The global data and research provider aims to drive the growth of the voluntary carbon market by helping to overcome integrity and transparency issues.
Global data and research provider MSCI plans to expand its climate solutions offering and strengthen its Voluntary Carbon Market (VCM) expertise with the acquisition from the British Trove Research.
Founded in 2015, Trove is a resource for carbon markets intelligence that combines sector knowledge with proprietary data and models. Over the past three years, the company has focused on tracking companies’ climate commitments and providing data and insights into VCMs through a single platform.
Oliver Marchand, head of climate research at MSCI ESG Researchtold ESG that VCMs are an “essential part” of financing the transition to a low-carbon economy and supporting businesses to achieve their net zero targets.
However, he acknowledged that the market faces challenges that need to be overcome, including a lack of reliable data, credit integrity concerns and an evolving policy environment.
“As regulators bring clarity to the rules of this market, there will be increasing demand for robust, clear and effective decision-making tools,” Marchand said. “Companies are likely to accelerate purchase offsets on their journey to net zero as they gain confidence in the integrity of credit offsets.”
He added that integrating Trove’s expertise in the global carbon credit market with MSCI’s end-to-end climate solutions will accelerate the expansion of the company’s climate proposition and meet the demand from corporates, institutional investors and other capital market participants for “transparent and credible insights” on VCMs.
VCMs ease the trading of carbon credits that do not count towards companies’ mandatory decarbonisation obligations, such as those under the EU Emissions Trading System (ETS). In 2019, the majority of carbon credits purchased from VCMs came from projects in developing countries value of the market to almost $2 billion by 2022.
The Integrity Council for the Voluntary Carbon Market (ICVCM) is the body responsible for the supply side of VCMs, while the Voluntary Carbon Markets Integrity Initiative (VCMI) introduces demand-side rules for entities using carbon credits.
Marchand described the two companies as having ‘complementary strengths’ The acquisition of Trove is expected to help MSCI create more products for the broader carbon market ecosystem, including banks, exchanges and project developers.
He added that this will enable MSCI to provide insight into companies’ transition plans, the quality of existing carbon credits and the outlook for carbon credit pricing. It will also allow them to examine the feasibility, credibility and cost-effectiveness of companies’ decarbonization strategies.
Guy Turner, CEO of Trove, said combining the company’s carbon market data and analysis with the “scale and breadth” of MSCI’s sustainability and financial data will enable the creation of “world-leading climate solutions”.
According to a recent study by Trove, investments in carbon credit projects have has risen sharply over the past decade. Trove’s research found that $36 billion was invested in such projects between 2012 and 2022, with half of this amount spent in the last three years. Currently, 246 VCM projects cover an area equivalent to the size of Italy’s landmass, with industry experts predicting growth of between $10 and $60 billion by 2030.
Research Research from Forest Trends’ Ecosystem Marketplace found that companies participating in VCMs tend to demonstrate leadership in climate action, responsibility and ambition.
According to the study, companies that purchase carbon credits outperform their counterparts that do not, and are actively reducing their emissions at an accelerated rate compared to their peers. The research shows that companies that purchase carbon credits are almost twice as likely to reduce carbon emissions year-on-year, indicating a strong commitment to carbon reduction.
MSCI will also use Trove’s data and analytics to help develop new quality criteria for VCMs. This data will help promote and shape emerging mechanisms, such as corresponding adjustments and carbon tax limit rules, as well as new standards and guidelines.
Marchand said MSCI customers will have access to and benefit from more “comprehensive and consistent” data sets, tools and reports, which “enhance their ability to make informed investment decisions, manage risks and capitalize on investment opportunities.”
In SeptemberTrove launched its ‘VCM Country opportunities and risk index‘ to help buyers and sellers of carbon credits assess market-related risks. The index provides a detailed analysis of climate policies, regulations and political risks in twenty countries where more than 3,400 voluntary carbon projects are underway, representing more than 80% of all carbon credit emissions.