Specific accounting standards are urgently needed for new asset types such as certified carbon offset credits, says a new report from Imperial College Business School.
The report, Financial Accounting for Carbon Finance: A New Standard for a New Paradigm, shows how emerging global carbon markets and new investable assets make the need for new accounting regulations more pressing in the fight against climate change.
The new accounting standards will also be a major step towards achieving “transparency” the researchers said. Despite the lack of clarity around accounting standards, in 2021 global carbon markets grew to a record $851 billion. Accounting standards – particularly around carbon credits – are now widely considered crucial to scaling up carbon markets and achieving net zero by 2050.
To achieve change report author Dr Raul Rosales said there needs to be a re-think on the definition of carbon offsets. Rather than being classed as intangible assets or inventories, carbon offsets should be considered as investable assets used as part of a bank’s offering to corporate clients for ‘offsetting’ and ‘hedging’ purposes.
The report, Financial Accounting for Carbon Finance: A New Standard for a New Paradigm, can be accessed here.
