LANYON Offsets will play a role alongside reducing emissions. To reduce emissions, it is really important that we understand our clients’ decarbonisation strategies in totality. We need to ask how we can support them with capital and solutions throughout their entire journey. This could mean greening electricity supply, replacing machinery and electrifying as much as possible.

Sustainable finance plays a role too, through use-of-proceeds and sustainability-linked instruments. Almost every sustainability-linked transaction we have been on has had an emissions reduction target.

Nonetheless, offsets are a valuable component of emissions reduction strategies, and facilitating supply and demand will be critical. Voluntary targets and decarbonisation strategies will drive growth in demand, as well as the proposed changes to the safeguard mechanism.

The key will be unlocking supply. CBA [Commonwealth Bank of Australia] wants to play a key role in this, including working with development projects and trying to come up with innovative structures such as the carbon pre-pay structure.
CBA will also support the demand side by working with its institutional and business bank customers that have a requirement and facilitating access to credits.

TONKIN ANZ shares this view and would like to be a significant involved party. Given the increased demand and interest, we are very focused on continuing to develop our environmental markets business, offering products and services across the supply and demand sides. It has been a really interesting journey to watch customers start asking about offsets over the years.

There are obviously many different types of offsets, and at the same time companies have a fixed budget for them. We receive a lot of questions: which offset to buy, which are the most popular, are the cheaper ones from offshore a good option, whether a credit needs to target a material ESG [environmental, social and governance] risk to the specific business, and whether offsets should be supporting First Nations people.

We are supporting the market in this area, and our perspective is that the supply and demand sides can see some amazing projects coming through. It is a really exciting time.

What has also been very interesting is the amount of private equity interest developing in the field. If private equity is interested, I think this almost tells us everything we need to know about where capital sees the value of offsets going.

WEST Everyone can admit that there is still a lot to figure out. However, I also think the regionalisation and matching of activities to offsets is here to stay. In carbon accounting, there is still great debate about which offsets can be used for scope-one, scope-two and scope-three emissions. This is reasonable and fair.

It will be necessary to have credible net zero strategies that address removal credits for scope-one emissions, and RECs [renewable energy certificates] and PPAs [purchase power agreements] for scope-two emissions.

Thinking about companies’ long-term strategy, there are not a lot of options to get to net zero. The first is to organically sort out and fund internal reductions, and the second is M&A to buy or divest. Really, the last strategy is offsetting. We know it will work; we just need to bring in credibility.

This is why governance bodies such as the IC VCM [Integrity Council for the Voluntary Carbon Market] have been such great additions to the market. I will confess that I am less impressed by the some of the other groups that are trying to tackle it, but at the end of the day this level of interest should mean more credibility and more thought given to this area. Stay tuned and watch this space for how we discover the right way forward.

THOMPSON This is not something we can avoid. Companies are setting net zero targets and when we turn to the operationalisation, or implementation, of these targets we will find that we cannot eliminate 100 per cent of emissions. There will be residual emissions that we will need to offset.

It is interesting, and exciting, to see the level of sophistication from all parties rise. However, we need to work together to improve the integrity of the market and move away from claims of greenwashing. It is now about regaining control of the narrative, to some extent.

The last thing I will say is that scaling the carbon market is our opportunity to direct financing to nature and biodiversity. It should be a virtuous circle.