Hong Kong: New Hong Kong business Allinfra recently joined forces with renewable energy provider Ultimate Carbon and private equity firm ADM Capital with the goal of listing carbon credit products on the local stock exchange.

The group announced last week that, as a pilot project to enter Hong Kong's emerging voluntary carbon-offsetting market, they will pool an initial US$10 million to finance decarbonization projects and purchase carbon credits.

We will be interested in HKEX (Hong Kong Exchange and Clearing), and eventually we would like to list our credits on exchanges like HKEX,” Bill Kentrup, co-founder and head of Genesis for Olinfra, mentioned the exchange operator.

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This partnership is an example of how start-ups are increasingly interested in business opportunities created by greenhouse gas emitters seeking to secure carbon credits to meet their climate goals. They can offset the carbon footprint they are unable to reduce themselves thanks to the system.

Hong Kong-listed China Carbon Neutral Development Group announced last week that it has signed a tentative agreement with Singapore boutique asset manager Northwaters Capital to investigate cooperation in the carbon business.

The Carbon Asset Global Opportunity Fund, a dual currency fund that invests in international carbon credit assets, was just launched by China Carbon Neutral Development.

According to the Ecosystem Marketplace, the value of global voluntary carbon market transactions increased nearly four times from 2020 to close to US$2 billion last year.

According to a prediction made by the Taskforce on Scaling the Voluntary Carbon Market last year, trade could reach US$50 billion annually by 2030. Credit vendors can finance their projects to reduce carbon emissions.

Allinfra, ADM Capital, and Ultimate Carbon's initial focus will be on credits produced by natural capital projects that capture carbon dioxide from the atmosphere and store it in biomass, such as reforestation, grassland rehabilitation, and sustainable agriculture.

They will seek to purchase a portion of the credit through agreements prior to their generation and verification to assist project developers in producing "millions of tons" of high-quality carbon credits each year.

According to Kentrap, they will also try to buy stake in some projects. In the coming years, he anticipates increasing the cost of carbon credits for natural capital projects, which currently range between US$6 and US$40 per tonne.

Agroforestry, which involves growing trees or shrubs along crops or pastures, and mixed farming are examples of practices that are part of sustainable agriculture and increase the productivity of land.

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According to Kentrap, among the projects we are considering are plans for the development of renewable energy. "Many natural capital projects can be combined with renewable energy projects because many developers of renewable energy have projects in remote locations."

According to CEO Nicolas Aguzin, HKEX is close to launching an exchange-based voluntary carbon credit trading market, in a bid to elevate the city's profile as a regional hub for sustainable finance.

To encourage partnerships, it established the Hong Kong International Carbon Market Council in July. Banks, businesses that produce greenhouse gases, and people who can take out loans are members.

ADM Capital has experience in forestry projects; In 2016, it launched a facility with BNP Paribas, UNEP and the World Agroforestry Centre, which aimed to provide up to US$1 billion to finance sustainable agricultural and renewable energy projects in Indonesia.

US-based UPC Renewables, one of the region's leading developers of solar and wind farms, has a branch called Ultimate Carbon.

Software for the management of sustainability data has been created by Allinfra that can collect information on verifiable and auditable greenhouse gas emissions of clients' assets.

It aims to increase the validity and value of customers' carbon credits obtained from emissions reduction projects by implementing blockchain technology, which makes transaction data immutable, as well as providing a data collection tool with unique identity and digital footprint .

The collection of emissions data can be automated, which could significantly cut costs and turnaround time, but according to Kentrup, the human brain is still needed for data validation.

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As long as you're not removing critical evaluation steps to achieve this kind of efficiency, he said, "anything that makes the process more efficient is great."