(Tor) for the New Governance Body & Call for Expressions of Interest

July 2021

Taskforce on Scaling Voluntary Carbon Markets (TSVCM)

Terms of Reference (ToR) for the new governance body &

Call for expressions of interest

Table of Contents

EXECUTIVE SUMMARY ...... 4

I. TERMS OF REFERENCE ...... 18

Critical governance needs for the voluntary carbon market ...... 18 Blueprint for an end-to-end governance landscape...... 18 The current VCM governance landscape ...... 19 Improved governance of existing bodies to address pain points ...... 20

Mission and mandate of the new umbrella governance body ...... 22 Mission of the new umbrella body ...... 22 Mandate of the new umbrella body...... 22

Organizational design ...... 26 Organizational structure of the body ...... 26 Board of Directors ...... 27 Expert Panel ...... 30 Executive Secretariat ...... 32 Member consultation group ...... 34 Funders ...... 35

Funding ...... 35

Operating model and principles ...... 36 General operating principles and participant rights ...... 37 Conflicts of interest ...... 38 Transparency mechanism ...... 41 Grievance mechanism ...... 42 Key performance indicators (KPIs) ...... 44

Initial establishment and transition from setup phase to steady state operations ...... 44 Setup phase ...... 45 Transition to steady state operations ...... 48

II. CALL FOR EXPRESSIONS OF INTEREST ...... 49

Timeline and process for the implementation of the governance body ...... 49 Implementation timeline ...... 49 Recommendation process ...... 50 Benefits for parties taking on a role in the governance body ...... 52

Recommendation guidelines ...... 53 Founding Sponsors ...... 53 Independent Board Members ...... 54 Expert Panel ...... 55

Executive Secretariat Host ...... 57 Member consultation group representatives ...... 58 Funders ...... 59

Required information to express interest ...... 59 Founding Sponsors ...... 60 Independent Board Members ...... 61 Expert Panel ...... 62 Executive Secretariat Host ...... 63 Member consultation group representatives ...... 64 Funders ...... 65

EXECUTIVE SUMMARY

The following summarizes the Terms of Reference (ToR) of the new umbrella governance body. It sets out critical governance needs for the voluntary carbon market and the need for a new umbrella governance body, the mission and mandate of the new body, its organizational design, funding, and operating principles. In addition to presenting the ToR, the Taskforce is calling for expressions of interest from parties that are interested in playing a role in the new governance body (e.g., as Founding Sponsor, Independent Board Member, representative of the member consultation group on the Board, Expert Panel Member, Executive Secretariat Host, and Funder). The second section of this document describes the implementation timeline and process as well as the guidelines to inform recommendations on who can be a Founding Sponsor, Independent Board Member, member consultation group representative, Expert Panel Member, Executive Secretariat Host, and Funder for the new body.

I. TERMS OF REFERENCE

Critical governance needs for the voluntary carbon market

In order to achieve the Paris goal of limiting global warming to 1.5 degrees Celsius, the global community needs to deliver rapid emissions reduction and to reach net zero emissions by no later than 2050. Climate action needs to start now. Corporates must follow a clear mitigation hierarchy: they must first reduce emissions in their own operations and value chain, followed by regular and transparent reporting of emissions reductions, only then does effective use of carbon credits have a role to play.

Successful use of carbon credits will involve defining high-integrity standards while at the same time ensuring a robust, transparent and liquid market that can increase in volume by a factor of up to 15 until 2030. Over the next 30 years, billions of dollars will flow from those emitting carbon to those reducing, avoiding, sequestering, and removing carbon. For finance to flow to the right projects, a well-functioning voluntary carbon market (VCM) is needed.

Today, demand in the voluntary carbon market is held back by a lack of a high quality standard for credits. Buyers and potential buyers are concerned about the environmental and reputation risks connected with the purchase of credits. In the survey that the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) conducted in Phase I, credit quality was the topic that buyer representatives expressed most concern about, mentioning a lack of environmental and social integrity of certain projects. In addition, today’s voluntary carbon market value chain is highly fragmented. It contains highly heterogenous and mostly small project developers with more than 20 standards issuing carbon credits. The current market does contain a few oversight bodies (e.g. the International Carbon Reduction and Offset Alliance (ICROA) and the International Civil Aviation Organization Technical Advisory Board (ICAO TAB) overseeing the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)), which have played a key role in increasing integrity of the market and quality of credits to where they are today.

A large majority of participants in the TSVCM have emphasized that further step-changes in oversight are required, to increase the quality of credits to a level where buyers have the confidence to enter the market at scale. Hence the TSVCM Phase I report from January 2021 called for the development of an umbrella governance body with the mission to promote the integrity, liquidity and growth of the global voluntary carbon market. At the core of its mandate is the hosting and curating of a set of Core Carbon Principles (CCPs), which is a threshold standard for high quality credits.

The need for this umbrella governance body was reconfirmed by an expert Governance Working Group, which conse- quently developed a set of concrete recommendations for the mandate, organizational design and implementation path for this body, in the period of March-May 2021.

