21 Jun Case – Making the Sale of Carbon Credits Easier: Tokenization of Credits Arising out of Forest Assets
Sustainability-related issues, and especially sustainability that allows for satisfactory and considerable financial return, are and will remain at the top of the agenda for the twenty-first century, having increasingly gained space among consumers, the media and the market in recent years. What to do? How can we be part of this? How can we be successful in this market? These are some of the common questions asked by private sector professionals concerned with environmental issues, and who are willing to shift their investments towards practices that meet, together, both corporate and social-environmental interests; in other words, the Environment, Social and, Governance (ESG) practices. This is precisely the context in which Canopée was set up, in 2020.
Canopée is a company comprised of a small group of entrepreneurs and executives of different nationalities, who have come together to promote measures for the environment, and for communities located close to protection and preservation areas. The purpose of the group is to manage social-environmental projects, whether directly or indirectly by means of partnerships with landowners, in order to preserve and protect the areas subject to deforestation or degradation, as well as to develop reforestation programs.
Based on such partnerships, landowners agree to protect the specific areas and receive compensation for such efforts, part of which is allocated to purchase new pieces of land, with the same purposes. The collateral to back the credit comes from the protection efforts and the ecosystem services provided by the assets – the forest assets.
Examples include the carbon credits, which Canopée issues and assesses, according to its own metrics and methodology, duly certified by specializing entities.
The recurring question, after all, is how is it possible for the carbon credits to be rapidly and safely marketed?
The cycle begins with the issue of such credits, which are thus recognized as assets, representing a portion of the carbon ton that was not issued or that was sequestered by the forest assets. Such portions are calculated electronically, which process is referred to as tokenization, whereby digital tokens are issued on a platform using blockchain technology, representing parts of the generated carbon credits, to facilitate the sale thereof.
Hence, it is Canopée’s methodology, followed by specific certification, and the blockchain system used in the process, which provide the market with a safe, fast and transparent means to process trades for players interested in neutralizing their emissions.
According to social-environmental principles and sustainable development, and thanks to the multidisciplinary background of its team, VBSO has advised the Canopée group, considering the complexity of the aforementioned transactions, especially the legal and regulatory structure of the model it uses.