emissions and offsets.
“We hope to accelerate these efforts by providing financing solutions with tokenised carbon credits, and expand the reach of private sector finance in areas and sectors most crucial in mitigating climate change,” continues Lam.
This partnership underscores the Bank’s commitment to combating climate change and supporting customers in their journey to carbon neutrality, by seizing growth opportunities in green and sustainable financing.
By the end of 2021, the Bank had extended over S$34billion in sustainable financing to customers, surpassing its original target of S$25billion by 2025 four years ahead of schedule. A new target of S$50billion in sustainable financing commitments by 2050 has been established.
“By joining forces with Southeast Asia’s second-largest bank, we have the opportunity to advance our sustainability ambitions and fast-track our nation’s goal of achieving Singapore’s 2030 Green Plan,” continues Bai.
“We are excited to be building the bridge between green investments in traditional finance and the global carbon trading markets of the future through green digital assets.”
Last year, MVGX launched its first batch of CNTs ahead of COP26 in Glasgow. These asset-backed tokens were tied to carbon credits generated by a wind project in Zhangjiakou, China that was verified and registered with China’s National Carbon Registry.
The first tranche of 5,000 carbon credits was sold to a Hong Kong-based private equity firm last year, lowering barriers to access ESG assets for retail and institutional investors in the Asia Pacific.