Mission and mandate of the new umbrella governance body

The new umbrella governance body will be an independent, voluntary, stakeholder-led and self-regulating body with the mission to advance ready solutions to the global climate crisis. To this end it will promote the integrity, liquidity and growth of the global VCM by ensuring a high integrity of credits and uniting the fragmented governance landscape. In order to do so, it will embrace membership participation of companies and organizations active in all segments of the voluntary carbon market and will engage with industry groups, investor alliances, government agencies and non- governmental organizations (NGOs) whose members or activities are involved with the market.

The governance body’s goal will be to build the market by ensuring that the supply of high integrity carbon credits is sufficient to meet the demand from institutional, corporate and individual purchasers. Rapid VCM growth requires Core Carbon Principles (CCPs) and standards for high integrity carbon credits that are broadly accepted and applied; infrastructure, technology and solutions that foster market data and price transparency; and, sufficient debt and equity capital formation to support a liquid market for VCM credits.

The umbrella governance body’s mandate will be to:

i. Ensure that the VCM serves its primary purpose of reducing and removing greenhouse gas emissions and accelerating the transition to net zero to mitigate climate change;

ii. Establish, host, and curate: a) CCP eligibility guidelines and additional attributes; b) CCP assessment framework for standard setters; c) Eligibility principles for suppliers and Validation and Verification Bodies (VVBs);

iii. Provide oversight over standard setting organizations on adherence to CCPs and participant eligibility / oversight;

iv. Coordinate work of, and manage interlinkages between, individual bodies. Serve as the steward for the Volun- tary Carbon Market and endeavor to foster its responsible growth by defining a roadmap for success.

Organizational design

There will be five parts to the umbrella governance body: Board of Directors (consisting of Founding Sponsor representatives and Independent Board Members); Expert Panel; Executive Secretariat (hosted by the Executive Secretariat Host); member consultation group; and funders. The governance body will ensure diverse expertise (e.g., carbon and financial markets, governance) and representation from all geographies (including the Global South) across the body and within each of its constituent groups.

The Founding Sponsors are a group of NGOs, investor alliances and industry associations that provide public endorsement, legitimacy and authority to the new governance body. Their representatives serve on the Board during the initial phase (first 3 year term) to provide guidance and steering during the setup phase. There should be several Founding Sponsors to ensure diversity of expertise (e.g., financial and carbon markets, climate change) and representation from all geographies.

The Executive Secretariat Host is an organization that is hosting and running the Executive Secretariat. In order to avoid conflicts of interest, the Executive Secretariat Host is not a Founding Sponsor. In the steady state, the Board of Directors can establish or appoint another legally independent institution to run the Executive Secretariat.

The TSVCM Advisory Board will recommend1 organizations to become Founding Sponsors and the Executive Secretariat Host in September 2021.

The tasks, composition, nomination process and funding for each of the five constituent groups of the governance body are detailed below.

Exhibit 1: Design of the new body

Board of Directors

• The Board of Directors (BoD) takes key decisions on CCPs (e.g., accepts / rejects credit eligibility guidelines, standard assessment framework and standard eligibility under CCPs) and the strategic roadmap of the governance body based on recommendations from the Expert Panel and Executive Secretariat.

• The Board targets to have 9-11 Directors (uneven number, number may be increased to account for required diversity of expertise and geographies). Board seats are rolling (terms are staggered and last 3 years, each year 3-4 Board Members are appointed) and are distributed as follows:

1 Advisory Board members who submit interest to become a Founding Sponsor, Independent Board Member, Expert Panel Member or Executive Secretariat Host will be excluded from the decision process

o Founding Sponsor representatives during the initial phase (first 3 years), each of the Founding Spon- sors appoints one representative from their organization;

o Independent Board Members acting in the global interest (e.g., experts, academics or former market participants2), including representatives from multilateral and international organizations. These Direc- tors need to be in the majority on the Board to ensure its independence3. In the steady state phase (after first 3 years), seats are rolling and Independent Board Members are elected by the remaining Board of Directors;

o Member consultation group representatives (3 Directors) representing the opinions and interests from the member consultation group on the Board. There will be one seat each for representatives of suppliers (e.g., project developers, standards setters and VVBs), intermediaries (e.g., banks, exchanges, investors) and buyers.

• The Board will be made up of a diverse group of Directors. This includes geographic diversity (including the Global South), demographic diversity (e.g., gender), and diversity of expertise including on carbon and financial markets and governance (in particular during the setup phase).

• The Board of Directors will be led by a Chair and will have observers from the Executive Secretariat (Secretary- General and Deputy) and the Expert Panel (Chair and Deputy), who do not have voting rights. • Board Members are expected to commit sufficient time to ensure an efficient and informed decision process of the governance body. During the setup phase, the time commitment may be higher than in the steady state to accelerated the establishment of the new body.

• Independent Board Members are compensated for their work. Representatives from Founding Sponsors and the member consultation group receive in-kind contributions from their organizations.

Expert Panel

• The Expert Panel makes recommendations for key decisions on CCPs for approval by the Board of Directors (e.g., develops standards assessment framework and credit eligibility guidelines for methodology types, assesses whether standards should be eligible under CCPs). The Board of Directors provides oversight over the agenda of the Expert Panel. • The Expert Panel is a group of experts (e.g., academics, experts from multilateral and international organizations, market participants (overall in minority)2), which are grouped in sub-panels based on required expertise for assessments of different methodology types. The Expert Panel is led by a Chair and Deputy and the work of each sub-panel is organized by a Coordinator. Expert Panel Members, Chair and Deputy are appointed by the Board of Directors.

