We had the pleasure of working closely with the carbon analysts at the leading carbon ratings agency BeZero Carbon over the last few months.
BeZero are setting themselves up as the leading carbon credit ratings agency globally, with more than 280 carbon projects rated on their platform, covering more than half of the current liquidity on the Voluntary Carbon Market (VCM).
The global VCM was valued at around US$2bn in 2021. It is expected to reach between $10bn and $40bn by 2030 according to sources.
Each carbon credit trading on the VCM is a reduction or removal of emissions of carbon dioxide to compensate for emissions made elsewhere.
With regulations such as the EU Carbon Entry Tax (Carbon Border Adjustment Mechanism), importers in the EU will need to buy carbon credits worth the emission implied in the amount imported from the 1st Jan 2026. This will have huge implications on the VCM and volumes traded.
There has been increasing coverage of carbon projects in the media recently, questioning their real efficacy, so the need for ratings agencies to assess their quality is growing.
As equity research analysts, we were impressed with the methodology and the analysis conducted on these projects.
We could also draw several parallels between the role of an equity research analyst in the financial industry, and that of a carbon credit ratings analyst: i) Thorough analysis of an instrument following a detailed methodology, ii) Determination of a rating based on its quality, iii) Writing detailed and intelligible research notes and iv) Presenting the findings to the financial market.
Given that the role of a carbon ratings analyst did not exist two years ago, we have little doubt that the emergence of VCM analysts will grow rapidly as the market follows the same trajectory as for the equity and bond markets.
Watch this space.