Carbon credits, also known as carbon units or carbon offsets, are certificates, each representing 1 tonne of CO2 avoided or removed from the atmosphere through carbon projects compared to baseline emissions. There are many different carbon projects, ranging from nature-based solutions like reforestation to renewable energy initiatives.

These projects are then verified for their impact, and their emissions reductions or removals are converted into carbon credits and listed on recognized registries.
The credits are then sold on the market to organizations that wish to address their carbon footprint or to investors who want to trade with the credits. Ultimately, carbon credits are purchased by businesses to compensate for their emissions and are then retired by the registry. Carbon credits from high-quality projects with co-benefits, like nature-based solutions, are often more desirable by purchasers and have higher-valued credits due to their benefits.

The demand for carbon credits is increasingly driven by new market shifts and regulations. Corporations are pressured to meet ambitious emission reduction targets and sustainability goals, often set through initiatives like the Science Based Targets initiative (SBTi). Purchasing carbon credits allows them to compensate for emissions that cannot be eliminated, showcasing their commitment to environmental responsibility and satisfying stakeholder expectations.

Investor and consumer pressure, alongside regulatory compliance requirements like the new Corporate Sustainability Reporting Directive (CSRD) and the Carbon Offsetting and Reduction Scheme (CORSIA), further fuels the corporate demand for carbon credits. The adoption of rigorous standards and third-party audits further enhance the credibility and appeal of carbon credits.

Governments also drive demand for carbon credits through commitments under the Paris Agreement and Nationally Determined Contributions (NDCs). Regions like the EU and California have established emissions trading systems (ETS), creating structured demand.

As the urgency to address climate change intensifies and more ambitious emissions reduction targets are set, the demand for high-quality carbon credits is expected to rise, driven by corporate sustainability efforts, government climate policies, and the recognition of the benefits of carbon credit projects, particularly those focused on nature-based solutions that support Sustainable Development Goals (SDGs).

1. Market growth: The global carbon credit market is expected to grow significantly, with projections suggesting it could reach up to $50 billion by 2030, compared to $300 million in 2018, according to the Taskforce on Scaling Voluntary Carbon Markets.
   
   
2. Regulatory support: Increasing regulatory measures globally aim to curb carbon emissions, compelling companies to compensate for their carbon footprint. For example, the European Union’s Fit for 55 package aims to reduce net greenhouse gas emissions by at least 55% by 2030, potentially increasing demand for carbon credits.
   
   
3. High potential returns: As regulations tighten and the demand for carbon credits increases, their value is likely to rise. Early investors could see significant appreciation in value, mirroring trends observed in early environmental markets.
   
   
4. Diversification: Adding carbon credits to an investment portfolio can reduce risk through diversification. Carbon credits have shown a low correlation with traditional asset classes like stocks and bonds, providing stability even in volatile market conditions.
   
   
5. Social and environmental impact: Investing in carbon credits contributes to funding projects that reduce emissions or remove carbon from the atmosphere, such as reforestation or renewable energy projects. This not only helps combat climate change but also supports local communities and biodiversity.
   
   
6. Incentive mechanisms: Certain jurisdictions offer tax incentives or credits for companies that invest in carbon offsets, reducing the overall cost of investment while fulfilling regulatory requirements.

The company participates in carbon credit markets by investing in early-stage environmental projects that generate carbon credits through activities like reforestation and ecological restoration. By securing a portion of these credits at discounted prices, the company can later sell or trade them on carbon credit markets for potential financial returns.

The value of carbon credits that the company invests in is influenced by several factors. Market demand for carbon credits, driven by regulatory policies and corporate sustainability commitments, plays a significant role. Additionally, the quality and scale of the environmental projects generating the credits, along with their verification and certification processes, affect credit values.

The company ensures the credibility and legitimacy of the carbon credits it trades through rigorous verification and certification processes. It works with reputable third-party organizations to verify that the environmental projects meet established standards and criteria. This verification process adds transparency and credibility to the carbon credits, enhancing their market value and investor confidence in trading activities.

Nature-based solutions can offer a multitude of co-benefits in addition to carbon sequestration, making them particularly impactful and desirable. Benefits of nature-based solutions include:

1. Carbon sequestration: Healthy ecosystems act as natural carbon sinks, removing carbon dioxide from the atmosphere and storing it in vegetation, soil, and other organic matter. Nature-based carbon solutions protect, restore, or sustainably manage these ecosystems.

2. Biodiversity conservation: Nature-based carbon solutions often involve the preservation or restoration of vital natural habitats, which helps to protect and revitalise biodiversity and maintain ecosystem services essential for human well-being.

3. Sustainable community development: Many nature-based carbon solutions are located in developing countries, providing opportunities for sustainable economic development, job creation, and improved livelihoods for local rural communities.

4. Other co-benefits: In addition to climate mitigation, nature-based solutions can offer a range of co-benefits, such as improved water quality, soil conservation, biodiversity enhancement, resilience to natural disasters, and local community upliftment.

The company aims to achieve a positive environmental impact through investments in projects focused on reforestation, ecological restoration, and conservation efforts. By supporting these nature-based solutions, the company contributes to carbon sequestration, biodiversity conservation, and the restoration of ecosystems.

The company employs various tools and methods to measure and monitor the environmental outcomes of its funded projects. This includes tracking metrics such as carbon sequestration rates, biodiversity indicators, and the overall health of restored ecosystems. Regular assessments and reporting ensure transparency and accountability in achieving environmental objectives.

In terms of promoting sustainability and ecological restoration, the company has long-term goals of expanding its portfolio of impactful environmental projects. This includes scaling up investments in large-scale reforestation initiatives, partnering with local communities to implement sustainable land-use practices, and advocating for policy measures that support nature-based solutions and carbon sequestration. By advancing these goals, the company aims to make meaningful contributions to global efforts towards environmental sustainability and climate resilience.