• To ensure the widest possible breadth and depth of expertise and a broad geographic representation, the panel consists of about 20-22 members, out of which 5-10 experts serve for a 3-year term (including Chair and

2 For details on guardrails applying to active market participants to avoid conflicts of interest see section Conflicts of interest 3 The Board needs to ensure a majority of independent Directors overall. Some Founding Sponsor representatives may also be classified as independent by the Advisory Board in the recommendation process if they do not have material conflicts of interest. This could be the case for representatives of organizations that are not active market participants (i.e., developing, financing or trading carbon credits) or that do not directly represent interests of market participants (e.g., industry associations of buyers)

Deputy). The remaining 10-17 experts serve on an ad-hoc basis corresponding to the currently required expertise.

• During the first 6 months, all 20-22 experts are expected to commit at least 40 percent of their time in order to finalize the standards assessment framework (based on work from TSVCM), approve initial standards and develop initial credit eligibility guidelines. Experts can optionally increase their time commitment up to 100 percent and take on a secondment role (with honorarium). After the first 6 months, the time commitment is likely to reduce to 10-20 percent.

• The Expert Panel is led by a Chair and Deputy, which have an observer role on the Board.

• Expert Panel Members are compensated for their work.

Executive Secretariat

• The Executive Secretariat develops recommendations for strategic decisions of the governance body for approval by the Board of Directors, carries out operational tasks (e.g., coordinating work, organizing meetings, managing memberships, supporting experts) and coordinates other individual bodies in the VCM governance landscape.

• During the setup phase (initial three years), the Executive Secretariat is hosted within an Executive Secretariat Host organization. This organization should not be a Founding Sponsor in order to ensure a clear separation between the development of content and preparation of materials (Executive Secretariat) and decision making (Board of Directors). In the steady state, the Board of Directors can establish or appoint another legally independent institution to run the Executive Secretariat. Secretary-General and Deputy are appointed by the Board of Directors.

• The precise setup will be determined by the Executive Secretariat Host organization. It likely consists of 17-25 full-time employees during the first year. After the first year, it contains 15-22 full-time employees.

• The Executive Secretariat is led by the Secretary-General and Deputy, which have an observer role on the Board.

• Secretariat employees are compensated for their work.

Member consultation group

• The member consultation group provides regular input to the Expert Panel and Executive Secretariat.

• It consists of representatives of all stakeholders of the voluntary carbon market, including market participants (suppliers, project developers, standard setters, market intermediaries, investors, buyers), NGOs, experts / academics, international and multilateral organizations, and others.

• The members may form specific groups around focus areas, leveraging their expertise to provide targeted feedback on specific topics.

• The member consultation group is neither compensated nor required to provide funds. In the steady state (after first 3 years), the Board may decide to introduce a membership fee (varies depending on size and financial means of organization).

Funders

• Funders provide funding for the governance body in particular during the setup phase (first 3 years). Funders will be recognized for their contribution, but will not obtain any rights or privileges (e.g., decision power) associated with their funding.

• Funders consist of corporates, philanthropic institutions and governments / public institutions.

• The decision on the steady state funding model will be taken by the Board of Directors. The governance body will aim to be self-sustaining with potential additional contributions from corporates, philanthropic institutions and governments / public institutions.

Funding

The governance body will operate on a not-for-profit basis. Funding for the new umbrella body will follow a phased approach:

Setup phase (first three years)

The first three years require seed funding of approximately USD 23 to 33 million (8 to 11 million per year). Fundraising will be the joint responsibility of the Founding Sponsors and the TSVCM. Key sources of funding will include governments / public institutions, contributions from corporates and philanthropic donations. Funders will be recognized for their contribution, but will not obtain any rights or privileges (e.g., decision power) associated with their funding. While not required, it would be desirable for Founding Sponsors and the Executive Secretariat Host to contribute to funding in cash or in kind. In kind contributions could for example include office space and infrastructure or seconded employees to the Executive Secretariat and / or Expert Panel.

Steady state

In the steady state, funding needs will amount to approximately USD 7 to 10 million per year to cover expenses. The final decision on the steady state funding model will be taken by the Board of Directors. Funding can for example be secured from membership fees and / or a service-based user fee (e.g., fee based on CCP credit issuance or retirement (potentially levied on buyers purchasing CCPs) per ton CO2). The funding needs correspond to less than 0.4 percent of the predicted VCM market size in 2024 (and less in subsequent years), assuming that the market will grow by a factor of 6-7 between 2020 and 2024 (following the market size analysis in TSVCM report from January 2021). Potential additional sources are contributions from Founding Sponsors / Executive Secretariat Host, public funding, and philanthropic donations. Funders will be recognized for their contribution, but will not obtain any rights or privileges (e.g., decision power) associated with their funding.

Operating model and principles

The governance body will put measures in place following key principles to ensure successful operations of the governance body and the voluntary carbon market overall. Key components of the operating model will include:

• General operating principles and participant rights to ensure both short- and long-term success of the organization as well as due procedural fairness;

• Guardrails and process to manage conflicts of interest as part of the modalities and procedures for the Board of Directors, which requires those with a conflict (e.g., related to activities as a market participant) to disclose the conflict, and prohibits Board members from voting on any matter in which there is a conflict;

• Transparency mechanism to ensure maximum transparency on a procedural and transactional (i.e., trades of carbon credits in the VCM) level;

• Grievance mechanism including a process to address complaints of stakeholders about procedures and decisions of the governance body as well as a system for ensuring that grievances and their resolution feed directly into the decision making of the Governance Body and enable continuous improvement;

• Key performance indicators (KPIs) to measure the success of the voluntary carbon market overall and of the governance body in reducing GHG emissions and accelerating the transition to net zero.

