Accounting for carbon – how new rules could affect markets

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illuminem summarises for you the essential news of the day. Read the full piece on Responsible Investor or enjoy below:

🗞️ Driving the news: U.S. regulators are preparing a new accounting standard for environmental credits, a move that could fundamentally reshape carbon markets
• The standard aims to clarify how companies should recognise, value, and disclose carbon offsets, renewable energy certificates, and other environmental credits, instruments now widely used but inconsistently reported across industries

🔭 The context: As companies race to meet climate pledges, the voluntary carbon market has surged, yet remains fragmented and plagued by inconsistent methodologies and low-quality credits
• Current accounting practices vary widely, limiting comparability for investors and weakening market integrity. Establishing a uniform U.S. standard would set a powerful global precedent

🌍 Why it matters for the planet: High-quality accounting rules would improve transparency, reduce greenwashing, and direct capital toward credible emissions-reduction and carbon-removal projects
• This strengthens trust in environmental markets and helps ensure corporate climate strategies rely less on questionable offsets and more on verifiable impact, a critical step for delivering genuine decarbonisation

⏭️ What’s next: Draft guidance is expected in 2026, covering recognition, measurement, impairment, and disclosures
• Companies may need to overhaul internal systems and reassess the balance between offsets and direct emissions reductions
• Investor scrutiny is likely to rise as clearer reporting exposes the true climate value of environmental credit portfolios

💬 One quote: “Transparent and comparable accounting for environmental credits is essential if markets are to support real decarbonisation”

📈 One stat: Voluntary carbon markets exceeded $2 billion in value in 2024, yet up to 40% of credits assessed globally have shown weak or unverifiable climate benefits

See on illuminem's Data Hub™ the sustainability performance — carbon credit purchases, total emissions, and climate targets of thousands of companies

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