Amy Kennedy and Kenneth J. Markowitz are partners and Charles Smith is a contractor at Akin Gump Strauss Hauer & Feld LLP. This post is based on an Akin Gump memorandum by Ms. Kennedy, Mr. Markowitz, Mr. Smith, Euan Strachan, Becky Skeffington, and Nadia Candelon. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) and Will Corporations Deliver Value to All Stakeholders?, both by Lucian A. Bebchuk and Roberto Tallarita; For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock by Leo E. Strine, Jr. (discussed on the Forum here).
On November 5, 2021, the London Stock Exchange (LSE) announced that it is developing a new Voluntary Carbon Market (VCM) solution to “accelerate the availability of financing for projects that will support a just transition to a low-carbon economy”. [1] As explained in the press release announcing the VCM, the LSE’s initiative is intended to address two major challenges related to carbon mitigation projects: facilitating scalable capital formation for the development of new climate projects worldwide and establishing primary market access to a sustainable supply of high-quality carbon credits (CCs) for companies and investors. Per the announcement, the LSE believes that the VCM will enable stakeholders to “augment credible net zero transition strategies, by financing additional projects to offset unavoidable carbon emissions during their path to net zero”. [2]
Specifically, the LSE envisages that the VCM will: (i) facilitate a liquid market for listing and trading interests in carbon funds with opportunities for investors in secondary markets; (ii) provide a wide range of investment opportunities generating CCs from a diverse range of underlying carbon reduction projects offering investors the chance to gain exposure to a variety of initiatives whilst at the same time hedging their risk; (iii) provide an additional and transparent benchmark to generate a “clear price signal” for carbon; and (iv) help generate investor confidence in the carbon credit market by facilitating investment opportunities in high-quality CC-generating projects via a reputable institution within an existing regulatory framework, including well-known disclosure and governance requirements.