General operating principles and participant rights

The governance body will adopt key operating principles ensuring both short- and long-term success of the organization. The principles build on the values and operating principles established during the setup of TSVCM and include being highly collaborative (e.g., uniting players across the value chain), building on current momentum of VCMs, aiming to obtain buy-in from private sector, ensuring transparency in decision making and high integrity in managing conflicts.

Conflicts of interest

The governance body will include market participants in its governance structure in various ways. It will include active and former market participants on the Board, on the Expert Panel and as members of the member consultation group, with guardrails where necessary to prevent compromising its integrity, in both perceived and real ways. Inclusion of market participants with guardrails will bring necessary up-to-date expertise to the body including expertise in current most pressing issues without compromising the integrity of the body.

The conflicts of interest policy requires those with a conflict (or who think they may have a conflict) to disclose the (potential) conflict, and prohibits Board members from participating in discussions on any matter in which there is a conflict. In addition, the body will have multiple measures in place to avoid conflicts of interests (see Exhibit 8). The precise process to manage conflicts of interest is part of the five key governance topics that will be further developed ahead of the establishment of the new body (see section Initial establishment and transition from setup phase to steady state).

Organizational Conflict of Interest: Founding Sponsor(s) and Executive Secretariat Host

To ensure the highest integrity of the governance body and to prevent conflicts of interest, the governance body will only consider Founding Sponsor and Executive Secretariat Host organizations that are not-for-profit NGOs, industry / investor associations or public organizations. These types of organizations may also be considered if they are actively participating in the market (e.g. as project developers). However, they are required to disclose any carbon market activities and justify how they will minimize conflicts of interests linked to these activities. Significance of conflict of interest will be a point for consideration in the recommendation by the Advisory Board. One exception are not-for-profit

NGO standard setters. These may not be Founding Sponsors or Executive Secretariat Hosts as these bodies are foreseen to be directly overseen by the new governance body and may have more significant conflict of interest.

Individual Conflict of Interest: All Board Members and Expert Panel Members

All individuals serving on the Board and Expert Panel act in their personal capacity. They are required to adhere to a ‘Code of Conduct’, sign that they agree with the mission and mandate of the governance body, and fully and transparently disclose information about any conflicts of interest with recusal from votes where there are conflicts for any member.

In addition, conflicts of interest on the Board of Directors (as Founding Sponsor representatives, Independent Board Members and member consultation group representatives) and Expert Panel will be prevented by a set of guardrails. These guardrails will allow the inclusion of market participants, but avoid significant conflicts of interest. There will be four sets of guardrails:

• Composition rules:

o Independent Board Members: Overall in the majority on the Board4;

o Member consultation group representatives: 3 representatives (one each for suppliers, intermediaries and buyers);

o Expert Panel: Active market participants are in the minority on the Expert Panel.

• Guardrails on cooling off period (applies to Independent Board Members only): Minimum of two years cooling off period since the last employment for an organization that is generating revenues in VCMs (e.g., suppliers, for-profit standard setters, VVBs, intermediaries, investors with significant holdings in VCM revenue generating companies). No current employees of buyers, investors or non-profit standard setters. No cooling off period required for other organizations (industry / investor association and public organizations).

The three member representatives on the Board will be elected by the member consultation group. There are no guardrails for the eligibility of these representatives. However, the individuals will also have to adhere to a ‘Code of Conduct’.

Member consultation group and Funders

4 The Board needs to ensure a majority of independent Directors overall. Some Founding Sponsor representatives may also be classified as independent by the Advisory Board in the recommendation process if they do not have material conflicts of interest. This could be the case for representatives of organizations that are not active market participants (i.e., developing, financing or trading carbon credits) or that do not directly represent interests of market participants (e.g., industry associations of buyers)

Any organization or individual is eligible to join the member consultation group, after signing that they agree with the mission and mandate of the governance body. All organizations can become funders, in particular corporates, philanthropic institutions and governments / public institutions. Funders will be recognized for their contribution, but will not obtain any rights or privileges (e.g., decision power) associated with their funding.

Transparency mechanism

Following a guiding principle of maximum transparency, the governance body will put measures in place to ensure full transparency of:

• The body’s procedures: All recommendations from the Expert Panel and Executive Secretariat and decisions taken by the Board of Directors will be disclosed transparently to the public. The member consultation group and broader public can provide comments and suggest modifications in a consultation process. The body will provide full disclosure on financials, provide the market and the public with annual reports on its activities and hold annual general meetings with all its members. Every three years, the Board will commission third party effectiveness reviews to assess the advancement of the body and the success of the VCM in contributing to climate action;

• Trades of carbon credits: The governance body will strive to ensure transparency of trades in the voluntary carbon market. The Board of Directors will decide what kind of information should be publicly disclosed (e.g., ownership / retirement of credits and parties participating in trades should be publicly disclosed) and how (e.g., in real time).

