Temasek’s GenZero has jointly authored a legal paper with local law firm Allen & Gledhill LLP examining the importance of clarifying the legal characterisation of voluntary carbon credits (VCCs). Titled “The Legal Character of Voluntary Carbon Credits: A Way Forward”, the paper offers a possible characterisation of VCCs as intangible property in Singapore.
The 39-page paper, released on March 26, also calls for action by governments to articulate a position.
The paper shares views that VCCs may be characterised as intangible property. According to the authors, this is supported by existing legal principles in Singapore and provides market participants with a “sound commercial basis” to transact and manage risk in a few areas.
These include buying and selling VCCs, using VCCs as a collateral for loans, and the establishment of trusts, property and insolvency.
Recognising VCCs as intangible property will give clarity to the priority of claims over VCCs in the event of the owner becoming insolvent, say GenZero and Allen & Gledhill. “The ability to create trusts over VCCs will also enable project development and create a more liquid carbon market.”
Further, the paper highlights the “pathfinder” role that Singapore can play in articulating a position. This comes as international consensus is “ideal but unlikely” in the near term, say the authors. “There is a strong tendency for the ecosystem to converge around jurisdictions where there is a relatively high degree of clarity.”
Sim Ting, general counsel at GenZero, says gaps within the voluntary carbon market limit the ability for market participants to fully leverage carbon markets and unlock its potential for carbon finance.
“We believe that legal clarity on VCCs will be welcomed by all in the carbon ecosystem, from the financial institutions and investors to the corporates and end-users. Together, we hope that this paper will help galvanise action and cement Singapore’s leadership as a carbon hub that is at the forefront of scaling carbon markets,” adds Sim.
Adrian Ang, partner and co-head of ESG and public policy at Allen & Gledhill, hopes the paper will inform and start relevant discussions on key ESG topics. “With ESG issues continuing to grow in prominence globally and governments looking to implement new regulations to ensure sustainable business practices, it is important that our firm plays its part in supporting our clients through providing relevant input into vital conversations such as these.”
See also: Temasek's GenZero turns one with inaugural summit to explain 'nascent' decarbonisation sector
GenZero is a Temasek-owned investment platform company focused on accelerating decarbonisation. Temasek committed an initial amount of $5 billion to the subsidiary at its launch in June 2022.
In December 2022, GenZero released the “Carbon Markets 2.0 — Addressing Pain Points, Scaling Impact” whitepaper at the COP28 Singapore Pavilion in Dubai.
The 30-page report explores the state of the carbon markets today, along with obstacles from both the demand and supply sides. GenZero’s whitepaper was developed with support from MSCI Carbon Markets, and input from industry stakeholders Calyx Global, Climate Impact X, Environmental Defense Fund, Gold Standard, the International Emissions Trading Association (IETA) and Verra.
Carbon credits are among GenZero’s three focus areas, which are nature-based solutions, technology-based solutions and carbon ecosystem enablers. GenZero is a minority shareholder in Swiss carbon finance consultancy South Pole.
