The path to net zero:

Investing in carbon
markets
As the drive to curb global warming gathers pace, carbon markets
have become increasingly fundamental to achieving net-zero
greenhouse-gas emissions.

© IGphotography/Getty Images

January 2022
 In this episode of the Future of Asia Podcast, senior
partners and leaders Oliver Tonby and Badrinath
Ramanathan join Adeline Aw, vice president
of Environmental Sustainability at Singapore’s
Economic Development Board (EDB), and
Thongchie Shang, managing director of Enterprise
Strategy at GIC, to discuss some of the insights in
the recent joint report by GIC, EDB, and McKinsey,
Putting carbon markets to work on the path to net
zero.1 An edited version of their conversation follows.
For more conversations on the Future of Asia,
subscribe to our podcast.
Oliver Tonby: Hello, I am Oliver Tonby. Welcome to
the Future of Asia Podcast series. The Asian century
has begun. Asia is the world’s largest regional
economy. It’s at the center of the technology
revolution. It’s at the center of consumption growth
and consumers of the future. It’s at the center of
climate risk and what we need to do to mitigate it. As
our economies evolve further, Asia has the potential
to fuel and shape the next normal. In each episode,
we are going to feature conversations with leaders
from across the region to discuss what Asia’s rise
means for businesses everywhere.
Today’s topic is investing in carbon markets, and
I am joined by three distinguished panelists:
Adeline Aw is the vice president of environmental
sustainability at the EDB, Thongchie Shang is the
managing director of enterprise strategy at GIC,
and Badri Ramanathan is a senior partner
at McKinsey.
All three of our panelists today are authors of
a newly released report called Putting carbon
markets to work on the path to net zero. Let’s just
understand a little bit about who you are before
we get into the content. Let me ask each of you:
we’ve now been through one and a half, maybe two
years, of COVID-19. What are some of the learnings,
personal or professional, that you’ve had during
that period?
1
“Putting carbon markets to work on the path to net zero,” McKinsey, October 28, 2021.
2 The path to net zero: Investing in carbon markets
Thongchie Shang: On the personal side, I’ve
learned that my daughters are delightful when
they are playing well with each other. I have a
seven-year-old and a five-year-old. And during
COVID-19 and the work-from-home and home-
based learning, I’ve had much more exposure to
that, but they are terrible when they’re fighting with
each other and I’m on a Zoom call with my boss and
the management committee.
On the professional side, I think I’ve really learned
about the importance of overcommunicating to my
team, to my stakeholders, with the people I work
with. Because they can’t really pick up on some of
the subtle cues that we are all used to in meetings.
And you can’t really stand up and whiteboard
a solution anymore. So it’s really about being a
lot more prepared and a lot more deliberate in
communicating the points.
Oliver Tonby: Excellent. Thank you,
Thongchie. Adeline?
Adeline Aw: Thanks, Oliver. Through the last
couple of years, I really learned how adaptive, how
innovative, and how resilient we can all be in the
middle of a real-life crisis. And that really came
through both professionally and personally for me.
Professionally, we had to do many things at the EDB
that we were not used to doing, including helping
the industry tide over a period of crisis, dealing with
the situation, both in their companies themselves
and with their employees at the EDB.
On the personal side, I think it’s about finding
new ways of interacting with family and friends in
the “new normal,” as everyone likes to call it. It’s
something that took some getting used to. But I
think we’re now in that new groove, and people are
kind of getting used to it. So that’s really something
that I learned through this entire experience.
Oliver Tonby: Indeed, indeed. Very hectic times.
Badri, last but not least, what are your reflections on
the last year or two?
Badrinath Ramanathan: Sure, Oliver. It’s of
course been quite a difficult time, but to focus on
the positive, I think what was brought home to
me is, sometimes a constraint can really open up
opportunities, right? We kept talking about how
digitalization might take a while to make progress,
and customers may not adopt certain things. And
suddenly, when they had no choice, things [started]
growing by leaps and bounds. So sometimes
constraints can lead to progress. And I just look at
the positive and what can we do to make the world a
better place.