The operationalization of the transparency mechanisms on a procedural and transactional level will be a key task for the governance body after its establishment (first 3-6 months of operations). A possible transparency mechanism for the governance body to consider is open book accounting: Every transaction, in digitally-enabled real- time, needs to be fully transparent to everybody. To support an accelerated implementation of the governance body, the TSVCM welcomes proposals for recommendations on transparency mechanisms from members and the public ideally before August 9th.

Grievance mechanism

The governance body will define a grievance mechanism that includes:

• A process to address complaints of stakeholders about procedures and decisions of the governance body (including a process for legal arbitration). The governance body will provide a publicly available complaint form to bring forward grievances about the body. All complaints and answers from the governance body will be disclosed publicly;

• Appropriate mechanisms to ensure privileges and immunities for individuals serving in a role for the governance body. Possible complaints that may be brought against individuals serving on the governance body can include acting outside of the delegated, substantially incorrect decisions, conflict of interest, breach of confidentiality, violation of procedural or bias in decision-making;

• A process to resolve conflicts among market participants (suppliers, VVBs, standard setters). The standard assessment framework will require standard setters to have a grievance mechanism in place in order to apply for eligibility under the CCPs. Furthermore, the governance body will mediate conflicts that cannot be resolved among market participants on topics such as adherence to CCPs. The governance body will also set up a system

for ensuring that grievances and their resolution feed directly into the decision making of the Governance Body and enable the continuous improvement of the CCPs and their implementation.

The operationalization of the grievance mechanism will be a key task for the governance body after its establishment (first 3-6 months of operations). A possible grievance mechanism for the governance body to consider is open governance (or strategic grievance mechanism): Any party impacted by any actual transaction can level a grievance. To support an accelerated implementation of the governance body, the TSVCM welcomes proposals for recommendations on grievance mechanisms from members and the public ideally before August 9th.

Key performance indicators (KPIs)

During the establishment of the governance body (initial 3-6 months ramp up phase), the governance body will define KPIs for:

• The voluntary carbon market overall;

• The governance body and its individual entities, including the Board of Directors, Expert Panel and Executive Secretariat.

The decision on KPIs will be taken by the Board of Directors with input from all members, the Expert Panel and Execu- tive Secretariat. To support an accelerated implementation of the governance body, the TSVCM welcomes proposals for recommendations on KPIs from members and the public ideally before August 9th. KPIs will be the basis for the regular effectiveness reviews that the governance body will undergo every three years (see section on Transparency mechanism).

Initial establishment and transition from setup phase to steady state operations

The new umbrella governance body will transition from the setup phase (first three years) to steady state operations (after three years) along three dimensions: Mission and mandate, organizational design and funding .

Setup phase

In the setup phase, the body will first focus on establishing, hosting and curating CPPs, as well as on providing oversight over standard setters on adherence to those principles. The Board of Directors will have Founding Sponsor representatives as members (alongside with a majority of Independent Board Members) to provide public endorsement and give initial authority and legitimacy to the body. The Executive Secretariat will be run by a Host organization (not a Found- ing Sponsor). The seed funding for the first 3 years will be sourced from philanthropic donations, governments, public institutions and / or corporates.

The first 3-6 months of the setup phase will be the ramp up phase. During this time, the body will take decisions on topics that are key to establish it as a legal entity and enable its functioning as well as on five key topics that will be further developed ahead of the establishment of the governance body. Along these two dimensions, the concrete tasks of the governance body will be:

• Establish the body as a legal entity and enable its functioning:

o Align on foundational considerations for the governance body;

o Prepare legal requirements and formally establish the body;

o Answer operational questions;

o Establish the process for disbursement of initial funds;

o Establish the relevant trademark protections;

o Set up IT infrastructure and determine how to address digital;

o Finalize a mission statement and ToR.

• Take decisions on five key topics that will be further developed ahead of the establishment of the governance body. The majority of these topics is centered around providing more detail on the operating model and principles of the governance body as described in the previous section. The key content topics include:

o Modalities and procedures for the Board of Directors including a process to manage conflicts of interest;

o Transparency mechanism;

o Grievance mechanism ;

o KPIs and definition of success;

o Transversal approach to ensure integrity across the value chain.

To support an accelerated implementation of the governance body, the TSVCM welcomes proposals for recommendations on these five topics from members and the public ideally before August 9th. The TSVCM Operating Team will collect proposed recommendations and update the TSVCM Advisory Board on received proposals. The Advisory Board may review proposals and make a non-binding recommendation to the Board of Directors of the governance body. After the establishment of the new body, the TSVCM Operating Team will facilitate sharing the proposed recommendations with the Executive Secretariat and Board of Directors. The Board of Directors of the new body will decide on ac- ceptance or rejection of the proposed recommendations.

In parallel to the activities, the body will focus on establishing, hosting and curating CPPs during the ramp up phase, as well as on providing oversight over standard setters on adherence to those. The concrete tasks include finalizing and approving the standard assessment framework based on inputs from the Credit-level integrity Working Group of the Taskforce and conduct assessments to approve the first set of standards (approx. 5-6). Additionally, the body will develop initial credit eligibility guidelines by defining a whitelist of the most relevant methodology types (approx. 3-4) and identify shortcuts to accelerate the review process of methodology types and standard setters.

