Standard Chartered Carbon Credits Fuel Financial Innovation

Forests cover around 30% of the world’s land area, but are disappearing at a high rate according to the Food and Agriculture Organisation of the United Nations.

It indicates that since 1990, the world has lost more than 420 million hectares of forest. National Geographic emphasises the importance of trees in trapping greenhouse gas emissions and slowing down global warming.

Standard Chartered has revealed a five-year agreement to sell high-integrity forest protection carbon credits in collaboration with the Brazilian State of Acre, centred within the Amazon Rainforest.

Marisa Drew, Chief Sustainability Officer at Standard Chartered, says: "Without deploying new market mechanisms, standing forests are unlikely to be protected because the short-term economic incentive for deforestation nearly always outweighs the perceived value of these long-term natural assets.

"We’re leveraging our global network and carbon market expertise to address this challenge directly, offering a means to help preserve standing forests that act as vital carbon sinks, and in turn help the communities that depend on them continue to realise the economic and social returns they provide."

Strategic Framework and Implementation

This initiative marks a novel collaboration between a major international bank and a sub-national government to support forest conservation efforts.

The jurisdictional credits will help protect the State of Acre's forests from deforestation over the coming five years, with a target of five million carbon credits by 2026. The credits will be formally registered under the Architecture for the REDD+ Transactions registry using its TREES methodology.

Acre has pledged that the funds generated from the sale proceeds will be dedicated primarily to two areas: 72% will go to indigenous and local communities, focusing on sustainable practices such as low-emissions livestock farming, reforestation and community-based tourism.

The remaining 28% will fund project management and governance, ensuring adherence to the TREES standard and managing emergency responses to extreme weather events.

The venture seeks to establish a scalable model for jurisdiction-wide deforestation management and emissions reduction.

Amarisio Freitas, Secretary of the Treasury of the State of Acre, Speaker and Leader of the State’s Jurisdictional Carbon Project, says: "This arrangement will bring economic and social benefits to the people of Acre, while protecting our natural resources and supporting the traditional communities and indigenous peoples of our state.

"The government has fought for a fair society by providing solutions for all its inhabitants, creating development mechanisms in the regions furthest from the capital without negatively impacting the ecosystem. This arrangement provides us an effective tool in the fight for sustainable economic development.

"We are excited to work with Standard Chartered on this groundbreaking innovation."

Understanding the TREES Methodology

The Architecture for REDD+ Transactions provides an environmental excellence framework tailored for national adoption. TREES enables countries and jurisdictions to generate verified emissions reduction and removal credits, contingent on meeting detailed criteria:

• Robust accounting and crediting systems
• Comprehensive monitoring, reporting and independent verification
• Mitigation of leakage and reversal risks
• Prevention of double counting
• Ensurance of stringent environmental and social safeguards
• Public registry transparency for serialized units.

The scheme aligns with the Paris Agreement, expediting efforts to achieve large-scale emissions reductions. Germana Cruz, CEO & Head of Financial Institutions, LATAM at Standard Chartered, reflects: "As the world looks toward COP30, the State of Acre is stepping forward with bold leadership on carbon markets, combining environmental ambition with economic opportunity.

"Standard Chartered is proud to support this vision by bringing our global expertise in sustainable finance to help build credible, scalable carbon market solutions for our markets."

The Amazon's Vital Ecosystem

National Geographic reports that 17% of the Amazon rainforest has disappeared over the past 50 years. The Amazon conservation highlights a surge to 21% deforestation in 2020, equating to a loss equivalent to the size of Israel.

Globally, communities rely on the Amazon Rainforest for essential resources like food, water, wood, and medicine as well as its critical contribution to climate stability, given the 150-200 billion tonnes of carbon it stores, according to WWF.

WWF also notes the Amazon's role in releasing 20 billion tonnes of water into the atmosphere daily, underpinning both carbon and water cycles globally and regionally.

Marisa said on LinkedIn: "This initiative, which speaks to our ambition to drive innovation in sustainability, will help to channel climate finance towards the communities that depend on these forests with the majority of net funds generated through sales allocated for indigenous peoples and local communities.

"This collaboration represents one of the first examples of a major international bank working with a sub-national government in this way and we’re proud to bring our global network and sustainable finance expertise to bear, to help build credible, scalable carbon market solutions."