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Understanding the Value of Multiple Ratings Agencies

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Carbon credits are a critical component of any corporate sustainability strategy, but they are not without risk. Issues with additionality, over-crediting, durability, or double-counting can jeopardize the validity of your climate claims and damage your reputation. In today's highly scrutinized marketplace, even a single problematic investment can trigger accusations of greenwashing, potentially undermining years of sustainability efforts.

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To protect against this, conducting due diligence on carbon credit purchases is widely regarded as best practice in the VCM. While some larger corporations conduct internal due diligence, this process is very costly and complex, requiring large teams of experts to do well. As a result, third-party ratings agencies have emerged as one the most effective tools for assessing credit integrity. 

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Most buyers that leverage third-party ratings tend to rely on a single service provider. This approach eliminates the need to pay for multiple subscriptions and the challenge of reconciling different methodologies.

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However, a multi-agency approach delivers significant strategic advantages that far outweigh these drawbacks, providing a more robust foundation for carbon credit investments.

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Comprehensive Risk Assessment

Risk mitigation is one of the most crucial aspects of due diligence, and multiple perspectives give you a more complete picture of potential risks. Each agency evaluates risk differently, and a high rating from one agency might not be reflective of all possible risk factors. By cross-referencing multiple ratings, you gain a more complete understanding of a particular carbon project, allowing you to make more informed decisions and protect yourself from unforeseen risks.

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Leverage the Strengths of Diverse Methodologies

Each ratings agency uses its own methodology, criteria, and data points to assess the quality of a project. One agency may calculate its own baseline for a project while another validates how the project calculated its own baseline. Similarly, some agencies may specialize in different project types, making their analysis particularly strong for certain projects. Understanding these nuances allows you to weigh the different assessments effectively and make more informed decisions. 

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Increase Credibility & Trust

When investors, clients, or other stakeholders ask about your carbon credit strategy, having multiple assessments also strengthens your credibility. Demonstrating that you’ve cross-referenced multiple reputable sources shows diligence, builds confidence and enhances your reputation as a responsible market player.

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Wider Coverage

Most projects are only rated by one or two agencies due to costs and the amount of effort involved. Relying on a single agency limits your access to projects rated elsewhere. By using multiple sources, you expand your reach to a broader range of rated projects.

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Conclusion

As carbon markets mature and stakeholder expectations evolve, the bar for due diligence continues to rise. While sourcing reviews from multiple ratings agencies may increase costs and effort, the enhanced risk mitigation, credibility, and strategic insights justify the investment for organizations committed to high-integrity climate action. For organizations seeking these benefits without the added effort, partnering with a carbon credit provider that collaborates with all major rating agencies offers an efficient alternative. 

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That’s why at CNaught, we incorporate all major ratings systems (Calyx Global, Sylvera, BeZero, and Renoster) into our diligence and procurement process. We do the heavy lifting so you don’t have to, and ensure through our multi-agency approach that every project in your portfolio meets our high-integrity standards.

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Reach out to learn more.