Oliver Tonby: Superb. Thank you all. Let’s dig into
some of the content now. All three of you are core
authors of this report that you have just released
on carbon markets and how they can help us on
the path to net zero. Let’s start with the basics first.
Adeline, let me ask you, what are carbon markets?
Adeline Aw: We’re really in the middle of a low-
carbon transition right now. And what’s really
important is to help finance and bring to life projects
that can help us to remove and to avoid carbon
emissions. And that’s what carbon markets are for.
In the compliance space, carbon markets are
where you have an instrument called a carbon
allowance, or an offset, that’s used to meet
regulatory requirements to decarbonize. And
they are important because they place a price on
carbon, which can then influence business actions
to decarbonize.
In the voluntary-market space, on the other hand,
that’s where carbon credits are used on a voluntary
basis, and they are not for meeting regulatory
requirements. They allow corporates to meet
their corporate-finance commitments and drive
investment in carbon-avoidance and -removal
projects toward their goal.
Oliver Tonby: Exactly. And we’re going to come
back to this, the difference between voluntary
and compliance markets, in a second. But I want
to go to Thongchie first. Why is this important,
Thongchie, to have carbon markets? A carbon
The path to net zero: Investing in carbon markets
market doesn’t remove more CO 2. So why is
this important?
Thongchie Shang: Thanks, Oliver. I think it’s super
important and very interesting for us because
it really puts a price on what economists call an
externality. Like Adeline said, it puts a price on
carbon. Before the advent of carbon markets,
you had carbon being an unpriced byproduct of
industrial processes. People didn’t even think about
how much carbon was spewing into the atmosphere
from their corporate and personal activities. And
because we are working in a market society and
a capitalist system, that kind of byproduct was
not factored into the decisions of companies or
regulators or individuals.
But with carbon markets, for the first time you
have a price, an explicit cost, that decision makers
in companies and individuals will have to take into
account, because they are compelled to pay for
this price in the compliance markets. And there is a
willingness to pay for them in the voluntary space.
So for the first time, you can actually do things like
think about the economics of conservation and the
preservation of forests, as an example. Historically,
it’s been very hard to get good economics and, to
put it bluntly, a profitable business model from
preserving forests or mangrove swamps or planting
trees. It’s a public good. It requires taxpayers’
money to be pumped into it. It’s historically been the
province of governments and public policy. But with
a carbon price and a carbon market, you can have a
mechanism where the companies and foundations
and entities that are doing preservation activity
and planting trees are being able to monetize the
benefits of storing carbon and of capturing carbon.
And that gets traded in the market and incentivizes
private investors and private companies to allocate
capital to what is an activity that will be beneficial for
climate change.
So it’s really exciting because it harnesses the
power of market prices and market signals for
the good of the planet and for the fight against
climate change.
3
 ‘We’re really in the middle of a low-
carbon transition right now. And what’s
really important is to help finance and
bring to life projects that can help us to
remove and to avoid carbon emissions.’
–Adeline Aw
Oliver Tonby: How is that price set? Thongchie, let’s
stay with you for a second here. How does the price
setting happen?
Thongchie Shang: It happens slightly differently in
the compliance markets and in the voluntary market.
Take the compliance markets, which I think is the
most straightforward example. Here, the regulator
gets involved. The first step is that the government
or the regulator sets a cap on the total amount of
carbon emissions that companies can emit. And this
has been happening in real life—in the European
Union for about 20 years now. So companies that
emit more carbon than the regulatory cap have
to buy additional carbon allowances—otherwise
they’re in violation of the law and they get penalized.
And companies that emit less than the cap can sell
[the allowances].
So now you have these two sets of companies, those
that emit more and those that emit less, having to
trade with each other through intermediaries to be
able to balance out their carbon emissions so that
they meet the regulatory cap. And companies that
want to buy the allowances have to pay an explicit
price to the companies that sell them.