Transition to steady state operations

As the body transitions to steady state operations after approximately three years, the new umbrella governance body will also adopt the coordination role of the voluntary carbon market and manage interlinkages between existing bodies. Founding Sponsors will no longer serve on the Board of Directors and will be replaced by Independent Board Mem- bers. The Board of Directors may appoint another independent entity to run the Executive Secretariat and funding is secured from service-based user fees and / or membership fees. The transition to the steady state operations including the coordination role should be accelerated as much as possible to the extent determined by limited resources. If feasible, it is desirable that the body takes up its coordination role before the three year mark. Before the transition to steady state operations, the body is to formally evaluate its success as well as the success of the market against previously defined criteria in an effectiveness review.

Authority of the governance body

The governance body has three main sources of authority: First, it will rely on legitimate organizations to be its Found- ing Sponsors as well as Board Members and Expert Panel Members with high integrity and expertise. Second, it is based on an effective and inclusive organizational structure and ensures transparency of procedures and decision making. Lastly, it will ultimately obtain authority and legitimacy from market participants issuing, trading and buying high quality CCP credits in the voluntary carbon market.

II. CALL FOR EXPRESSIONS OF INTEREST

The Taskforce is calling for expressions of interest to be a Founding Sponsor, Independent Board Member, representative of the member consultation group on the Board, Expert Panel Member and Executive Secretariat Host of the new umbrella governance body. In addition, the TSVCM is calling for funding contributions from corporates, philanthropic institutions and public sources. The following section summarizes the implementation timeline and process, the guidelines to inform recommendations on who can be a Founding Sponsor, Independent Board Member, Expert Panel Mem- ber and Executive Secretariat Host, and the information interested parties need to provide for their expression of interest in July / August.

Timeline and process for the implementation of the governance body

Between July 8th and August 9th, the TSVCM is calling for expressions of interest to become a Founding Sponsor, Inde- pendent Board Member, representative of the member consultation group on the Board, Expert Panel Member and Executive Secretariat Host. Founding Sponsors, Independent Board Members, Expert Panel Members and the Executive Secretariat Host will be recommended by the TSVCM Advisory Board in September 2021. Representatives of the member consultation group on the Board will be elected by the Taskforce members (see details on the recommendation process below). In parallel, corporates, philanthropic institutions and public institutions are encouraged to contribute to the seed funding of the new governance body.

Process for the recommendation of Founding Sponsors, Independent Board Members, Expert Panel Members and Executive Secretariat Host by the TSVCM Advisory Board

In this report, the TSVCM publishes the governance design and recommendation guidelines for Founding Sponsors, Independent Board Members, the Executive Secretariat Host and Expert Panel Members. Interested parties need to submit an expression of interest form for their desired role, which can be accessed on www.iif.com/TSVCM and needs to be submitted to [email protected]. The TSVCM continues to offer meetings with interested parties to answer questions and explain the recommendation process. Further details can be found in section Call for expressions of interest.

Afterwards, expressions of interest to become a Founding Sponsor, Independent Board Member, Expert Panel Member or the Executive Secretariat Host will be examined against recommendation guidelines (see section Recommendation guidelines below). Provided information will be scored against the recommendation guidelines using a scoring matrix, assessing candidate(s)’ fulfillment of the guidelines. Between August and September, the TSVCM Advisory Board will assess expressions of interest based on the scoring output. Special consideration will be given to representation of all stakeholders, women and all geographies. Advisory Board members who express interest to become a Founding Spon- sor, Independent Board Member, Expert Panel Member or Executive Secretariat Host will be excluded from the decision process.

The Taskforce Principals will make a draft recommendation and lead the discussion with the Advisory Board. The Advi- sory Board will decide by consensus on a recommendation for each role. Every reasonable effort will be made to encourage consensus. Where no consensus is possible, the majority view of Advisory Board members including Principals prevails. If a recommendation cannot be made by the Advisory Board – even after every reasonable effort has been made to do so – the Principals will make a recommendation in their own names. For transparency, Principals will publish the reasons why the Advisory Board could not make a decision including concerns that were raised, as well as the grounds for their decision, alongside their recommendation.

In a first step of its recommendation process, the Advisory Board will define a shortlist of interested parties and give feedback to the Operating Team on potential member combinations and scoring of the expressions of interest. The Operating Team may optionally hold clarification sessions with shortlisted parties as necessary to give feedback and broker joint expressions of interest. Afterwards, the Advisory Board will recommend parties for Founding Sponsors, Executive Secretariat Host, Independent Board Members and Expert Panel Members.

In mid-September, the Advisory Board will communicate its recommendation of Founding Sponsors, Independent Board Members, Expert Panel Members and the Executive Secretariat Host to the recommended parties.

Process for the election of Board representatives from the member consultation group by TSVCM members

Member consultation group representatives on the Board will be elected by TSVCM members. Individuals from any organization may put themselves forward as a Board candidate. Interested parties are encouraged to submit an expression of interest to the TSVCM by August 9th, indicating which part of the value chain they primarily wish to represent (e.g., suppliers, intermediaries, buyers). Parties should summarize their prior expertise and track record, legitimacy and authority, commitment to high integrity of carbon credits, and their motivation for the role. In addition, candidates need to sign that they agree with the mission and mandate of the governance body (like all members of the member consultation group).

