In an effort to support the development of carbon markets, global securities regulators issued a report detailing a series of recommendations for operating these kinds of trading schemes.
The International Organization of Securities Commissions (IOSCO) published its final report on voluntary carbon markets — the kinds of schemes that companies can use to trade carbon credits to meet both environmental and financial goals.
That report sets out a series of recommended practices for operating healthy markets, and “facilitating orderly and transparent trading of carbon credits,” the group said.
The recommendations address market structure issues and functions such as custody, trading and settlement. They also detail principles for ensuring fair, orderly trading and combating abuses such as fraud, market manipulation, insider trading and investment scams.
“Financial and market integrity is an essential component to the sound functioning of carbon markets. Today’s [recommendations] seek to be both practical and effective in fostering transparency, trust and integrity in voluntary carbon markets,” said Rodrigo Buenaventura, chair of IOSCO’s Sustainable Finance Task Force and chairman of Spain’s Comisión Nacional del Mercado de Valores, in a release.
Among other things, the regulators’ recommendations aim to foster enhanced transparency in the creation, trading and use of carbon credits; governance standards, risk management practices and policies to address conflicts of interest in carbon markets; comprehensive market surveillance to detect and deter fraud and market abuse; practices to support market liquidity; and, a regulatory framework that provides legal certainty and proportional oversight.
“Establishing financial integrity and transparency within voluntary carbon markets is crucial for their credibility and impact,” said Verena Ross, co-chair of IOSCO’s workstream on carbon markets and chair of the European Securities and Markets Authority.
“Our [recommendations] build on the experience of securities markets regulators with the aim to empower market participants to engage confidently in this important sector in the future,” she added.
Alongside the regulators’ report, IOSCO and the World Bank also announced a partnership to help jurisdictions establish and operate carbon markets, and they published a joint policy note outlining high-level principles for promoting financial integrity in carbon markets.
“Our partnership with the World Bank will empower jurisdictions worldwide in their efforts to establish robust, transparent and effective carbon markets,” said Jean-Paul Servais, chair of the IOSCO board and chairman of the Belgian Financial Services and Markets Authority.