At a recent panel discussion hosted by Slaughter and May’s Samantha Brady at the ACT’s “Tomorrow’s Treasury: The Crucial Conversations Conference”, NatWest’s Head of Carbon Markets, Chris Spry, joined Rodford & Partners’ Carel van Randwyck to explore the evolving landscape of carbon and nature markets and the ways in which treasury professionals can leverage these opportunities. The session provided a thorough overview of market developments, regulatory trends, and practical strategies for integrating environmental considerations into financial planning.

The structure of carbon markets: the panel clarified the distinction between compliance and voluntary carbon markets. Compliance markets, driven by government policy, allocate emission allowances to industries such as steel and electricity, with companies required to purchase additional allowances if they exceed their quota. Voluntary markets, meanwhile, allow organisations to reward outcomes through the purchase of carbon credits associated with projects like renewable energy and reforestation.

Integrity and transparency: as the carbon market matures, the Integrity Council for Voluntary Carbon Markets has introduced robust principles to ensure that projects issuing carbon credits meet high standards of integrity. This fosters greater trust and transparency, essential for confident market participation.

Strategic value for treasurers: carbon credits are increasingly being viewed not just as compliance tools, but as strategic assets. Companies can account for future carbon credits as inventory, amortising them as they are retired against emissions in future years. With growing demand and the likelihood of price increases, treasurers are encouraged to consider early investment in carbon credits as part of long-term financial planning.

Risk management and resilience: integrating carbon credits and nature-market investments into financial strategies helps manage operational and reputational risks, especially as customers and regulators demand stronger decarbonisation efforts. Such activities can also contribute to lowering operating costs and enhancing enterprise resilience.

Nature-based solutions and additional benefits: the panel highlighted how nature-market projects, such as rewilding and flood management, can deliver co-benefits beyond carbon reduction. These initiatives can mitigate physical risks to infrastructure and communities, offering added value for organisations investing in environmental projects.

Stay informed and start small: the carbon and nature markets are rapidly evolving. Treasurers should familiarise themselves with market developments and consider initial, manageable investments as part of their sustainability strategy.

Embed internal carbon pricing: establishing internal carbon pricing allows organisations to manage sustainability performance and prepare for future regulatory changes, making environmental factors part of daily financial decision-making.

Integrate carbon credits into financing: explore the possibility of linking carbon credits with green bonds or sustainability-linked financing, potentially reducing borrowing costs and demonstrating commitment to climate goals.

Assess strategic fit: align carbon market activities with your organisation’s risk profile, resilience plans, and decarbonisation targets. Early engagement will position your business to respond proactively as the market grows in scale and importance.

Embrace transparency and integrity: seek out verified, high-quality projects and adopt transparent practices to build trust with stakeholders and ensure compliance with emerging market standards.

As Chris Spry emphasised, carbon and nature markets are not just regulatory obligations – they are valuable mechanisms for environmental stewardship, risk management, and financial innovation. Treasurers who engage thoughtfully and proactively will be well-placed to support their organisation’s transition to a more sustainable future.