The London Stock Exchange (LSE) welcomed the first fund to use its new market framework for carbon credits. The LSE is the first exchange to use a public carbon market framework to drive funding into climate mitigation projects. LSE issued its first Voluntary Carbon Market (VCM) designation to Foresight Sustainable Forestry Company (FSF).
The LSE launched its VCM to give investors easier access to information about carbon credits they seek to buy. Although investors can get carbon credits through intermediaries, it can be hard to find information on projects and its developers and to identify which projects suit requirements and preferences.
The LSE VCM platform gives entities and individuals a means to raise funds and use the money on projects that cut emissions. In return for their investments, investors and firms can get carbon credits in place of cash dividends.
They can then use those credits for offsetting purposes and meeting net zero targets. LSE´s Head of sustainable finance for capital markets division Claire Dorrian said “the overarching principle behind all of this is transparency through disclosure”.
Operating companies or investment funds on the LSE are eligible for the VCM. But they must meet all other requirements for the market on which they are listed.
The LSE VCM designation requires issuers to perform disclosures relating to the projects they are directly or indirectly financing. Demand for carbon credits in the VCM is growing as firms pledge to reach net zero and help abate climate change.
The volume of credits traded in 2021 is up more than 3x, from $520 million to about $2 billion. The Exchange had previously hosted Europe's first carbon-neutral exchange traded fund.
FSF -an investment company offering direct and liquid access to UK forestry and afforestation projects- will offer access for investors and companies wanting to buy carbon credits to offset emissions.
FSF´s current portfolio consists of about 9,700 hectares of UK standing forestry and afforestation assets. The carbon sequestered by its 27 afforestation sites equals to around 800,000 carbon credits under the Woodland Carbon Code.
FSF co-head Richard Kelly remarked that: the VCM designation means that the ever-growing number of climate-minded investors can easily and confidently identify sustainable solutions.