Bursa Malaysia Bhd announced that it will be launching the voluntary carbon market (VCM) exchange. VCM will be launched at the end of the year. This initiative is to reduce the carbon footprint of companies.
According to the report of Hong Leong Investment Bank (HLIB) Research, the initiative will incentivize companies to invest in clean technologies and own assets which are more environmentally friendly.
Bursa's VCM internalizes the cost of carbon emissions
VCM functions by allowing a price to be put on carbon emissions and low-carbon opportunities. VCM will be entirely voluntary. The participants can show their commitment to reducing carbon footprint, as the failure to do so may result in paying more operational costs.
According to the report of HLIB, VCM is able to internalize the cost of carbon emissions into business operations. The companies are likely to transition to low carbon practices because more and more debt financiers will look at the company’s commitment to sustainability when providing loans.
Furthermore, this initiative rewards owners of green assets owners because the investors will be able to price in carbon emission costs to businesses.
Bursa's VCM will adopt the "Verra" Standard
In the press statement, Bursa Malaysia said that the VCM exchange plays the role in allowing companies to buy carbon credits from climate-friendly projects to offset the companies’ climate impact. It standardizes the carbon credit products for trading by establishing the baseline demand for carbon credits by the clearing from the auction.
The clearing price will be a reference point for the subsequent tradings. Bursa Malaysia said that the VCM exchange would adopt the “Verra” standard.
“Verra” is a widely recognized standard in the voluntary carbon market, and it can prevent greenwashing claims by conducting robust assessments to verify the environmental claims independently.
Bursa Malaysia said that VCM might not bring immediate results or contributions, but the initiative has the significant potential over the long term.
