Viridios AI CEO Marcelo Labre and Viridios Group CEO Eddie Listorti explain how they are applying technology to carbon credits, and the effects of greater scrutiny on the market

Environmental Finance: Viridios AI won the Best Market Innovation category again this year. Can you explain how your voluntary carbon market pricing dashboard works?

Marcelo Labre: Our Viridios AI platform offers project-level pricing by vintage of close to 17,000 projects across voluntary carbon markets (VCM), covering the five main standards (the Verified Carbon Standard, the Gold Standard, American Carbon Registry, the Climate Action Registry and the Clean Development Mechanism). The platform aggregates market price contributions (trades, bids and asks), publishing those market prices on the platform. We fill price gaps, such as non-traded vintages and more opaque projects, through a combination of quantitative finance techniques and artificial intelligence (AI) models. The platform also publishes price aggregations, such as REDD+, household devices and afforestation-reforestation, and more recently started publishing price aggregations for Australian Carbon Credit Units (ACCUs) in the Australian carbon market.

EF: The platform also tracks projects' co-benefits and contributions to the Sustainable Development Goals (SDGs). How does it collect that data?

ML: We use a combination of human expertise and technology to reveal the contributions of projects to the objectives of the SDGs. The data collection and aggregation are done by parsing all possible information on projects in natural language, typically sentences from thousands of pages of project documentation. Then a natural language AI model classifies and ranks those sentences that provide evidence of contributions to one or more of the SDGs at the SDG target level. Finally, a human domain expert confirms the classification performed by the machine. This has enabled the Viridios AI platform to offer a unique dataset of SDG contributions from close to 17,000 projects in the VCM.

EF: It also applies digital monitoring, reporting and verification and certification to carbon projects, using 'ground truth' data. How does that work?

ML: We have developed the platform by surfacing ground truth – information that we know to be accurate – in difficult-to-grasp but already available data embedded in the information provided by the registries, such as project documentation. Through strategic partnerships, our approach is now evolving toward accessing more granular ground truth data, such as direct measurements of project activities. Features like these will become available on the platform over the coming months.

EF: Meanwhile, Viridios Group's trading arm, Viridios Capital, was runner-up in the Best Trading and Advisory categories. How do you feel the market has changed over the past year?

Eddie Listorti: This has been a defining year for carbon markets. We have seen policies and methodologies continuing to improve and the market's understanding of what drives the price of the various types of carbon credit maturing. With greater transparency across carbon markets, we're getting a clearer picture of what investors place a value on when investing in carbon credits.

EF: Obviously there has been more scrutiny of the market. Has this impacted your work at all?

EL: I feel for the local communities who rely on the revenue from carbon projects to fund healthcare, education and employment opportunities. In so many ways, the scrutiny some projects have faced is unwarranted and only serves to accelerate inequality and deforestation.

We believe in the incredible benefits that carbon projects can deliver, and we continue to work with investors to help them understand why this asset class is so valuable to local communities and the planet.

EF: And how do you expect this to affect the market going forward. Will prices or demand recover?

EL: While we have seen VCM prices come off this year, Australia's compliance market is a great example of how policy stability and methodology improvements have created price stability.

Viridios AI data shows that despite two government reviews and intense scrutiny, the price for generic ACCUs is basically unchanged over the past 12 months at around A$30 (US$19). It also shows that prices for a range of ACCUs - such as human-induced regeneration, environmental planting and savannah fire management with indigenous co-benefits - are trading at premiums to generic ACCUs. This is a clear indication that policy change is driving demand.

I think it's reasonable to expect that, as new integrity measures and methodology improvements come into effect across the VCM, demand and prices will respond.

EF: How have policy/voluntary frameworks changed the market over the past year, and what more is needed in this space?

EL: Policy and methodology changes over the past year have laid the foundations for the growth across carbon markets. Importantly, the changes provide project developers and investors with greater confidence to invest in vital carbon removal and avoidance projects. We need to see greater alignment between compliance and the VCM. By standardising, and at the same time acknowledging the strengths various methodologies have, we'll create a robust and effective international carbon market.

For more information, see: viridioscapital.com and viridios.ai