{"id":471784,"date":"2023-09-18T13:25:44","date_gmt":"2023-09-18T17:25:44","guid":{"rendered":"https:\/\/www.investmentexecutive.com\/?p=471784"},"modified":"2023-09-18T13:25:44","modified_gmt":"2023-09-18T17:25:44","slug":"no-free-lunch-from-carbon-offsets-moodys","status":"publish","type":"post","link":"https:\/\/www.investmentexecutive.com\/news\/research-and-markets\/no-free-lunch-from-carbon-offsets-moodys\/","title":{"rendered":"No free lunch from carbon offsets: Moody’s"},"content":{"rendered":"

Carbon offsets can play a key role in enabling companies to meet their net-zero commitments, but Moody’s Investors Service says they come with greenwashing and other risks.<\/p>\n

In a new report, the rating agency warned that companies need to be careful when using carbon offsets in their emission reduction plans.<\/p>\n

“Ambiguous or exaggerated decarbonization claims, inadequate vetting of carbon credits and excessive reliance on offsets as a transition risk management strategy can leave companies vulnerable to a range of credit risks,” the report said.<\/p>\n

While offsets can help finance investments needed to enable net-zero transitions, “their use in corporate carbon transition strategies poses financial and reputational risks if they are not applied as part of a credible, science-based approach,” the rating agency said.<\/p>\n

For instance, companies that use offsets to claim that they’ve achieved net-zero targets or carbon neutrality “in ways that are not consistent with science, or that overstate the scaling potential of offsets, face reputational and litigation risks,” Moody’s said.<\/p>\n

These risks can be reduced by “prioritizing efforts to cut emissions within their value chain, ensuring that carbon offsets do not replace but rather complement efforts to reduce scope 1, 2 and 3 emissions,” the report said.<\/p>\n

Relying too heavily on offsets to meet climate commitments increases companies’ financial risks, too, the report warned.<\/p>\n

“The shift to a low-carbon economy and regulations limiting demand for high-carbon products will intensify, whether or not a company invests in carbon credits or carbon removal. Therefore, companies cannot rely on offsets to mitigate market demand risks,” it said.<\/p>\n

At the same time, using carbon offsets doesn’t exempt companies from most mandatory carbon-pricing programs, which impose a cost on companies’ carbon emissions, Moody’s said.<\/p>\n

“In most cases, these costs cannot be reduced by using offsets,” it noted.<\/p>\n

Additionally, emission reduction plans that rely heavily on offsets are also exposed to financial risk due to “the unpredictability of market prices and the continued evolution of standards and regulations.”<\/p>\n","protected":false},"excerpt":{"rendered":"

The rating agency warned that companies need to be careful when using carbon offsets to reduce emissions<\/p>\n","protected":false},"author":147314,"featured_media":471141,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2313,2312],"tags":[2784,3336,107348,86054,3677,2323,2365,107356,99359,52615],"yst_prominent_words":[2257,87730,79796,78388,76136,76087,12564,11408,11301,6652,5076,5073,5065,4032,6],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/471784"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/147314"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=471784"}],"version-history":[{"count":4,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/471784\/revisions"}],"predecessor-version":[{"id":471797,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/471784\/revisions\/471797"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media\/471141"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=471784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=471784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=471784"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=471784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}