KUALA LUMPUR (Aug 15): Bursa Malaysia Bhd is launching a voluntary carbon market (VCM) exchange by the end of 2022, which will enable companies to purchase voluntary carbon credits from climate-friendly projects and solutions.

In a statement on Monday (Aug 15), the exchange operator said the inaugural transaction will be by way of auction.  

The VCM is meant to support financing for projects and solutions to reduce, remove, or avoid greenhouse gas (GHG) emissions, in line with growing awareness of climate action. 

Bursa wants to enable both buyers and suppliers to transact high-quality carbon credits at transparent prices through the VCM exchange.

It intends to offer standardised carbon credit products for trading via a rules-based VCM exchange.

“There will be distinct product categories for carbon credits derived from nature-based solutions and technologies that reduce or remove carbon emissions. 

“The VCM exchange will aggregate carbon credits that share similar traits and fundamentals, with vintages [from] 2016 onwards,” Bursa said.

It added that products will be labelled to differentiate between carbon credits sourced in Malaysia and globally.

By end-2022, Bursa said a supply of carbon credits is to be sold via auction to interested buyers.  

“The auction will enable price discovery for the new standardised carbon credit products to be listed on the VCM exchange.

“The clearing price from the auction will establish a baseline demand for carbon credits in Malaysia, providing a reference point for secondary trading for market participants.

“In addition, it will help provide clear price signals to support the development of domestic carbon credit projects,” it said. 

Bursa said it will adopt the Verified Carbon Standard (Verra) to ensure high integrity of carbon credits offered through the VCM exchange. 

According to Bursa, Verra is a widely recognised standard in the voluntary carbon market, accounting for nearly 70% of voluntary carbon credit issuances globally. 

“Verra has developed transparent, credible, and robust methodologies covering a wide array of climate-friendly activities, such as nature-based projects, methane avoidance or capture, sustainable agricultural land management, green mobility and others.

“Using Verra standards, carbon credit projects will be subjected to robust assessment that ensures environmental claims are appropriately measured and independently verified, thus preventing greenwashing claims,” it said. 

Bursa highlighted that it signed a memorandum of understanding with Verra in May, which focuses on capacity building. 

Bursa chief executive officer Datuk Muhamad Umar Swift believes the VCM exchange can serve as an important lever in realising Malaysia’s net-zero GHG emissions aspirations, as well as supporting the private sector’s voluntary climate commitments and decarbonisation journey. 

“The VCM will act as a catalyst, encouraging investments in high-quality offsetting projects that can generate positive environmental and societal benefits,” he said. 

Bursa indicated that it had continued to engage with various stakeholders towards the development of a carbon market. 

“Stakeholder engagement is key in facilitating greater understanding among industry players to enable their participation in the VCM exchange, and in order to meet ESG (environmental, social and governance) requirements required by parties such as lending institutions,” Umar said.

“With better understanding of carbon credit origination and listing processes, stakeholders will be able to develop capacities to be part of the carbon-credit supply chain. This will also help the industry to use the VCM to reduce their carbon footprint.” 

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Bursa Malaysia teams up with Verra to further strengthen VCM ecosystem