Earth Day 2022 | Discovering what sustainability decision makers think of VCMs

The theme of Earth Day 2022 is Invest in the Planet. To mark the event we surveyed 500 environmental, social and governance (ESG) and finance decision makers in the US and UK to find out their motivations for, and perceptions of, investing in voluntary carbon markets (VCMs). We asked them about the benefits, risks and much more. Here’s what we learned.

‍

With the urgency of the climate crisis upon us, corporations must be creating and implementing their net zero strategies. We’re rapidly approaching a slew of environmental tipping points, and it's imperative that businesses lead the charge in reducing their carbon footprint if we're to achieve our ambitious targets of limiting global temperature rise to 1.5 degrees celsius. 

While decarbonization must always be the number one priority for businesses, we know that this is not 100% possible for a lot of industries in the short to medium term. Balanced with aggressive abatement activities, carbon offsetting can deliver short-term positive climate impact. 

And this is being recognized by large corporations. 

In fact, the overwhelming majority (96%) of the 500 US and UK ESG decision makers we surveyed said their corporation currently invests in carbon credits. 

‍

It's encouraging to see that this investment appears to be part of corporations’ net zero strategies. According to the survey responses, US corporations are ahead of large UK corporations when it comes to creating their net zero strategies. Over three quarters (78%) of US ESG decision makers surveyed said their company has a net zero transition strategy already in place, whereas only just over half (55%) of UK ESG decision makers said the same. On the surface, this appears to dispel general perception that European markets are further ahead. However, it may be reflecting differences between perception and reality. 

Having a plan in place doesn’t mean that the job is done. Words must be put into action so that net zero transition strategies aren't just created, but actually implemented. And implementation is the biggest challenge. A Harris survey commissioned by Google that polled 1,491 C-level and vice president office holders found a gap between how well companies think they’re doing and how well they're actually measuring it: 58% of executives say “green hypocrisy” exists and that their companies overstate their sustainability efforts, and only 36% of respondents say they have the tools to measure progress.

Perception and reality must match when it comes to climate progress. If corporations are to be successful in fighting climate change, accountability and the ability to measure success must be woven into the foundations of their net zero transition strategies.

So, what is driving investment into VCMs? 

The overall biggest driver of this activity is stakeholder pressure. 

Requirements of investors or boards and CEOs or leadership to invest in carbon credits were identified as two of the three biggest drivers, with over a third (35% and 33% respectively) of respondents whose companies currently invest in carbon credits saying this is what drove the decision of their company to invest. 

This is not altogether surprising. 

We know that investor and board pressure is mounting on their portfolio corporations to take steps to mitigate carbon emissions, especially in the financial services sector. And this pressure is only going to intensify as we get closer to emissions reductions deadlines and as new regulations come into force, such as the TCFD climate disclosure rules in the UK and the proposed SEC rule mandating climate risk disclosure for public companies in the US. 

But, what do ESG decision makers actually think of VCMs? 

Our respondents think that public and employee perception are key benefits of investing in VCMs. 

In fact, positive public perception and a competitive edge was identified by ESG decision makers as the biggest benefit of investing in VCMs (39%). This was closely followed by helping to protect the health of the planet (38%) and employee perception or aid attraction and retention of employees, with a third of respondents (33%) selecting it as one of the biggest benefits they associate with investing in VCMs. 

The ESG decision makers surveyed also revealed what they view as the biggest risks of investing in VCMs. 

Ultimately, VCMs still have a trust problem. 

Half (50%) of those surveyed identified lack of transparency into project quality and performance as the biggest risk associated with investing in VCMs and carbon credits. A third (36%) worry about paying too much for carbon credits, while over a quarter (29%) said not having the resources or experts to conduct the right level of due diligence before purchasing carbon credits was one of the biggest risks.

‍

To establish trust, the market needs reliable data. 

This is why our Carbon Intelligence Platform exists: to increase transparency and become a source of truth for carbon markets. 

The robust data we provide gives visibility into project performance, ensuring that investment only goes into high quality projects and not into projects with poor additionality or unreported issues in performance. Not only will this subsequently increase confidence in VCMs, but it will also accelerate change. 

If you’d like to find out more about the Sylvera Carbon Intelligence Platform and how we can help you to scale your investment in VCMs, get in touch today. 

*Survey sample: 250 UK and 250 US ESG and finance decision makers responsible for their corporation’s sustainability and ESG strategies or ESG plans. Job titles might include: ESG manager, sustainability manager or officer, CFO (Chief Finance Officer), CEO (Chief Executive Officer), risk analyst, founder, chief impact officer, partner, head of carbon offsets, head of carbon markets, head of corporate sustainability, president, managing director, trader and investment director. They should be working in companies employing more than 10,000+ people.

Field Dates: 29.03.22 – 06.04.22

‍