Each organization represented in the TSVCM (as Taskforce member, Consultation group member or observer) by the date of the last plenary meeting (June 25th, 2020) has one vote. Independent members also have a vote if they are not affiliated with another organization in the TSVCM. Parties expressing an interest to become a member consultation group representative need to recuse themselves from the election process.

The TSVCM Operating Team will share submissions with the Taskforce in mid-August. Afterwards, TSVCM members will elect representatives of the member consultation group on the Board in mid-September.

Recommendation guidelines for Founding Sponsors, Independent Board Members, Expert Panel and Exec- utive Secretariat Host

The TSVCM has set out guidelines to inform recommendations on who could be a Founding Sponsor, Independent Board Member, Expert Panel Member, Executive Secretariat Host, member consultation group representative on the Board and Funder.

Organizations and individuals submitting their interest will need to endorse the main positions of TSVCM, have limited conflicts of interest and be able to demonstrate their legitimacy and expertise (e.g., deep understanding of the sector, including supplier and buyer needs, track record in carbon methodology, knowledge on how carbon markets can work to mitigate climate change, awareness of parallel initiatives, etc.).

In addition, there are some recommendation guidelines specific to elements of the umbrella governance body:

• Founding Sponsors preferably contribute to funding of the Governance body (in cash or kind, not a mandatory requirement);

• Independent Board Members should ideally bring experience as a Board Member from a comparable organization;

• Expert Panel Members will need to demonstrate extensive specialist expertise to (collectively) assess standard setters for eligibility and develop eligibility guidelines for all relevant methodology types;

• Executive Secretariat Host preferably contributes to funding (in cash or kind, not a mandatory requirement).

• Member consultation group representatives need to indicate which part of the value chain they primarily wish to represent (i.e. suppliers, intermediaries, or buyers). In addition, candidates need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.

• Funders will be recognized for their contribution, but will not obtain any rights or privileges associated with their funding.

Required information to express interest

Interested organizations and individuals are to comment on a range of topics as part of their submission of interest in July / August. The topics are oriented around the guidelines that will inform recommendations on who could be a Founding Sponsor, Independent Board Member, Expert Panel Member, Executive Secretariat Host, member consultation group representative on the Board and Funder. All parties can express their interest by submitting an expression of interest form until August 9th. The expression of interest form for each role can be found on the TSVCM website at www.iif.com/tsvcm, covering the topics outlined below. The TSVCM offers to facilitate meetings with interested parties to answer any outstanding questions about the topics to be commented on or about the broader recommendation process. Interested parties can engage with the TSVCM via [email protected].

Joint expressions of interest

The Taskforce is encouraging joint expressions of interest for the Founding Sponsor(s) and/or Executive Secretariat Host roles as this setup allows for greater diversity of expertise and geographical representation. Such expressions of interest will be assessed as a consortium, looking at, e.g., joint expertise and geographical representation. During the recommendation process, the TSVCM Operating Team will optionally engage with interested parties as necessary to provide feedback on the recommendation process and potentially broker joint expressions of interest. In case a consortium contains both organizations that are interested in the Founding Sponsor and Executive Secretariat Host roles it needs to be ensured that these institutions operate separately. This separation of Founding Sponsors and Executive Secretariat Host is necessary to avoid any conflicts of interest and to ensure the independence and objectivity of each individual organization.

Parties interested in the Founding Sponsor role can suggest individuals to represent their organization on the Board. A consortium may additionally suggest Independent Board Members from other organizations that are not interested to become a Founding Sponsor and / or Executive Secretariat Host. Similarly, a consortium may suggest and / or sponsor a member of the Expert Panel (not mandatory, may be from their own or other organizations). In both cases, the recommendation of the consortium will be independent from the recommendation of these individuals as Independent Board Members or Expert Panel Members.

I. TERMS OF REFERENCE

The following section contains the Terms of Reference (ToR) of the new governance umbrella body. It sets out a description of critical governance needs for the voluntary carbon market and the need for a new umbrella body, the mission and mandate of the new body, its organizational design, funding, and operating principles.

Critical governance needs for the voluntary carbon market

Blueprint for an end-to-end governance landscape

Exhibit 2: Blueprint for an end-state governance landscape that ad- dresses VCMs’ expected needs

In its report published in January 2021, the Taskforce outlined a blueprint for end-to-end governance of the voluntary carbon market (see Exhibit 2). It included the need for four key governance roles:

• Ensuring credit level integrity, including the definition of CCPs and additional attributes as well as checking the adherence to them;

• Ensuring participant level integrity, including the definition of participant eligibility criteria and participant oversight;

• Ensuring process level integrity and market functioning;

• Defining and verifying adherence to legal and accounting rules.

All of these roles need to be fulfilled across the entire carbon market value chain, including supply (project design and development, validation and verification, issuance of credits), market intermediaries (supply side financing, trading, settlement and retirement, market and reference data) and demand (buyers of credits).

During the subsequent development and implementation phase, the Taskforce revised the governance needs based on the input from the Governance Working Group (see Exhibit 2).

The current VCM governance landscape

There are a number of existing governance bodies in the current governance landscape that partially fulfill the governance needs described in the previous section. These include Validation and Verification Bodies (VVBs), standard setters, different expert bodies, regulators, standard setters for corporate claims, standard contract hosts, and financial and carbon accounting firms.

