Industry

CPP Investments Deal Driving NbS Pipeline

Partnership with Conservation International will also support local communities and preserve ecosystems. 

The Canada Pension Plan Investment Board’s (CPP Investments) partnership with Conservation International (CI) is an important step towards encouraging more investment into high-quality nature-based solutions (NbS) via the voluntary carbon market (VCM), according to the US-based NGO.  

Under the partnership, first announced in Q4 2021, CPP Investments has launched the Accelerate Nature project which is rooted in Peru’s 600,000-hectare Amarakaeri Communal Reserve (ACR). It is expected to reduce global carbon emissions by between 220,000-330,000 metric tonnes of CO2 a year.  

“Our partnership with CPP Investments enables us to further expand our robust pipeline of nature-based carbon projects. It positions us well to drive VCM investments into carbon-rich ecosystems, including tropical forests, and partnerships with local communities,” Agustin Silvani, Senior Vice President of Conservation Finance at CI, told ESG Investor.  

“CI has the opportunity to influence the broader market towards higher quality in the offsets markets both on the supply and demand side,” he said.  

CPP Investments published a report last week outlining the parameters of Accelerate Nature. It noted that CI will work with the local communities to implement the project, introducing training to develop relevant skills and capabilities, and creating jobs that will provide sustainable revenue to those communities. At least 50% of project revenues raised through VCM sales will also go back to the Indigenous communities, the report added. 

“We see an opportunity both to cultivate new, trustworthy sources of carbon credits and to help the market grow in depth and scale, opening new avenues for our investment activities,” CPP Investments said in the report. CPP Investments manages C$550 billion (US$432 billion) in assets. 

All carbon credits will be verified by organisations such as Verra, a global NGO providing quality assurance in VCMs. 

Collaborating with NGOs 

The partnership is an example of how “joint ventures” between private capital and NGOs can help “scale nascent carbon markets and create enduring value by safeguarding unique forest ecosystems and communities”, Silvani said. 

“We believe we can help expand both the supply and market infrastructure necessary to progress towards a net-zero future,” the CPP report added. “Doing so will help protect ecosystems and their communities, and enable us to earn attractive risk-adjusted returns for generations of contributors and beneficiaries.” 

With an expected 30-year lifespan, the ACR project marks the first in a series of collaborations between the asset owner and NGO to advance the development of verified carbon credits and other nature-based carbon removal and reduction methods.  

The platform created for this project will fund additional projects over the next two years.  

The partnership between CPP investments and CI is a prototype for investors seeking opportunities presented by the whole economy transition to net zero,” said Deborah Orida, Global Head of Real Assets & Chief Sustainability Officer at CPP.  

Meeting expectations 

The report acknowledged that VCMs are still “too immature to meet rising expectations”, citing small volumes, variable standards and illiquid pricing, which have contributed to continued questions over the market’s credibility and scalability. 

“Without rigorous standards and methods to ensure the quality of carbon credit projects, concerns about the integrity of credits could impede the market’s emergence as an effective mechanism in the fight against climate change,” Silvani said. 

The Taskforce on Scaling Voluntary Carbon Markets – now renamed the Integrity Council for the Voluntary Carbon Market – is currently developing a core carbon principle (CCP) that can be used to mark offsets meeting its standards.  

Launched in July 2021, the Voluntary Carbon Market Integrity (VCMI) initiative is also working to ensure VCMs are transparent and robust. It will be launching claims guidance next month, which will lay out the prerequisites for the credible use of carbon credits by companies.  

US-based NGO Ceres also recently published investor guidance outlining when it is acceptable for investee companies to use carbon credits to offset emissions. 

The completion of Article 6 of the Paris Agreement at COP26 “sets the stage” for carbon markets to be upscaled and to establish cross-border standards, the CPP report noted, adding that there will be a sharp increase in demand for carbon credits as companies come under increasing pressure to decarbonise their products and business operations.  

VCMs are expected to grow by an estimated 50-80% this year, according to independent research and data company Trove Research. 

Growing in popularity 

Other asset owners and financial services providers are exploring the opportunities VCMs present.  

Danish pension fund PensionDanmark recently announced its new agreement with Hedeselskabet to plant 100 hectares of forest that will contribute to offsetting carbon and preserving biodiversity. Hedeselskabet is a mooring company that develops solutions for climate adaptation and nature conservation.  

Global financial services provider Apex Group has announced its plans to offset its lifetime of operational carbon emissions through its partnership with independent climate change consultancy firm Carbon Footprint. Emissions will be offset through domestic energy projects in Malawi and Nigeria, as well as ecosystem conservation in Cambodia, and renewable energy systems in Brazil, Turkey and China. 

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