Letters to Regulators: IOSCO Should Explicitly Acknowledge That Environmental and Social Integrity Are Critical Components of the Market Integrity of Carbon Credits

Americans for Financial Reform Education Fund (AFREF) submitted a comment letter on The Board of the International Organization of Securities Commissions (IOSCO)’s Consultation Report outlining a proposed set of Good Practices to promote the integrity and orderly functioning of Voluntary Carbon Markets (VCMs). 

IOSCO has appropriately developed a proposed set of 21 Good Practices in the categories of regulatory frameworks, primary market issuance, secondary market trading, and use and disclosure of use of carbon credits. The Good Practices are addressed to relevant regulators and other authorities as well as market participants and look to offer support to/in jurisdictions that have established or may be seeking to establish VCMs.

The letter recommends that the Good Practices should explicitly acknowledge that for VCMs, and indeed for any environmental spot or derivatives products, environmental and social integrity are critical components of market integrity. In addition to carbon-related goals, carbon credit projects often claim to meet or exceed best practices on environmental and social safeguards, which must be considered when assessing market integrity and market risks. 

The letter also recommends that IOSCO should expand the definition of additionality, and specify that additionality must also include, but is not limited to, regulatory, legal, and financial additionality.