INSTITUTE of Chartered Accountants of Zimbabwe (Icaz) chief executive officer William Mandisodza says the dearth of experienced carbon credit players who are knowledgeable in environment, social and governance (ESG) practices exposes the country to losses.
This comes amid the government losing out from over 21 million carbon credits generated from local projects, which generated over US$142 million to date.
One of the biggest complaints why Zimbabwe is yet to realise any benefits from carbon credits is due to the lack of negotiating favourable terms with carbon project players.
Having competitive players would allow for better terms to be negotiated with carbon credit project owners, leaving the country poised to make some benefits from the credits realised.
In an interview with NewsDay Business at the inaugural ESG & Sustainability Conference held in Nyanga last week, Mandisodza said the carbon credit market’s biggest challenge was inexperienced players.
He added that this lack of players would cause carbon credit price instability.
The conference was held under the theme, Driving Sustainable Integrating ESG Practices in Zimbabwe, and hosted by Institute for Sustainability Africa in partnership with Icaz and the Institute of Directors Zimbabwe.
“And the challenge with that is, how do we price that forest, as an example, if we don’t have many players in the industry? There is a risk that as a nation we can be ripped off because there is no competition of investors,” Mandisodza said.
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“So, what we hope ESG as a principle and as a standard will do is it will make people aware of other ways of actually reducing your environmental impact like buying carbon credits and so forth.
“That awareness might actually increase participants in the climate related assets and the country will benefit by having more players participating.”
He said he believed that if many players participated in the market, it would be easier for price determination as no one player will be monopolising the market.
“And when more players are there, pricing is usually better. So, the issue around that market in Zimbabwe is just information,” Mandisodza said.
“We do not have information and we also don’t have complex capital markets which can bring in such products and we are at the risk of actually getting bad deals because we are not open to many players. So that’s my view with regards to carbon credits and climate-related instruments.”
Training and Advisory Services managing director Webster Sigauke said the misconception around the carbon markets might have had an impact on the carbon markets.
This, he continued, was because it would have left many people unsure of what they would be investing in.
“The common misconception which is there is what is being sold and others think that we are selling our land, or we are selling our trees,” Sigauke said.
“So, what is being sold is not the land and what is being sold is not the tree, but rather what is being sold is the carbon dioxide, which has been absorbed.”
Carbon credits are generated each time carbon dioxide is offset.
