Developing FinTech Ecosystems for Voluntary Carbon Markets Through Nature-Based Solutions: Opportunities and Barriers in ASEAN

With more countries and companies setting net-zero targets, nature-based solutions (NBS) provides a great opportunity for carbon sequestration through forest and wetland preservation, recovery, and reforestation programs. The benefits also extend to preserving biodiversity and providing social co-benefits and equity in communities. This chapter considers the potential of natural assets convertible to carbon credits in the Association of Southeast Asian Nations (ASEAN) region, which is vulnerable to the impacts of climate change. Recent developments in establishing a carbon offset market exchange have been based on regional NBS. There will be significant need for FinTech such as financial instruments and associated technological innovations to develop large-scale regional carbon credit markets or voluntary carbon markets. In this chapter, Singapore’s Climate Impact X (CIX) is examined as a case study. Marketplaces and exchanges allow producers and consumers to interact on sustainability metrics and impacts, facilitating sales of carbon credits, biodiversity offsets, and ethically sourced and labelled products. FinTech solutions emerging in the areas of digital exchanges for carbon credits (biodiversity in the future) and e-trading of natural capital-backed digital assets include technologies such as satellite imagery, Internet-of-things data, application program interfaces, data tokens, blockchain for climate impact reporting, and more. Currently, there is a huge opportunity to reduce emissions and conserve existing forestland and wetlands through NBS. However, there remain barriers to making full use of FinTech solutions for NBS and scaling a carbon market in ASEAN such as costs of technology, logistics, MRV (measurement, reporting, and verification), and lack of regulation and regional coordination.