And what is that price that the companies will have
to pay? Well, that depends on the opportunity-cost
rate, the next best alternative, which is to reduce
output; and therefore, the carbon price is equivalent
4 The path to net zero: Investing in carbon markets
to the foregone output and value to that company.
Or they have to invest in carbon-abatement
technologies, like carbon capture and storage
or some other low-carbon industrial processes.
And that price therefore gets set according to the
marginal cost of reducing carbon.
So, economically, it’s pretty efficient. It’s almost a
textbook case of how you would price an externality
to get companies to internalize the cost of carbon in
their corporate decision making.
Oliver Tonby: Perfect. Thank you, Thongchie. I’m
now going to you, Badri. We’ve now heard the
terms compliance carbon markets and voluntary
carbon markets a few times. What’s the difference
between the two? And is there any difference
in the growth and the popularity of these two
different mechanisms?
Badrinath Ramanathan: Sure, Oliver. So, as
Thongchie said, compliance covered markets
[CCMs] are driven almost entirely by regulatory
actions. This has been happening for over 20 years.
Now, they’re not yet huge, but they are sizable
already. So we are talking about a market value
of about $100 billion worldwide, with the sort of
trading turnover of about $250 billion. So these
markets are becoming sizable, and they are driven
entirely by regulatory actions. This is not one market;
there are more than 20 such markets around the
world, and we expect 20 more to come online
soon, including recently China brought one of the
emissions trading schemes online.
So this space will develop. Now, just to contrast
this with the voluntary carbon markets, these
are still nascent and small. The total value of
these markets is about $300 million today—a
fraction of the size of the CCMs, if you will. But
they’ve been growing rapidly—at least 20 percent
a year for the last two years. And we do expect
that voluntary carbon markets will continue to
grow and will become as important as CCMs.
And this is a good thing because it gives more
avenues for folks to participate in the global carbon
market and to mitigate the emissions that are not
abatable immediately.
Oliver Tonby: You say there are more than
20 markets in place already. What are some of the
leading ones, and what are the learnings that we
have from there?
Badrinath Ramanathan: There are two large ones
in the US: one in California and another on the East
Coast. The European Union is actually one of the
earliest ones in operation, and [there are] a few
smaller ones in New Zealand. And, like I said, China.
I don’t want to give the impression that this is one
smooth market, operating sort of in a connected
way; these are all quite different, and the prices
can be quite different across [them]. But, of course,
the regulators do compare notes, and they do
look at each other and try to chart a way forward,
which might end up synchronizing these. The
mechanisms are also quite different. Some are an
open-auction kind of mechanism. Others simply
are allocated a certain amount of credits, and then
you go and trade them.
So what I’m trying to paint is a picture of variety,
but then I think this is actually a good thing,
because through this, we will actually discover
the most efficient mode of this market. As the
years go by, we’ll settle on something, which can
scale much more.
The path to net zero: Investing in carbon markets
Thongchie Shang: Just to add to that, Badri—I
think [the individual markets] are not just diverse
across the different compliance carbon markets
but also evolving over time. Just to take the largest
single one today, in the European Union, that is
also one of the oldest—like I mentioned earlier, it’s
been in existence for about 20 years. The European
Emissions Trading System [ETS] today is quite
different from the one ten years ago or 20 years
ago. I mean, it’s the same, but the details of the
regulations and the market mechanisms have
evolved as policy makers and market participants
have learned over time.
To give you a specific example: two or three years
ago, the European Union introduced a Market
Stability Reserve [MSR] to be able to more directly
control the amount of excess supply or short
supply in the market. And that’s allowed them a
more direct lever to influence the trajectory of
carbon prices in the market for a long time, until
about four or five years ago. If you look at the
historical price charts, the price of carbon in the
European ETS has been pretty low, and that has
been widely seen to be not as effective in inducing
corporate actions to fight climate change and to
abate carbon emissions.
