On July 23, ISDA published a new paper, Implications of the FRTB for Carbon Certificates, which explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
The FRTB would result in higher capital charges for carbon trading under the standardized approach to market risk, which could impair the ability of banks to act as intermediaries in the emissions trading system market globally, hampering a key tool for policy-makers to ensure a cost-effective transition to a carbon-neutral economy.
This paper was developed by ISDA’s ESG Risk and Capital working group and provides a detailed analysis of how the FRTB would impact on carbon certificates. The analysis, which is supported by market data, suggests the risk weight for carbon certificates should be reduced from 60% to 37% and the tenor correlation parameter should be increased from 0.99 to 0.995-0.999.
Documents (1) for Implications of the FRTB for Carbon Certificates
Latest
ISDA ALF: Katherine Tew Darras Opening Remarks
ISDA Annual Legal Forum New York, October 28, 2025 Opening Remarks Katherine Tew Darras ISDA General Counsel Good morning and welcome to the Annual Legal Forum here in New York. Thank you for joining us today and thanks to...
ISDA 2025 – 2002 Equity Derivatives Definitions (Versionable Edition) Protocol Opens for General Adherence
ISDA has opened the general adherence phase for the ISDA 2025 – 2002 Equity Derivatives Definitions (Versionable Edition) Protocol. The protocol enables adherents to amend the terms of their equity derivatives master confirmation agreements to incorporate the 2002 ISDA Equity...
ISDA Comment on ICC Application as Clearing Agency
On October 6 ISDA submitted a comment letter to the Securities and Exchange Commission in response to the ICE Clear Credit (“ICC”) application for registration as a clearing agency under Section 17A of the Securities Exchange Act of 1934, including...
Paper on Enhancing Liquidity and Risk Management
As ISDA marks its 40th anniversary this year, it is an opportune time to reflect on the challenges and opportunities faced by the global derivatives markets over the past four decades. Rapid growth, continued innovation, regulatory reform, central clearing, margining,...
