Strategizing carbon credit portfolios for cost-effective compliance and industry leadership With the mounting pressure to achieve carbon neutrality after reaching peak emissions and the value of carbon assets on the rise, corporations should proactively discover their own carbon assets and strategically develop them. For example, they require carbon credits to address two primary drivers of demand: –Compliance requirements: companies engaged in compliance carbon markets or bound by international mechanisms, such as CORSIA, require immediate access to carbon credits. These immediate needs prioritize credits from validated, cost-competitive projects with accelerated delivery timelines. –Market-driven commitments: companies pursuing voluntary targets (e.g. Science Based Targets initiative – SBTi) or net-zero goals, typically set for 2040 or 2050, utilize carbon credits to support their decarbonization efforts and demonstrate commitment, reinforcing market leadership. By using carbon removal credits to neutralize residual emissions, credits enable organizations to achieve carbon neutrality, advancing mid- to long-term sustainability goals. A successful portfolio approach to carbon credit procurement consists of the following features Balancing short- and long-term objectives: a diversified portfolio of projects with varying timelines and technological maturity addresses both immediate and strategic priorities, with clear roles for different carbon credit types: –Carbon dioxide removals (CDR – e.g. direct air capture, mangrove afforestation) target residual emissions and align with SBTi/ISO net-zero frameworks. –Carbon reduction credits (e.g. renewable energy, energy efficiency) address ongoing emissions and support carbon neutrality claims. For example, through projects such as forest and mangrove regeneration, Mitsui O.S.K. Lines (MOL) – a Japanese shipping and logistics company – blends credits from NbS (nature based solutions), which support near-term emissions reductions as part of broader decarbonization efforts, and credits from TbS (technology-based solutions), which foster innovation and cost efficiencies over time, to support progress on dual timelines (see Case Study 3). Meanwhile, investing in vessels operating on green fuels directly addresses operational emissions, enabling the decarbonization of shipping and aligning with the International Maritime Organization (IMO)’s decarbonization pathway. Even so, these advanced fuels still generate emissions throughout their lifecycle. This necessitates not only investment in green fuel-powered vessels but also the development of a robust CDR ecosystem. Actively building the CDR ecosystem proves essential to address these unavoidable residuals by permanently removing CO2, while also supplying clean CO2 feedstock. The two strategies form a closed loop and play complementary roles along the decarbonization journey. Diversifying and hedging risk: sourcing credits from multiple project types mitigates risks of underperformance or unexpected challenges in individual projects. A portfolio approach spreads risks, enhancing stability and resilience in investments – an approach that has been adopted by corporations including MOL and Tencent (see Case Study 3 and Case Study 4). Aligning with Sustainable Development Goals (SDGs): a varied portfolio amplifies contributions to the 17 SDGs, offering broader environmental, social and economic impacts and reinforcing corporate sustainability leadership. Supporting regional and international connectivity: regional and international carbon credit trading helps integrate voluntary carbon markets and addresses fragmentation, as seen with frameworks such as ACCF. This interconnectivity cultivates a global perspective, equipping corporations to build impactful portfolios that capitalize on diverse market opportunities. Tencent, for example, has expanded credible carbon credit supplies through long-term ecosystem collaboration with a Singapore-based investor (see Case Study 4). Corporations should proactively discover their own carbon assets and strategically develop them. Asia’s Carbon Markets: Strategic Imperatives for Corporations 34

Asia's Carbon Markets Strategic Imperatives for Corporations 2025