But recently, with the MSR mechanism, the
regulators have been able to put the EU on a path of
increasingly lower carbon emissions more directly,
and that’s resulted in an increasing price. The price
of emissions is increasing from about 30 euros
12 months ago to over 60 euros now. So that’s one
mechanism, just the most visible one on price.
The other dimension is around the coverage. I
think regulators are learning that it’s not just about
the headline price, the coverage of how many
sectors. What percentage of the economy’s total
emissions is covered by the emissions trading
regime is also important. Here, I think regulators
are quite rightly trying to expand them over time.
You see the EU doing that, you see China starting
small, with only the power-generation sector, but
with explicit plans to expand it to chemicals and
steel and so on.
5
 Oliver Tonby: Thank you. I want to go to
you, Adeline. This sounds fascinating. From
a government point of view, why and how do
governments around the world think about these
carbon markets? And I know that Singapore is at
the forefront on many, many dimensions. How do
governments think about this?
Adeline Aw: Well, in Singapore, we don’t really
have an emissions trading system. What we have
is a simple carbon tax regime. And when we were
starting out with our climate measures, where we
were coming from was to look for a simple and
effective system that could provide a clear price
signal to businesses to decarbonize and [start] small.
But we did say we were going to review the system
as the years go by and, in fact, we are right now
reviewing the trajectory as well as the level of the
carbon price.
But from a government perspective, there are many
factors to take into account. One, of course, is the
incentive for businesses to decarbonize. Thongchie
and Badri have spoken about [this], but the other, of
course, is the effect on other important dimensions,
including economic competitiveness and
affordability of electricity, for example. [Affordability
of electricity would affect] consumers from such
measures applied to the power sector. So there
are many different aspects. The question is how do
we put in place the right policies and the measures
that can encourage that transition to a low-carbon
future while managing a lot of these other complex
dimensions in the equation?
But going back to Asia, and Southeast Asia in
particular, we see many countries in the region also
stepping up action over recent years. And, in fact,
some of the other Southeast Asian countries have
announced that they are considering an emissions
trading scheme. So I think that the transition is
gaining momentum and that carbon markets will
play an important role.
This is really on the compliance front, but on the
voluntary space, we also see more corporates
committing to climate action, and that’s great. It
6 The path to net zero: Investing in carbon markets
also means that they will need to look for avenues
to address different types of emissions, including
some of their residual, hard-to-abate emissions.
And that’s where carbon markets and carbon
credits have a big role to play, to offer a cost-
effective and complementary way for corporates
to decarbonize such emissions, in addition to
other important abatement measures that they’re
taking in the value chain. So there are strong
drivers that I think will help to encourage the
growth of these markets.
Oliver Tonby: Badri, I want to turn to you. You work
with many institutional investors—you work with
banks and the like around the region. How do they
think about carbon markets?
Badrinath Ramanathan: For institutional investors,
this is an increasingly important topic, and there are
many facets to this. First of all, we make it clear—and
I think most institutional investors would agree—that
net zero should be the ultimate goal. And abatement
is incredibly important. Within that context, there
are several elements that are important.
First of all, global warming poses a risk to
[institutional investors’] portfolios and to
businesses. So the first step is to quantify that
risk, to put a number on it, try to create scenarios,
and so on. And there, carbon markets can actually
play a significant role in helping to address the
impact arising out of global warming. So if you
just look at a normal 60-40 reference portfolio,
which is globally diversified, allocating about
half a percent to 1 percent of carbon allowances
in such a portfolio can help mitigate the risk.
And if you’ve done nothing, you perhaps would’ve
lost 20 to 40 basis points of returns over a
30-year period.
Oliver Tonby: Sorry, Badri—just to understand what
you’re saying. You’re saying that there’s risk from
the energy transition, there’s risk for the returns of a
portfolio. And that is an order of magnitude of 20 to
40 basis points. So that’s what you’re saying?
