The treasury’s role and future of carbon markets: opportunities amid challenges

As global regulations tighten and carbon pricing becomes more volatile, companies are being forced to rethink their carbon strategies. This three-part series brings together four experts from the Hellenic Association of Treasurers (HAT) and industry-leading organizations to share insights on how companies can effectively navigate the evolving carbon markets:

• Yannis Lefas – Head of Shipping Treasury at HAT, specializing in shipping finance and risk management.
• Dimitris Stamoulis – Head of Corporate and Shipping Sales / Global Markets at Eurobank, focusing on financial solutions for shipping clients.
• Apostolos Androutsopoulos – Sr. Treasury Analyst at JERA Global Markets, with expertise in carbon credit trading and hedging strategies.
• Sourabh Verma – VP: Treasury Strategy and Market Insights at ION Group, providing insights on financialization and emerging ESG-linked products.

The first two instalments explored the fundamentals of carbon markets and how the shipping sector is adapting to EU ETS regulations. In this final blog, we focus on the evolving role of corporate treasury. From managing carbon credit portfolios to hedging against price volatility and integrating carbon credits into ESG-linked products, our experts share how treasurers can transform compliance into strategic advantage and shape a more sustainable financial future.

Treasury’s role in carbon market participation

Interviewer: Yannis, how does carbon market activity influence corporate treasury functions?

Yannis: Carbon markets have introduced new complexities for treasurers, requiring them to manage not just financial assets but also carbon credit portfolios. Treasury departments play a critical role in optimizing the trade and purchase of carbon credits, ensuring compliance with regulations while minimizing costs.

They’re also responsible for managing risks associated with price volatility, which can significantly impact financial stability. By integrating carbon credits into broader financial strategies, treasurers help companies achieve their Environmental, Social, and Governance (ESG) goals without compromising profitability.

Financialization of carbon credits

Interviewer: Sourabh, how are carbon credits becoming financialized, and what opportunities does this present for treasurers?

Sourabh Verma: Carbon credits are increasingly treated as financial instruments, similar to commodities or currencies. Treasurers can now trade carbon credits on futures and options markets, providing opportunities to hedge against price volatility and forecast compliance costs more accurately.

For instance, companies can use financial derivatives like swaps and forwards to lock in prices for future carbon credit purchases. This financialization not only mitigates risk but also allows treasurers to integrate carbon credits into ESG-linked financial products, creating avenues for sustainable investment.

Interviewer: Apostolos, how does financialization impact treasury’s management of carbon credits alongside traditional financial assets?

Apostolos: Managing carbon credits within treasury functions is becoming more complex as they are incorporated into broader financial strategies. Treasurers need to consider liquidity impacts, such as margining and transaction costs, when handling carbon credits. These assets now play a dual role—both as compliance instruments and as financial tools within investment portfolios.

Additionally, treasurers must navigate short-term hedging mechanisms, often using over-the-counter (OTC) hedging or futures contracts. Given the high price volatility of carbon markets, short-term contracts (1, 3, or 6 months) are the preferred method to manage exposure efficiently.

As carbon markets mature, treasurers will play an increasingly strategic role in optimizing credit purchases and ensuring alignment with corporate financial goals.

Addressing price volatility

Interviewer: How does the volatility of carbon prices impact long-term corporate sustainability strategies?

Dimitris: Price volatility poses a significant challenge for companies committed to long-term sustainability. Fluctuations in carbon credit prices make it difficult to predict compliance costs and allocate budgets effectively. This uncertainty can strain financial planning and impact other areas of business investment.

To counter this, treasurers often employ hedging strategies and diversify their carbon credit portfolios. Tools like futures contracts allow companies to stabilize costs and maintain consistent progress toward their sustainability targets.

Transparency and reporting

Interviewer: How can treasurers ensure transparency and accountability in carbon credit transactions?

Sourabh Verma: Transparency is key to maintaining credibility in carbon markets. Treasurers can adopt standardized reporting frameworks like the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB). These frameworks provide clear guidelines for measuring, verifying, and disclosing carbon credit transactions.

Also, applying advanced technology—such as blockchain—can enhance traceability and ensure that credits are retired properly. This reduces the risk of double-counting and strengthens stakeholder trust.

Integrating carbon credits into financial products

Interviewer: Can carbon credits be incorporated into investment portfolios or ESG-linked financial products?

Apostolos: Absolutely. Many treasurers are exploring ways to integrate carbon credits into investment portfolios. For example, companies can invest in carbon credit funds or ETFs to align their financial assets with sustainability objectives.

ESG-linked financial products, such as green bonds or sustainability-linked loans, also provide opportunities to incorporate carbon credits. These instruments allow companies to demonstrate their commitment to decarbonization while attracting environmentally conscious investors.

The future of carbon markets

Interviewer: Sourabh, what trends or developments do you foresee shaping the future of carbon markets?

Sourabh Verma: Several trends are poised to redefine carbon markets in the coming years. The introduction of a global carbon pricing mechanism could bring much-needed consistency, reducing regional disparities and making compliance easier for multinational corporations.

We’re also seeing increased investment in emerging technologies, like carbon capture and storage (CCS) and nature-based solutions, which will create opportunities for carbon credit generation. Also, the growing focus on emission intensity—driven by initiatives like the Carbon Border Adjustment Mechanism (CBAM)—is likely to influence market dynamics and pricing structures.

Interviewer: Yannis, what opportunities do you see for treasurers as these markets evolve?

Yannis: Treasurers have a unique opportunity to position themselves as leaders in sustainability. By staying informed about regulatory changes and emerging technologies, they can identify innovative ways to use carbon markets for financial and environmental gains.

For instance, treasurers can collaborate with sustainability teams to invest in high-quality carbon offsets or develop strategies to capitalize on new market mechanisms. This proactive approach not only supports corporate ESG goals but also enhances the treasury’s strategic value.

As carbon markets continue to evolve, the treasury function is becoming increasingly strategic in driving corporate sustainability. By managing price risks, ensuring transparency, and integrating carbon credits into financial products, treasurers can play a pivotal role in shaping a low-carbon future.

Looking ahead, the potential for global carbon pricing and innovative offset projects presents exciting opportunities for treasurers to align financial strategies with environmental goals. With the right tools and insights, they can lead the way in transforming sustainability from a cost centre to a competitive advantage.