Carbon could be as big as any hydrocarbon commodity
This year Viridios have not only won Best Market Innovation in the 2022 Environmental Finance Voluntary Carbon Awards, but were runners up in three other categories, including Best Carbon Advisory. How have they done it? Simple, says Founding Partner and CEO Eddie Listorti: by providing everything the market needs in one place
Environmental Finance: This is a remarkable achievement. How did you do it?
Eddie Listorti: It's a real honour that the industry has voted for us across so many categories and strongly attests to the fact that we have a compelling carbon market proposition. I believe we have demonstrated that we can provide a complete service developing and executing net-zero strategies.
For both Viridios AI and Viridios Capital, our priority over the last three years has been to lay strong foundations so we can deliver best in class services. We did this by identifying the requisite carbon market services and then hiring the best people to deliver them. This was no mean feat, given the current skills shortage in carbon.
For Viridios Capital, our end-to-end approach means we can offer a professional global advisory service for clients alongside building up a decent origination pipeline. By doing this, we are able to offer solutions that fit increasingly stringent criteria, with lower downside risks. Indeed, we receive consistent feedback from clients on how robust our project due diligence and risk frameworks are. Overall, it is more cost effective to outsource carbon project origination and due diligence work to Viridios.
We are also committed to playing a key role in developing the carbon industry more broadly. Through our technology company, Viridios AI, we are adding real value by making pricing, valuation, and carbon project analytics available to all. This reduces market opacity. It is so pleasing that the market has acknowledged that by voting us in the Best Market Innovation category.
EF: How do you see voluntary carbon developing as a commodity?
EL: I firmly believe carbon will become a key commodity going forward as corporates and investors increasingly realise that doing nothing about climate risk will no longer be accepted by their stakeholders. Thankfully, the debate has largely shifted from climate change denial to more technical discussions on the best way to bring about the mass behavioural change required if we are to reach net-zero. Even the concept of offsetting is gaining more acceptance, not least due to industry initiatives calling out known weaknesses such as inflated baselines and dubious additionality.
We fully support the various efforts to raise the bar on the key attributes to help ensure higher integrity carbon projects. Creating more meaningful co-benefits including an equitable distribution of funds with local communities and efforts to protect natural capital will be key. Alongside this, new entrants have come into the carbon market, exchanges are providing market participants with more liquidity and companies like Viridios are providing analytics commonly seen in most traditional asset classes.
The critical horizon of 2030 on the long journey to net-zero is now only 7 years away. It is great that increasing numbers of major corporations are acknowledging that a properly functioning carbon market is a powerful tool to help manage their climate risk exposures.
EF: Do you believe that global growth is now being driven by these big organisations?
EL: Absolutely – not least due to the 80:20 rule. Large companies in all the major sectors are committed to a decarbonisation journey. A key theme that has emerged over the last 12 months is large financial institutions offering carbon services to clients. We're seeing large commercial and investment banks looking at how to embed carbon in investment and lending products, which is a very strong indication of the potential magnitude of this market.
Viridios is well positioned to cater for this growing demand. We are seeing increased demand for key analytics such as historic price data for stress testing and value at risk (VAR) calibration, real time price information for end of day marks and project analytics for marketing material and valuations. Large companies committing to decarbonisation, financial institutions embedding carbon in investment and lending products and growing demand for carbon pricing data are all important developments in scaling the market. I believe carbon has the potential to be as big as any hydrocarbon commodity.