After 30 years working in financial services, Scott Eaton insists he has found the perfect challenge as CEO of Carbonplace, a transaction network created by banks for banks to connect buyers and sellers of carbon credits.
Despite criticisms from some academics and campaigners that voluntary credits are a sell-out and will do little to bring down greenhouse gas emissions, Mr Eaton insists that with the right checks and balances the markets can deliver verifiable, on-the-ground climate action.
Originally from the US, Mr Eaton started at London-based Carbonplace in February 2023, joining from Nivaura, a capital markets start-up where he served as CEO. Mr Eaton was previously CEO of fintech company Algomi and chief operations officer at fixed-income trading platform provider MarketAxess.
Mr Eaton’s arrival coincided with the creation of Carbonplace as an entity in its own right, separate from its nine founder banks — BBVA, BNP Paribas, CIBC, Itaú Unibanco, National Australia Bank, NatWest, Standard Chartered, SMBC and UBS — after they stumped up $45m in funding.
The platform has carried “a handful of pilot trades”, says Mr Eaton, and is set to launch as a commercial entity in the summer of 2023.
Carbonplace’s mission is to accelerate corporate climate action by providing transparent, secure and accessible carbon markets. Global demand for voluntary carbon credits is likely to increase by a factor of 15 in the next seven years, according to McKinsey estimates.
The platform will help develop this market, says Mr Eaton, “leveraging the number of buyers and sellers that can access the market” and ensuring parties engaging in transactions are “trusted counterparts”.
Read more about carbon credits
As a “veteran of three months”, Mr Eaton says the voluntary carbon credit market “would benefit from some infrastructure and some rules around it to permit large money to come in and to remove some of the frictional elements”.
Today, as a corporate buyer looking for carbon credits “you would typically have to find a seller, get to know them, make sure they are delivering something of value — that they are not a criminal organisation [or] a money launderer — then you would have to engage lawyers to negotiate a contract, open up a registry account and then you could transact,” says Mr Eaton. “This is a long process.”
“If we can financialise the product, we will get more people to invest in projects in the voluntary market and drive the right results,” he says.
Mr Eaton says he understands the arguments of carbon credit “naysayers”, but suggests there is a “naive basis” to them. “We can’t get to the point they want to get to overnight,” says Mr Eaton, unsurprisingly a firm believer in the power of the financial markets to bring about positive change.
“The profit incentive matters; it is how you drive results,” he insists. Making the market more transparent and allowing “fairly frictionless” transactions will help the market “coalesce around projects that have value”.
In terms of transparency, there are no plans for Carbonplace to be audited independently, says Mr Eaton, but all transitions will be recorded on blockchain and “participants could expose their wallets” to anyone wishing to audit them.
“Reporting, regulating and putting some guardrails around [the market]” are important to “get the results we want”, agrees Mr Eaton.
Things get better when people make critical comments and regulators support disclosure
“We need critics to force the market to respond and we need regulators to drive the market to the right place; there are problems and things that need to be fixed,” says Mr Eaton. “Things get better when people make critical comments and regulators support disclosure. We need to prove, not just make, claims.”
As the range of founding banks suggests, the platform aims to be global, says Mr Eaton. He makes an analogy with the idea of “buying local” and “eating homegrown vegetables” — “that is effectively what is happening in this market”.
“If we develop a mangrove restoration project in California, then the carbon credit should stay roughly in that geography,” says Mr Eaton, suggesting the voluntary carbon credit market will “naturally coalesce around local hubs, but it is a global market and all participants will benefit from being able to interact with each other globally”.
Rather than different regulations in different jurisdictions being a problem, Mr Eaton hopes they will “create different price degradations”, with “credits in highly regulated environments trading higher” and “a broad spread” of prices in more unregulated markets.
Bankers and financial experts working on climate change are under increasing pressure as regulators ramp up legislation, notably in Europe, and this stress is increasingly apparent during interviews.
It is obviously early days, but Mr Eaton, on the other hand, seems to be having a ball. He is having “the most fun”, he says, fulfilling a dream that dates back to his college days in Colorado, when, after taking a class in environmental economics, he planned “to drive positive environmental outcomes through a trading mechanism”.
Such a job “never really materialised”, says Mr Eaton, “and then this comes along at the end of my career.” His new role allows him to “take what I know about trading and apply it to a market where I don’t know anything, and to learn”.
“I pinch myself; this is the best job out there at the moment,” he concludes.
