Linklaters advises ISDA on New Documentation for the Trading of Verified Carbon Credits

Linklaters has advised The International Swaps and Derivatives Association, Inc. (ISDA) on new industry documentation for the trading of verified carbon credits (VCCs), as part of a broader effort to support the transition to a green economy by developing robust legal and risk management standards for markets related to ESG activities.

The 2022 ISDA Verified Carbon Credit Transactions Definitions and related template confirmations for spot, forward and options contracts have been developed with the flexibility to support trading of carbon credits across carbon standards and registries.

The documents have been designed to facilitate more liquid secondary trading of carbon credits as well as to allow parties to document bespoke carbon credit transactions.

The new standards will be available digitally on ISDA’s MyLibrary electronic documentation platform.

Deepak Sitlani, Derivatives partner at Linklaters, commented:

“We were pleased to work with ISDA as drafting counsel for the definitions. Standardised documentation is a significant step in the continued transition to a low carbon economy.”

The definitions follow publication of ISDA whitepapers in December 2021 and November 2022, which included input from Linklaters, that explored the key legal issues associated with the voluntary carbon market and recommended steps to create greater legal certainty.