Triangle Digital

Insights Continued.... (2 of 3) Now I will be then first to stay the Carbon Credits today as unregulated assets that can not be custodied by banks or asset managers are ineffective and failed assets. That is why a similar intervention as we saw with Sarbanes Oxley is needed today in the carbon market. By leveraging Triangle’s >100 years of experience from both the buy and sell side of institutional finance, including commodity and carbon markets, the management team of Triangle is circulating our Regulated Carbon Credit Policy proposal that delivers auditability, verifiability and transparency, and thus confidence. This asset class that will be custodied by qualified custodians will allow for these assets to be used as collateral, for lending and structured products. With the right structure, the asset class will increase velocity and will shape a multi-trillion dollar market with capital allocators and infrastructure decision makers allocating capital based on market efficiency. Is the juice of the carbon market worth the squeeze? Today, climate has one arm tied behind its back and that is an ineffective Carbon Credit market. These are the Carbon Credit demand drivers:  1. CBAM, Carbon Border Adjustment Mechanism, a new EU tariff that normalizes the prices of goods based on carbon. That takes effect middle of next year and your carbon credits need to be on your books by the end of Q1 for supply that is delivered in the 2H of the year. Companies can either buy carbon credits or pay the ETS price (~$60/MT CO2e). Markets will determine the most efficient allocation of capital and price for the VCM credits will move to the ETS price based on supply as 1MT of Carbon is 1MT of carbon. On 37 GT (GT = one billion tons), that is a $2.5T market before asset lending, speculation and leverage. 2. Local fines like Local Law 97 in NYC, BE305, BERDA, and similar programs in Philadelphia, Denver and Seattle, and the California GHG reporting rules and their Cap and Trade ecosystem. For LL97, at $268/MT, that puts you at a $10T market. 3. 80% of the wealthiest part of global GDP has adopted a common framework for carbon accounting where companies have net zero commitments to achieve and failure results in fines, litigation, repetitional risk, higher borrowing costs and lower sales process for your goods. Last year, Triangle delivered great research with the University of Michigan Ross School of Business that spells out the cost of borrowing impact for lack of compliance. The cost of borrowing impact starts at 76bps and grows to 625bps as you move from AAA to Non-investment grade. Examples of lower sales prices are seen with Russian Crude oil (15-20% price discount). All companies globally can use carbon credits are a risk management tool to manage that.

Triangle Insights: (1 of 3) NYC Climate Week to HK Fintech Week: Title: Carbon Capitalism has arrived! (2 of 2) 1. There is a global wall (80% of Global GDP) of compliance for accurate reporting (timely is questionable today and that is something Triangle has made significant progress through its Scope 3 tool called Constellation released during climate week). If you want to sell your products, receive investment from or get debt from either banks or the capital markets, you will need to deliver audited statements on your GHG emissions. That is the now and future. Failing to do this will cost your business money with either lower prices for your good (think sanctioned Russian oil), will impact your cost of borrowing as you are more risky and banks need to set aside more capital for that risk and ultimately you pay for that additional capital with higher borrowing costs and higher insurance premiums, and / or the risk of litigation and fines from infractions on this compliance. Similar to BNP’s $9B fine for AML/KYC failures, and this week’s TD $3B fine, this stick of compliance is real and those that operate in financial markets know this . 2. The emergence of Carbon Credits as a necessary risk management tool as part of your GHG accounting to efficiently allocate and among your carbon exposure and capital. With 400 years of case history in commodity markets, high prices for a commodity results in more supply, and for climate, we need as many new assets as possible. And when prices are too high, corporations will choose to transition their infrastructure because it's less costly. So how do you get high prices? Well the first thing you need to do is deliver auditability and verifiability to the carbon market as a market without confidence is a failed market and that is what we have today. After the Worldcom, Enron and Arthur Anderson mess, markets lacked confidence and velocity, and only until Sarbanes-Oxley legislation was passed that resulted in CEO’s and CFO’s signing off on reporting #s, and auditors providing assurance did confidence return to the market.

What an incredible NYC Climate Week!!! The theme for this year is “It’s time!” and for Triangle, #carboncapitalism is the here and I have never been more optimistic as we link new regulations with data, finance and climate solutions to deliver the most cost effective and fastest transition. We released our #Scope3 tool called Constellation allowing clients to route their data in a market data format upstream and downstream. We released our Regulated Carbon Credits Policy and will now build a coalition to support the creation of verifiable and auditable carbon credits that banks can custody and use as collateral, for lending and structured products. With a view on Carbon Capitalism, our panels covered Ag, Farming, Food, Manufacturing, Logistics, Retail, Project Finance, Real Estate and Carbon Credits to discuss the compliance for those sectors, the innovations that solve problems for end customers and stakeholders, and how you add more profitability to your business. I want to give a special thanks to the incredible Triangle Digital team. A special thanks to our partners Turtle and Jayne Millard for her incredible leadership, Infor BDO, Karen Baum Cisco University of Michigan Mastercard and our panelists for your insights and support to realize an incredible week. Peter Adriaens Eric Fins Katherine Foster Michele A. Zachary Pogue Sean Casten Conor Mulderrig Mike Dieterich Carlos Rojas Brian Carelli Kevin Richards, MBA Noah Lincoff Heather E. Burns Raymond Wood Philipp Klingelhofer, CFA Silvio Pupo-Casco (朋友) Teesee Murray Monica Medina Cameron Prell David Carpentier Srinand Yalamanchili M.A. Brendan Hermalyn Stephen Edkins Martijn Dekker Doug Cornell Alik Hinckson (he/him) Chamss Ould