Carbon credit standards body defends policies after former director charged with fraud

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The new chief executive of the world’s largest carbon credit registry Verra has defended its policies on conflicts of interest, after a former board member and client was charged in the US over fraud involving credits that it had certified.

US federal prosecutors in New York accused former Goldman Sachs and Verra director Kenneth Newcombe earlier this month of faking data to obtain some of the $100mn invested in C-Quest Capital, a carbon credit developer backed by Macquarie and Shell. 

Verra issued 148mn carbon credits in 2023, more than twice as many as the next largest registry, the Swiss-based Gold Standard, making it the largest verification body in an unregulated market worth around $1bn a year.

Mandy Rambharos, who became chief executive of the Washington DC-based non-profit organisation in August, told the Financial Times that allowing Newcombe to sit on the registry’s board while his company also developed carbon projects that it paid Verra to accredit was “not inappropriate”. 

Rambharos previously spent 14 years at South African state utility Eskom, where she represented South Africa in international talks on carbon market negotiations and helped broker an $8bn public-private financing package meant to help the country shift from coal power.

She took on the role at Verra more than a year after its previous chief executive resigned. This followed reports, which it disputed, that the organisation had endorsed methodologies that exaggerated how much carbon dioxide was saved when forests were protected. 

Newcombe was a long-standing board member of Verra, serving from 2007 till the end of 2023. This included the period when the registry gave its stamp of approval to credits issued by 26 of his projects, based on inflated data he had allegedly submitted to Verra between 2021 and 2023, in exchange for a per-credit fee.

CQC’s projects overestimated the emissions saved from funding the switch to cleaner cooking fuels in developing countries and issued millions more credits than it should have, the company said. The registry has since cancelled more than 5mn credits.

Verra said in June that it had reviewed its board “governance policies, processes and procedures, including its code of conduct and conflict of interest policy”.

The registry asks board members to disclose conflicts of interest and will in certain cases ask them to recuse themselves or leave the board, Rambharos said. Board membership “doesn’t give you any advantage . . . you still have to follow the rules”.

But banning project developer clients from joining the board would be “like saying you shouldn’t have a tech person on your board because you’re trying to digitise your processes right now,” she said. “The policy hasn’t changed.”

Newcombe could face up to 20 years in prison if found guilty of offences including wire fraud and securities fraud, according to the charges unsealed by the US attorney for the Southern District of New York on October 2. It did not prosecute the CQC Impact Investors holding company after it voluntarily disclosed the misconduct and co-operated fully.

The Commodity Futures Trading Commission filed a fraud complaint against Newcombe and fined CQC Impact Investors on the same day, in what it said was its first enforcement action for fraud in the voluntary carbon credit market. It did so shortly after finalising the first federal guidelines for unregulated carbon offsets.

CQC declined to comment, and a representative for Newcombe did not respond to a request for comment.

A person close to Shell said that it would not use or trade any CQC credits it held until it received assurances about their integrity. Macquarie declined to comment on its investments in the group.

A proposal for guardrails for a global carbon trading system is expected to be put forward at the UN climate summit in Baku next month in an attempt to boost the credibility of the instruments which are meant to represent a ton of CO₂ cut or saved.

Rambharos said about the purchase of carbon credits by companies: “It’s not just the wild, wild west, there’s a lot of rigour.”