Badrinath Ramanathan: Yes.
Oliver Tonby: OK. And then you said that carbon
markets can actually help mitigate some of that.
Badrinath Ramanathan: Exactly. Even a small
allocation would help. Half a percent to 1 percent
allocated to this asset class can help mitigate this
risk. So that’s the first way of thinking about it, as a
sort of potential hedge to climate risks.
The second way we look at it is, it’s an emerging-
asset class in its own right, because the
characteristics of returns, the sort of volatility
patterns that are exhibited, are quite different from
current asset classes. If you took the same 60-40
reference portfolio, which is expected to return,
let’s say, 4 percent annually over the next 30 years,
adding 5 percent carbon to the portfolio could
generate returns of about 50 basis points annually.
So this is actually quite meaningful improvement in
the returns.
But I want to go back to the theme of abatement
first and the goal really being net zero, because the
idea is to use these markets to support abatement
objectives and not use them as a way to profit; that
cannot be the primary motive. Investors should
make sure that they’re taking other actions, like
direct investment in projects, supporting carbon-
capture projects, working with the investee
companies, helping them set decarbonization
goals, and helping them focus along those. And
only when all those actions have been taken, they
could certainly look at carbon as an asset class
and then look at the kind of effect it has as a part of
hedging strategies.
Oliver Tonby: Thank you. I’m going to go back to
Adeline for a second because I know, Adeline, you’ve
also been looking at what are some of the sectors
that are more affected and less affected by climate
risks. Would you care to elaborate a little bit on that,
and what are some of the sectors that should be
even more interested in these markets?
Adeline Aw: If you look at the risks that climate
change poses to business value, there are the
different dimensions to think about. But one way is
The path to net zero: Investing in carbon markets
to think about where business value and business
strategies are greatest and are most at risk, and,
frankly, that’s really in the resource-intensive and
the energy-intensive sectors. And so, in a way, we
see that many of the leading companies in these
sectors are taking action to think about how
they can incorporate carbon-mitigation, carbon-
abatement, measures into their business strategies.
The international oil companies are thinking about
how they can transform their businesses to adapt
to a lower-carbon future. We see that as a growing
trend, especially in recent years.
So I really think it’s important that investors also
consider how they can play a role in enabling this
transition in these sectors. And, in fact, maybe just
to go back to the voluntary carbon markets, beyond
investing in the secondary market, right now what
we urgently need is to allot investment to build
up the necessary expertise and infrastructure to
scale the supply of high-quality compensation and
neutralization projects.
Investors can play a more active role to capitalize
on this development and facilitate that transition.
This would include committing and purchasing
carbon credits of high integrity to meet their own
ESG [environmental, social, and governance]
goals, investing directly in projects to help scale
up the supply of high-quality credits, supporting
the establishment of high-integrity standards in
the voluntary carbon markets, and then guiding
portfolio companies in their transition, in their
journey, to net zero so that they make choices
that are aligned with reinforcing the trust and the
integrity of these global markets that’s necessary
to ensure that we see a stable, successful, and
continuous progress and transition in this journey.
Oliver Tonby: Got it. I want to shift to you, Thongchie.
GIC is one of the largest institutional investors
globally. We heard Badri saying the risk here from
the energy transition is 20 to 40 basis points—
carbon markets can help mitigate a significant
part of that. How do you think about this? The
opportunities here, but also, what are some of the
risks involved?
7
 ‘We look at carbon markets as a pretty
exciting development because it’s one
of the key mechanisms that help
investors “do good” as well as “do well”
at the same time.’
–Thongchie Shang
Thongchie Shang: Indeed, Oliver. We look at
carbon markets as a pretty exciting development
because it’s one of the key mechanisms that help
investors “do good” as well as “do well” at the same
time. If you cast your mind back to ten or 15 years
ago, when sustainable investing and ESG investing
really started entering into investors’ consideration
set, I think the initial reaction a decade ago was
that, intuitively, there must be a trade-off between
returns and impact, right? Because Finance 101
says that the efficient frontier for investors—if it’s
as unconstrained as possible, if your investment
universe is as wide as possible—then truly you can
gain from diversification, which is the only free
lunch, right?
