MSCI launches new ratings to assess carbon credit projects

MSCI has launched the MSCI Carbon Project Ratings to improve assessment of integrity and risks.

This comes amid a lack of confidence in the quality and integrity of carbon projects, which is causing some buyers, investors and developers to hesitate, said head of MSCI carbon markets Guy Turner.

He noted that “carbon markets are critical to accelerating decarbonisation and meeting net-zero goals”. However, only 5 per cent of projects on the market are considered as being of very high integrity.

The new ratings thus seek to improve understanding of a project’s impact on the climate, environment and society, as well as legal and ethical risks, said the financial data provider on Monday (Sep 23).

A first in the industry, the MSCI Carbon Project Ratings assesses more than 4,000 projects in the global carbon credit market.

Each project is assessed against six criteria and over 50 sub-criteria, which are assessed on a scale of one to five, where one indicates a likelihood of low integrity, and five indicates high integrity.

These criteria are broadly categorized under emissions impact and implementation integrity, said MSCI.

Emissions impact considers how much carbon the project has reduced or removed from the atmosphere, whereas implementation integrity looks at how the project does so.

The resulting rating is a composite of these two categories, ranging on a seven-point scale from AAA to CCC.

Projects rated AAA are very likely to achieve a 1-tonne emissions impact per credit. These projects also support positive social and/or environmental outcomes, while upholding legal and ethical standards.