Principles for carbon offsetting
Insights

Principles for carbon offsetting

There has been increasing pressure on corporates to reduce their greenhouse gas emissions to limit global warming to 1.5 degrees, including from investors through engagement. This has led to many companies committing to achieve net zero emissions. While reducing emissions is an evident priority to limit warming to 1.5 degrees, often eliminating residual corporate emissions is either expensive or not yet technologically feasible. Thus, many net zero commitments either implicitly or explicitly rely on carbon ‘offsetting’: where carbon emitters purchase verified units of greenhouse gas emission reduction or removal to compensate for remaining emissions. Emitters are increasingly turning to the voluntary carbon market to source these carbon offset credits, or developing offset projects themselves, particularly through Nature Based Solutions (NBS).

The voluntary carbon market is growing quickly to meet this increasing demand. Over $1bn worth of carbon credits were transacted on the market for the first time in 2021, a three-fold increase on 2020. However, with this rapid expansion has come considerable growing pain. Critiques of the market focus on the legitimacy of the claims made by both credit sellers and credit buyers. Some projects which sell credits have been criticised for failing to have the additional and long-term climate impact they claim, and for generating negative environmental and social side effects. Credit buyers can be embroiled in project level controversies and can also be accused of greenwashing if they conduct profligate purchasing of offset credits with limited efforts to decarbonise. Even legitimate offset buyers and sellers face reputational risks due to the current lack of consensus on what constitutes credible offsetting.

We have a strong history of active engagement with the companies we hold and those we engage with on behalf of our Reo clients. Here we aim to communicate our perspective on when companies should use offsets, which offsets they should be using, and how companies should use and disclose on their use of offsets. Our principles build on the established quality standards already in the market but aim to raise the level of expectation. Our intention is that we will revisit and revise these principles as the voluntary carbon market evolves.

Interested in learning more? We explore how nature can be a powerful ally in the fight against climate change. Download the full viewpoint to discover more.

4 April 2022
Joe Horrocks-Taylor
Joe Horrocks-Taylor
Senior Associate, Analyst, Responsible Investment
Share on linkedin
Share on email
Key topics
Related topics
Listen on Stitcher badge
Share on linkedin
Share on email
Key topics
Related topics

PDF

Principles for carbon offsetting

Risk Disclaimer

Views and opinions have been arrived at by Columbia Threadneedle Investments and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Related Insights

28 November 2023

Fixed Income Desk

In Credit - Weekly Snapshot

In Credit Weekly Snapshot – November 2023

Our fixed income team provide their weekly snapshot of market events.
Read time - 5 min
27 November 2023

Steven Bell

Chief Economist, EMEA

UK base rate cuts to be delayed following last week's Autumn Statement

The UK’s Autumn Statement partially relieved the upward trend in taxes. But what does that mean for interest rates? Steven Bell explains why cuts in early 2024 now seem unlikely.
Watch time - 5 min
23 November 2023

Alice Evans

Responsible Investment Strategist

Vicki Bakhshi

Director, Responsible Investment

Letitia Byatt

Social Impact Analyst

ESG Viewpoint: Investing in a Just Transition

It’s essential we consider the social dimension as we transition to a low carbon world. We explore the investment implications of a Just Transition.
Read time - 2 min
true
true

Risk Disclaimer

Views and opinions have been arrived at by Columbia Threadneedle Investments and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

You may also like

Investment approach

Teamwork defines us and is fundamental to our investment approach, which is structured to facilitate the generation, assessment and implementation of good, strong investment ideas for our portfolios.

Funds and Prices

Columbia Threadneedle Investments has a comprehensive range of investment funds catering for a broad range of objectives.

Our Capabilities

We offer a broad range of actively managed investment strategies and solutions covering global, regional and domestic markets and asset classes.