That’s what Finance 101 that everyone studies
in college tells you. But with carbon markets, it’s
really a game changer in the sense that, as we
said earlier, it prices an externality. It changes the
economic calculus of firms to behave a certain way.
And if you look at how carbon markets are evolving,
they are essentially driven by government policy
in the case of compliance markets or by corporate
commitments to fight climate change in the case of
voluntary markets. And as Badri pointed out, these
things tend to have low correlation or even negative
correlation with a standard portfolio: 60 percent
stocks and 40 percent bonds.
8 The path to net zero: Investing in carbon markets
Actually, carbon markets help us diversify even more
risks that have been unpriced before. So in a way, it
helps us expand our option set from an investment
point of view. And from an impact point of view, it
has a very positive outcome. I think we spoke about
how it helps to facilitate the flow of capital into
nature-based solutions or reforestation projects
that would otherwise not be economical. So it’s
really a mechanism to help us pursue both those
objectives at the same time.
But, of course, I just want to highlight that investors
really should not think about trading speculatively in
carbon markets. When we look at the development
of carbon markets, what strikes us are the parallels
it has with the evolution of other commodity markets,
whether it’s soybeans or pork bellies or natural gas.
And in commodities markets like that, investors and
financial institutions really have an important role in
providing liquidity, aiding price discovery, matching
supply and demand over time, being market makers.
And these are typical functions that we see. Similar
to commodity markets, we think carbon markets will
evolve in pretty much the same way. So it’s about
providing these value-added services rather than
trading speculatively.
Oliver Tonby: And I guess for an investor like
yourselves, you also would like the markets to
 have some depth, and that isn’t there just yet. Is
that correct?
Thongchie Shang: Exactly, Oliver. We find it
interesting, but, frankly, the markets are still at a
very early stage of development, [especially] on the
voluntary side. As Adeline pointed out, the quality
issue is something that a lot of market participants
all have to get together to try to solve collectively,
even in compliance markets, which today are more
developed and more liquid and more deep. There is
still a lot to be done in terms of the coverage of the
specific regulatory mechanisms. For example, China
established its national one in July [last] year, and
it’s early days yet. So we see more development and
more growth ahead.
Adeline Aw: Yeah, I think Thongchie pointed it out
earlier—that there’s a lot to do in supporting the
development of the carbon markets, especially in
the voluntary space. And we know Singapore is
making efforts to scale a well-functioning carbon
market and working with like-minded partners
in this journey. For example, we are actively
participating in negotiations on Article 6 in the lead-
up to and at COP26,2 and this will help to set rules,
we hope, on market and nonmarket cooperation
between countries under the Paris Agreement.
We are also working with the World Bank and IETA,
the International Emissions Trading Association,
to progress the climate warehouse initiative.
And that seeks to connect disparate systems,
different registries, to enhance the transparency
and credibility of the carbon market and address
double counting.
We’re also participating in globally leading initiatives.
Here, there is space for investors as well to help
shape some of this, especially in private sector–led
initiatives, to provide guidance to the market on the
use of high-quality carbon credits.
And finally, we are also supporting efforts to build
the necessary market infrastructure for a high-
quality, efficient, and transparent carbon market.
2
The COP26 Climate Change Conference was held in Glasgow, Scotland, between October 31 and November 13, 2021.
The path to net zero: Investing in carbon markets
We recently had a public–private partnership to
develop Climate Impact X, which is a platform for the
voluntary trading of high-quality carbon credits. And
that’s to be launched soon.
So I think through all these efforts, we see that
it’s important for both public, private, as well as
nongovernmental, nonprofit, stakeholders to come
together to ensure that we can grow and scale
the carbon markets in a way that still continues to
support and is aligned with our efforts to make a
successful transition.
