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Carbon markets action framework launched at UNCTAD World Investment Forum

Abu Dhabi, 18 October 2023 — Today, the United Nations Sustainable Stock Exchanges (UN SSE) in collaboration with the International Organisation of Securities Commissions (IOSCO), hosted a roundtable on Carbon Markets at the 8th UNCTAD World Investment Forum in Abu Dhabi. The session brought together stock exchanges, policymakers, and industry leaders to engage in dialogue on the future of carbon markets and the role exchanges and securities market regulators can play in making these markets work effectively in combating climate change. A highlight of the event was the launch of the UN SSE’s publication How exchanges can maximize the opportunities of carbon markets: an action framework to guide exchanges.

Carbon markets have gained significant attention in recent years as one of the fastest growing market mechanisms to mobilize resources supporting the transition to a net zero emissions economy. As marketplaces or facilities where emission allowances, carbon credits and derived financial instruments are bought and sold, carbon markets can incentivize emissions reduction, and channel investment capital towards climate mitigation efforts. 

The roundtable event kicked off with an overview of the UN SSE’s new publication, the product of a year-long process by 88 experts from 58 organizations across 39 countries, making up the informal SSE Carbon Markets Advisory Group. The publication offers a practical action framework to guide exchanges that are looking to optimize the opportunities of involvement in carbon markets. The action framework has two main objectives, each with three action areas that contain a range of suggested actions that exchanges can consider for application as appropriate.

In the foreword to the publication Mr Ahmed Abdel Rahman El Sheikh, the Executive Chairman of the Egyptian Exchange wrote, “We have no doubt that this timely UN SSE publication on carbon markets marks a significant step towards strengthening the knowledge of exchanges on carbon markets. This guidance can open doors for exchanges to explore ways to improve liquidity and accessibility of carbon markets through the benefits that exchanges can bring, such as increased transparency, stable price discovery and reliability.” 

Mr Datuk Muhamad Umar Swift, CEO, Bursa Malaysia Berhad, in his foreword wrote: “I very much laud the UN SSE’s proactive effort to develop this guidance on carbon markets for exchanges. Bursa Malaysia is pleased to have supported its development based on our experience. I believe that the information and proposed actions provided in this publication will significantly contribute in raising awareness on voluntary carbon markets, and opportunities for exchanges around the world. I encourage our peers to use it, in exploring how to serve the needs in a growing market, by providing a trusted market mechanism.”

The launch event included keynote comments by the co-chairs of the UN SSE Advisory Group on Carbon Markets. Datuk Muhamad Umar Swift, CEO of Bursa Malaysia, anticipates that involvement in carbon markets will grow, offering greater potential synergies and harmonization opportunities. He commented that the action framework will significantly contribute to awareness on carbon markets, and opportunities for exchanges around the world. 

Heba El Serafi, Vice President of The Egyptian Exchange noted that the SSE publication and discussions at the World Investment Forum mark a timely step towards strengthening the knowledge of exchanges on carbon markets. She observed that the framework can open doors for exchanges to explore ways to improve liquidity and accessibility of carbon markets through increased transparency, stable price discovery and reliability.

IOSCO reflected on how securities regulators are adapting to the changing dynamics of carbon markets and how regulatory frameworks can encourage transparency, liquidity, and efficiency in carbon markets. “We will be collaborating with our friends at the UN SSE to help regulators and market participants in the establishment of sound, fair and transparent carbon markets. In achieving transparent carbon markets, exchanges have a big role to play because by listing you typically get more transparency. If we do this properly, challenges turn into opportunities, and we need the exchanges to get this done!” said Kris Nathanail, Senior Policy Advisor, IOSCO.

Sharing expert insights and policy perspectives, speakers explored the challenges and opportunities for carbon markets. Exchanges that are already active in various ways in carbon markets, shared their experiences and expectations of how the market landscape may evolve, touching on aspects such as making provision for regional specificities, linkages and the role of international agreements, such as the Paris Agreement, in influencing the development and operation of carbon markets. Representatives from two leading carbon credit standard setting bodies discussed efforts to support credible carbon markets through ensuring  the integrity of the instruments that are traded on them. The COP28 Presidency emphasized the critical importance of carbon markets to help meet global emissions reductions targets and presented insights into the carbon market related outcomes that are being targeted for COP28’s Finance Day. 

Speakers stressed that, given the urgent need to address the climate crisis, carbon markets are expected to continue gaining traction as an important tool for achieving ambitious emissions reduction targets and transitioning to a net zero emissions economy. There was a strong emphasis on the need for international collaboration and partnerships in promoting the efficiency and integrity of carbon markets on a global scale, and the role that exchanges can play in supporting these efforts.

The deliberations were moderated by prominent climate finance pioneer, Sean Kidney, Co-Founder and CEO, Climate Bonds Initiative who concluded the session by saying, “We need harmonization and interoperability. We need exchanges to succeed. Watch this space, because it is going to be amazing.”