Cultivating a sustainable, carbon-free future

Singapore-based asset management firm, Gunung Capital, started its transition toward net zero in late 2019. It began with a review of its main portfolio asset: Indonesian steelmaker Gunung Raja Paksi (GRP), one of Indonesia’s largest privately owned steel groups.

With an overhaul of the asset’s management, the Gunung team considered the stark reality of its carbon footprint. As a result, their decision later that year to list GRP on the Indonesia Stock Exchange (IDX) formalized regular disclosure of the asset’s activities in the public domain.

Steelmaking is a big contributor to carbon emissions, with nearly 2 billion tonnes of metal produced yearly contributing to 8% of the global total, according to the Leadership Group for Industry Transition (LeadIT). “We are fighting an uphill battle, but we recognise through our research, that there’s really no option for us but to adapt quickly,” Kevin Fu, co-founder, and managing partner at Gunung Capital, told FinanceAsia.

The firm is completing a carbon footprint study and plans to release its roadmap to track annual progress this year. Fu explained that the company’s carbon footprint is low at 20% compared to other traditional steel businesses, as its steelmaking process employs an electric arc furnace that recycles scrap metal. In addition, it has installed solar panels on its roofs. But the team will continue looking at ways to reduce carbon outflows further. Gunung Capital is transforming its main portfolio asset in several ways, starting with changing the energy mix right at the source. Fu recognizes that the biggest influence across this endeavor will be “to tap a reliable source of green energy” and that this process will take time, depending on how long it may take to build out green power capabilities.

The firm is investing in new, energy-efficient equipment and sourcing high-quality raw materials regarding the scrap metal and hot briquetted iron it relies upon. Additionally, it draws upon artificial intelligence (AI) and technology to make its entire value chain run more efficiently. The Gunung team aims for its sustainability roadmap to be sufficient for application across other companies and industries.

“If you look at specific industries like forestry or some conglomerates that have multiple business lines, they don’t necessarily have an experienced sustainability team.”

“As we talk to these companies – potentially to invest in them, we’re also saying that we have a sustainability playbook and we can be their on-ground team to support their energy transition,” said Fu.

Supporting the global transition also requires huge amounts of capital, and earlier this year, Gunung Capital committed to investing up to $500 million to decarbonize its assets. In addition, Bain and Temasek’s Southeast Asia Green Economy 2022 Report states that $3 trillion in sustainable infrastructure investment is needed by 2030 to facilitate Southeast Asia’s carbon transition. This figure far overshadows the mere $9 billion invested in green business endeavors and assets in 2020.


But energy transition is just one piece of the puzzle for teams like Gunung Capital. Carbon mitigation is also central to the team’s investment strategy. As Fu puts it, “the delta is very big because the holy grail for carbon is ultimately its removal.”

This is where the voluntary carbon markets come into play.

Corporates typically buy carbon credits to offset the emissions that they cannot eliminate. They do so by investing in environmental projects to avoid or contribute to removing carbon emissions, with each carbon credit representing one metric tonne of carbon dioxide emissions.

The establishment in May last year of a Singapore-based global exchange and marketplace for voluntary carbon credits, Climate Impact X (CIX), is a testament to the interest in the voluntary market. The joint venture, which unites the expertise of DBS, the Singapore Exchange, Standard Chartered, and Temasek, provides a solution to the trust and transparency problems that have previously plagued the construct of a viable carbon market.

Carbon Credit
Mitigation Action

“There’s a lack of trust in paying for a piece of paper that says a tonne of carbon is sequestered. Even if you trust the piece of paper, what is a fair price to pay? Markets are effective in solving the pricing sensibility problem, as well as drawing that forward curve to help figure out what this might be worth in three, five or ten years,” said Genevieve Soh, head of Platforms and Ecosystems at CIX.

“Singapore has one key competitive edge – the ability to commodities carbon and simplify its trading process through carbon exchanges and standardised contracts.”



In November, CIX conducted its first auction of voluntary nature-based carbon credits, which saw participation from 19 global buyers across various industries. As a result, 170,000 tonnes of carbon credits were transacted as part of a curated portfolio of eight natural climate solution projects at $8 per tonne.

Gunung Capital was one of the firms that took part in the pilot auction, which Standard Chartered CEO, Bill Winters, described as “a critical step in unlocking billions in funding needed to achieve our shared climate goals.”

In the first quarter of 2022, CIX launched Project Marketplace to allow businesses and carbon project developers to buy and retire credits. Explaining this concept, Soh offered up the analogy of a can of soup, which nobody can benefit from unless it is opened and consumed: equally with carbon credits, there is no benefit unless they can be retired, and it is only through a marketplace that this can happen.

The firm plans to launch an auction platform in the third quarter, with a spot exchange to follow. These multiple trading venues address what CIX sees as a “diverse set of needs.”

“The auctions platform is where the projects to sequester carbon will sit. Auctions tend to be very effective at sending pricing signals for new products, and we set this out to be an in-between to the marketplace and the spot exchange,” said Soh.


Meanwhile, the AirCarbon Exchange (ACX) is capturing a different approach to voluntary carbon credits by putting them on the blockchain.

The concept is simple: to form a carbon market in Singapore by pairing the best attributes of traditional commodity market architecture with blockchain to create a digital ledger. After all, by nature, carbon credits are intangible digital assets.

The approach came from what ACX co-founder and CEO Thomas McMahon considered a flaw in the commodities markets. “The management of underlying assets and how they are stored and custodised, is challenging. While this challenge remains, blockchain works to fix it, by allowing for the acquisition and deposit of carbon credits as an asset class, defining beneficial ownership and removing transaction friction.”

Before setting up ACX in 2019 alongside William Pazos, the firm’s managing director, McMahon, served as CEO of the Singapore Mercantile Exchange, worked as deputy chairman of the Hong Kong Mercantile Exchange, and spent over two decades at the New York Mercantile Exchange. In tandem with the team’s efforts, his experience has brought over 330 members to the exchange, comprising a client base of both buy- and sell-side constituents.

In March this year, Deutsche Börse made a substantial investment in ACX, marking a partnership to accelerate further the development and scale of the voluntary carbon markets. In May 2021, the firm became the world’s first carbon negative exchange by offsetting carbon emissions for the year ahead through its Onil Stoves Guatemala Uspantan project.


A growing ecosystem of players is emerging in Singapore to facilitate carbon trading. With digital marketplaces such as CIX and ACX, the city-state is asserting itself as a global leader of carbon fintech services, adding to its recently acquired reputation as the location of choice for carbon trading desks, which has attracted the likes of commodities trader Trafigura, and oil majors like Shell and BP.

“Singapore has one key competitive edge – the ability to commoditise carbon and simplify its trading process through carbon exchanges and standardised contracts,” said Ivy Yin, energy transition and carbon specialist at S&P Global Commodity Insights.

But there are roadblocks to Singapore’s future vision. In the short term, geopolitical events, including Russia’s invasion of Ukraine, raise questions around energy security, subsequently impacting the prioritization of cutting emissions. Across the longer term, there is a question about how to standardize carbon trade in the region.

“This involves development across the entire carbon market and the resolution of the deep-seated issues of poor quality and regulation that have accumulated over decades,” said Yin.

Despite the challenges, there is velocity behind carbon market developments in Southeast Asia. With discussions on the transition to net zero just warming up among countries and corporates, market commentators consider

Singapore is well positioned to realize its vision of scaling up its contribution toward cutting carbon.




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