For a market created to help address the climate crisis, the biggest challenge may not be a shortage of carbon credits. It may be whether businesses, investors and governments can trust what those credits represent. As climate finance grows, the value of a carbon credit will increasingly depend on the credibility of the emissions reduction or removal it represents.
This is becoming an important consideration for businesses seeking to meet climate commitments while managing financial and reputational risks.
A company can purchase thousands of credits, but that investment becomes difficult to defend if the underlying project is later found to have overstated its climate impact. The question is therefore shifting from how many credits a company can buy to whether those credits can withstand scrutiny.
That challenge is particularly significant because the carbon market remains fragmented. Different registries track the issuance, transfer and retirement of credits, making it difficult to establish whether the same emissions reduction has been counted more than once. Concerns over poor-quality offsets have consequently weakened confidence in parts of the market and made transparency increasingly important.
Singapore’s support for the Climate Action Data Trust, or CAD Trust, illustrates how the market is responding. The platform links and harmonises information from major carbon credit registries to improve tracking throughout the credit life cycle. Within a year of its launch, six registries representing about 85 percent of carbon credits issued to date had joined the platform, providing a more integrated view of the market.
For businesses, this infrastructure is more than a technical improvement. Better tracking can reduce double-counting risks and strengthen the credibility of climate claims. It can also help financial institutions and investors assess risks and identify credible opportunities in an increasingly complex market.
But transparency alone will not determine which credits succeed. Buyers are also becoming more interested in whether projects deliver measurable and lasting climate benefits. Credits could therefore become less interchangeable, with value increasingly tied to project quality.
The recent agreement between Royal Bank of Canada and Chestnut Carbon provides an example of this shift. RBC agreed to purchase Improved Forest Management credits from Chestnut, directing carbon-market funding toward privately owned forests while supporting practices intended to improve forest health and maintain carbon storage. The transaction reflects growing corporate interest in nature-based carbon removal.
The commercial implications are significant because quality can influence price. Higher-rated Improved Forest Management credits have been commanding a premium over lower-rated credits, showing that buyers are increasingly willing to pay for stronger evidence of additionality, permanence and carbon storage. For businesses, the cheapest credit may therefore not be the most valuable if its climate claims carry greater reputational or regulatory risk.
This could create opportunities for landowners and project developers where forests and other natural assets have traditionally generated limited income. Carbon finance can provide an additional revenue stream that makes conservation and responsible land management more commercially attractive. When keeping a forest standing becomes economically competitive with clearing or exploiting it, climate action becomes part of an investment decision rather than simply an environmental commitment.
The challenge is ensuring that this capital reaches projects capable of delivering credible outcomes. That is where international frameworks such as Article 6 of the Paris Agreement become important. Singapore’s recent agreement with Laos establishes a framework for developing and transferring carbon credits while introducing mechanisms designed to prevent the same emissions reduction from being counted towards the climate targets of both countries.
For Laos, the arrangement could help attract international finance into emissions-reduction and sustainable development projects. For Singapore, it expands access to high-integrity carbon credits while supporting its ambition to become a regional hub for carbon trading and climate finance. It also shows how governments can connect private capital with climate projects across borders.
The wider business lesson is clear: markets attract capital when participants understand the rules, can assess risks and trust the assets being traded. Carbon markets are no different. Stronger systems for verification, tracking and accountability should make it easier for businesses and financial institutions to commit capital with greater confidence.
This presents a significant opportunity for Africa. The continent has substantial natural capital, including forests, wetlands and other ecosystems that could support carbon-removal and emissions-reduction projects. But attracting investment at scale will require more than identifying these opportunities; countries will need credible systems for measuring climate outcomes, protecting communities, tracking credits and demonstrating that the benefits sold to international buyers are real.
This also changes how businesses should view climate strategy. Carbon credits should not simply be another purchase made to meet an emissions target or demonstrate environmental responsibility. Companies will increasingly need to consider where their climate spending goes, what outcomes it supports and whether those outcomes can withstand scrutiny from investors, customers, regulators and the wider public.
The carbon market is entering a more demanding phase. Transparency platforms are strengthening its infrastructure, buyers are placing greater value on quality, and governments are developing frameworks to facilitate cross-border climate finance. For companies and investors, this creates both an opportunity and a responsibility to distinguish credible climate assets from those carrying greater risk.
The future of carbon markets will not be determined simply by how many credits are issued or traded. It will depend on whether the market can convincingly demonstrate that each credit represents a real climate benefit and that the capital behind it is delivering value. Carbon may be the commodity being traded, but trust is increasingly becoming the asset that determines its worth.