Today, Calyx Global officially applied for recognition under the EU’s ESG Ratings Regulation (Regulation (EU) 2024/3005). This requires our company to operate in compliance with the regulation. What does this mean for Calyx Global and the carbon credit ratings industry?

First, we believe this is good news. Ratings have become central to many carbon credit procurement decisions and some corporate climate mitigation claims. Anything carrying this weight deserves scrutiny and oversight.

Regulated entities must manage conflicts of interest and provide formal rights for project developers. The regulation has rules on how ratings are produced, and requires transparency and disclosures. Under the Regulation, the European Securities and Markets Authority (ESMA) supervises rating agencies and can investigate, fine and withdraw recognition. In short: carbon credit ratings are moving from a self-policed market into a supervised one.

Some of what follows will feel familiar, because much of the regulation formalizes how we already work. Some of it is genuinely new, and we’ll be straightforward about both.

What has not changed for Calyx Global

The most critical element of the regulation is that ratings must be consistent and free from commercial influence. That has been the foundation of how we rate from day one.

Every Calyx Global rating follows documented frameworks: an overarching GHG integrity framework, sub-frameworks for each project type (from avoided deforestation to household biodigesters), and separate frameworks for sustainable development impact and environmental and social risk.

From the start of our company we put in place independent panels – composed of experts that are not Calyx staff and who sign conflict of interest attestations. These panels approve how we rate, including how we score carbon credits and assign specific letter or numerical grades. We believe this is one of the strongest controls we have in place to avoid bias.

In short: Calyx Global has always had very limited room for maneuver when generating ratings – and that won’t change.

Furthermore, we keep our ratings separate from any commercial stake in the outcome. We do not engage in credit transactions, we do not provide advice to developers on how to improve a rating and our sales team operates separately from our ratings team.

What has changed for Calyx Global

The regulation does bring some changes to how we work, and we think they are for the better.

Notifying project developers before we publish ratings: All rating agencies are now required to notify the “rated party” prior to publishing a rating. In the past, we have made our ratings public and invited project developers to contact us if they wish to see their rating – and we have provided the rating and detailed assessment to those who requested it (for no payment). Now we will be notifying project proponents if and when we are rating their credits.

Ongoing monitoring and reporting: We have also put in place a monitoring system that holds us accountable to the regulation on an ongoing basis and supports our reporting to ESMA.

Formalize practices we already followed: Our sales and ratings teams have always operated separately, and we have never advised developers on how to improve a rating. These important practices are now written into formal policies with clear firewalls we will be accountable for.

Closing thought: A maturing market

Getting our application together has been a rigorous process, requiring many pages of responses on how we meet the new rules and engaging specialized legal counsel. We see the regulation as an important step in maturing carbon markets by building trust and consistency in rating practices. We are pleased that all major carbon credit rating agencies are applying to be regulated.

The voluntary carbon market has sometimes been portrayed as a “Wild West”. In the past several years it has faced a crisis of confidence that has tempered demand. The result: less action to reduce global warming. In part, the problem has been due to weak infrastructure and conflicts of interest. This regulation will not solve all of the issues, but it brings the market one step closer to the maturity it needs to do more for our planet.

We’ll continue to share how we’re putting the regulation into practice at Calyx Global. If you have any questions about our ratings and what this means for you, you can contact us at info@calyxglobal.com.