Establishing voluntary carbon markets (VCMs) could further help incentivise businesses in the Middle East and North Africa (Mena) to think long term, as the region is an ideal staging ground for the growth and maturation of carbon markets, according to Nasdaq.
"The development and growth of sophisticated capital markets in Mena over the past 20 years means that the region is well-placed to support decarbonisation through channelling capital to carbon projects/initiatives," Nasdaq said in a white paper.
Stressing that the opportunity is evident, and the region has made progress toward capitalising on VCM, it highlighted the Egyptian Exchange’s launch of a VCM as part of the COP27 summit.
The exchange, which has recently worked with Qatar’s Global Carbon Council to list verified carbon credits, provides issuing Egyptian companies a link to both local and global investors.
The objective is to spur investment in climate-mitigation projects, while also improving credit quality, market access and transparency.
Capital markets in Mena have evolved greatly, becoming more sophisticated, resilient and reliable. However, various structural obstacles present a challenge to carbon credits growing and maturing as an asset class, according to the report.
"Overcoming these roadblocks will require stakeholders in the region to work in concert to solve problems at a root level and lay the building blocks for long-term growth," it said.
As an area susceptible to climate change impacts, it said the Mena region is an ideal staging ground for the growth and maturation of carbon markets.
Entities across the Mena capital markets spectrum must tackle the lack of awareness, standardisation, transparency and regulatory alignment before they can open the door to capital flows and meaningful climate change mitigation, it said.
"Building a strong infrastructure for developing, verifying, trading, registering and retiring these assets will be essential to those efforts and the realisation of benefits by countries, participants and populaces," the paper said.
Opportunities are abound for climate action and investment — but to unlock those benefits, voluntary carbon markets need dependable infrastructure to drive market efficiency, transparency and integrity, it said, adding carbon credits are on the way to becoming an institutionalised financial asset.
First introduced as part of the United Nations’ 1997 Kyoto Agreement, they were created to leverage market dynamics in controlling and reducing greenhouse gas emissions. Today, carbon credits are in wide use.
Yet to make the next step towards becoming a fully-fledged asset class, market infrastructure needs to be improved and standardised to support better efficiency, transparency and access for all participants, according to the white paper.