Oliver Tonby: Adeline, I loved hearing what you
just said about what you’re doing. Some of the
things that you are doing and that Singapore is
doing—can you talk about what is happening a
little bit more broadly in Asia, and the relevance of
this for Asia?
Adeline Aw: Asia and Southeast Asia can play a
key role to enable global sustainability, because we
are a middle of a region that has a great source of
natural assets and resources that can help us with
decarbonization. Southeast Asia can be a source of
credible and high-quality carbon credits because of
our potential here as a carbon sink. We have almost
15 percent of the world’s tropical forests and we
contain the world’s highest concentration of blue
carbon stocks. We also hold the highest potential
for added key biodiversity co-benefits, particularly
in countries like Malaysia, Thailand, Cambodia, and
others in the region.
So there is a real potential for decarbonization that
can be unlocked with the right investments and
the right emphasis on quality. There is also a great
opportunity to build out greater corporate capacity
to navigate climate change. If investors can think
about how they can work with their portfolio
companies in the region to build up that capacity
and build up the ability to make a successful
transition, that will also help to contribute to global
decarbonization. So for all these reasons, Asia is
where I see great potential and great opportunities
for partnership and solutions.
9
 Oliver Tonby: Wonderful. Listen, we’re going to
round out now. I’m not going to try to summarize
everything I’ve heard. It has been a fascinating
conversation. I just want a couple of snippets.
Number one, I heard Adeline say we are Asia,
we’re in the right region. I heard Thongchie say
there’s an opportunity here to both do good and
do well at the same time. We heard Badri say
the risk returns here mitigate 20 to 40 basis
points. So, very rich conversations, clearly a very
interesting opportunity for many companies,
many individuals.
I want to end by asking each of you the same
question. If you put yourself in the shoes of the
senior executives who are listening to this podcast,
what advice would you have for them as they think
about carbon markets? Let’s start with you, Badri.
Badrinath Ramanathan: If I were in the shoes
of a senior executive, I would be very excited
because now there’s an additional tool. There’s an
emerging-asset class, which is very interesting in its
characteristics and how it plays an important role in
a traditional portfolio, and this now allows me to do
more with my portfolio.
But I think the most important thing to keep in mind
is environmental integrity. I think the objective has
to be net zero and to move the world forward on this
dimension, and therefore this becomes a way to play
a role in furthering this objective, not just for myself
but also for my investee companies. So I would be
very excited because of that.
Adeline Aw is the vice president of environmental sustainability at Singapore’s Economic Development Board. Thongchie
Shang is the managing director of enterprise strategy at GIC. Badrinath Ramanathan and Oliver Tonby are senior partners in
McKinsey’s Singapore office.
Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or
positions of McKinsey & Company or have its endorsement.
Designed by McKinsey Global Publishing
Copyright © 2022 McKinsey & Company. All rights reserved.
10 The path to net zero: Investing in carbon markets
Oliver Tonby: Thank you. Adeline, what advice
would you have?
Adeline Aw: I would say start building the expertise
and the understanding now of carbon markets.
It’s a really technical space and it’s not one that I
think many outside of the space understand. So it’s
important to start thinking about what corporate
capabilities you would need internally to shape your
agenda and have an effective strategy to address
both the risks as well as the opportunities.
Oliver Tonby: Well said. Thongchie?
Thongchie Shang: I would say that the climate
imperative is real. We all have to think of ways to
make our businesses and our portfolios more
climate resilient. And carbon markets are not
the only solution, but they will be an increasingly
important part of the tool kit.
Oliver Tonby: Thank you. Listen, you have been
three wonderful panelists. Thank you so much. And
to all the listeners, thanks for tuning in, and you have
heard a very interesting conversation about how
we can use carbon markets on the path to net zero.
Have a wonderful rest of the day, everyone. And
again, thank you to our three panelists. Take care.
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