An executive at JPMorgan Chase & Co. has warned that developers of carbon-credit projects may struggle to find banks to finance deals, unless the purchase contracts they enter live up to a number of basic standards.
“Ultimately, banks really don’t like unproven risks so if a contract is vague and depends on future talks, that gives the credit officers very little certainty and they’re very uncomfortable with that contingency,” Genevieve Ding, the bank’s Asia Pacific head of sustainability, said Wednesday at the Carbon Forward Asia event in Singapore.
Banks and investors would be more likely to enter such deals if contracts include multiyear purchase agreements, Ding said, noting that failure to deliver credits often isn’t a case of project failure, “but because of administrative, bureaucratic delays” associated with the construction of the deal.
The market for carbon credits has struggled to right itself after years of greenwashing allegations, which have dented demand among corporations looking for ways to offset their emissions. Banks have grown extra cautious in attaching their name to contracts, as examples of bad projects continue to surface. Earlier this year, the collapse of clean-cooking company Koko Networks racked up losses of $300 million for investors.
