OCBC enters tie-up green financing using tokenized carbon credits

Green shoots. Photo by Markus Spiske on UnsplashGreen shoots. Photo by Markus Spiske on Unsplash

This item originally appeared on finews.asia.

OCBC Bank has tied up with digital green exchange MetaVerse Green Exchange (MVGX) to develop green financing using tokenized carbon credits.

The Singapore bank and MVGX said Monday they will work together to develop green financing services, including tokenizing carbon credits to help large companies offset their carbon emissions. The credits will be in the form of MVGX’s Carbon Neutrality Tokens (CNTs), which uses distributed ledger technology to keep updated records of climate action projects, the companies said in a press release.

The use of carbon credits to mitigate climate change has become more popular, particularly in hard-to-abate industries such as shipping, steel and energy, the release said. By buying credits, companies are investing in green projects, such as renewable energy, contributing to reducing greenhouse gas emissions, the release said.

Demand Growth

The demand for carbon credits could rise by 15 times or more by 2030 and by up to 100 times by 2050, with the market potentially valued at more than US$50 billion in 2030, according to a January 2021 report from consulting firm McKinsey & Co., which cited data from The Taskforce on Scaling Voluntary Carbon Markets (TSVCM), sponsored by the Institute of International Finance (IIF) with contributions from McKinsey. The report noted that for some companies it is prohibitively expensive to reduce emissions with current technology, and for others, it’s not possible, such as emissions from industrial-scale cement production. Buying a credit represents the quantity of greenhouse gases kept from being released, or which are removed from the air, the report said.

But tracking the credits to prevent double-counting and dealing with cross-border trading have created difficulties, OCBC and MVGX noted. The CNTs are expected to mitigate these issues with better accuracy on emissions and offsets, the release said. An independent party will be used to verify the expected carbon emissions from projects to calculate the carbon credits needed, the release said.

First Batch of CNTs

MVGX launched its first batch of CNTs last year, with asset-backed tokens tied to carbon credits generated by a wind-power project in Zhangjiakou, China, which was verified and registered with China’s National Carbon Registry, the release said. That batch of 5,000 carbon credits was sold to a Hong Kong-based private equity firm, the release said.

MVGX is licensed by the Monetary Authority of Singapore (MAS) as a market operator, the release said.

Correction: This story has been updated to indicate the agreement is to develop green financing using carbon credits.