Exhibit 3: Critical gaps to fill in the current landscape and opportunity for further strengthening

Exhibit 3 shows the areas in the governance landscape that these bodies cover. It can be observed that there are three different types of coverage:

• Areas that are covered by existing governance bodies (gray areas in Exhibit 3, e.g., participant oversight and market functioning for market intermediaries by financial jurisdictional and self-regulators, accounting partly by financial accounting standard setters and accounting firms verifying adherence to accounting rules);

• Areas that are covered by existing bodies with a need to strengthen and / or expand their role (blue areas in Exhibit 3, e.g., adherence to CCPs on the supply side by suppliers, VVBs and standard setters, participant oversight of suppliers and VVBs by standard setters, etc.);

• Gaps in the current landscape (orange areas in Exhibit 3, e.g., definition of CCPs and additional attributes, setting participant eligibility guidelines on the supply side, overall coordination role to manage interlinkages between individual governance bodies).

In order to have a robust governance structure in the voluntary carbon market that ensures a high credit level and market integrity, the TSVCM is recommending that existing bodies strengthen their role and is calling for the establishment of a new umbrella governance body to fill current gaps in the governance landscape and manage interlinkages between existing bodies.

Improved governance of existing bodies to address pain points This section summarizes potential governance improvements of existing bodies to address perceived pain points in the voluntary carbon market (see following table).

Body Examples Needs covered today Potential improvement – perceived pain points

Suppliers Various Developing carbon Lack of sufficiently high-quality supply credit projects in the market

Validation and Verifi- E.g., SGS, TÜV Süd, Validating and verifying VVBs are not always accredited by in- cation Bodies (VVBs) DNV the project design dependent accreditation body (e.g., IAF)

Potential conflicts of interest in case validation and verification is carried out by the same body.

VVBs are lacking capacity, in particular in developing countries

Standards Setters E.g., Clean Develop- Developing methodol- Quality is not perceived high enough ment Mechanism Exec- ogies for carbon credit Fragmented landscape is challenging utive Board (CDM EB), projects for buyers to navigate Verified Carbon Stand- ard (VCS), Gold Stand- ard, American Carbon Registry (ACR), Climate Action Reserve, Archi- tecture for REDD+ Transactions (ART), Plan Vivo, Climate,

Community and Biodi- versity Standards (CCB Standards)

Verification accredita- E.g., International Ac- Accrediting verification Further improvement potential for tion agency creditation Forum bodies that issue certif- control of VVBs (incl. spot checks) and (IAF), CDM EB icates attesting that enforcement of integrity rules they comply with a specified standard

Expert bodies (1/2) E.g., ICROA Define participant eligi- Perceived conflicts of interest for users bility guidelines of the market setting the standards through Code of Best Practice

Expert bodies (2/2) E.g., World Bank and Overseeing meta- Currently fragmented database struc- International Emissions registry ture related to different standards Trading Association (IETA)

Standard setters for E.g., Science Based Tar- Defining how carbon Currently only nascent guidance on corporate claims gets Initiative (SBTi), credits are recognized how carbon offsets will enter financial International Organiza- for corporate claims accounting of companies tion for Standardiza- tion (ISO) and Volun- tary Carbon Market In- tegrity Initiative (VCMIi)

Standard contract E.g., International Hosting standard con- Current templates for carbon markets hosts Swaps and Derivatives tract templates for are out of date Association (ISDA), over-the-counter (OTC) IETA, European Federa- and exchanges tion of Energy Traders (EFET)

Carbon accounting E.g., Greenhouse Gas Developing rules on Incomplete guidance on use of offsets standard setters Protocol, ISO, Partner- how offsets enter cor- and attributes (e.g., for scope 3 emis- ship for Carbon Ac- porate emissions ac- sions) counting Financials counting (PCAF)

The new umbrella governance body will provide oversight over these individual bodies and manage interlinkages between them.

Mission and mandate of the new umbrella governance body

The TSVCM is calling for the establishment of a new umbrella governance body to fill the current gaps in the governance landscape described in the previous section and to manage interlinkages between existing governance bodies.

Mission of the new umbrella body

The new umbrella governance body will be an independent, voluntary, stakeholder-led and self-regulating body with the mission to advance ready solutions to the global climate crisis. To this end it will promote the integrity, liquidity and growth of the global VCM by ensuring a high integrity of credits and uniting the fragmented governance landscape. In order to do so, it will embrace membership participation of companies and organizations active in all segments of the voluntary carbon market and will engage with industry groups, investor alliances, government agencies and NGOs whose members or activities are involved with the market.

The governance body’s goal will be to build the market by ensuring that the supply of high integrity carbon credits is sufficient to meet the demand from institutional, corporate and individual purchasers. Rapid VCM growth requires Core Carbon Principles and standards for high integrity carbon credits that are broadly accepted and applied; infrastructure, technology and solutions that foster market data and price transparency; and sufficient debt and equity capital formation to support a liquid market for VCM credits.

Mandate of the new umbrella body

In order to fulfil its mission, the new governance umbrella body will have a mandate that covers three main areas:

I. Mitigate & accelerate

Ensure that the VCM serves its primary purpose of reducing and removing greenhouse gas emissions and accelerating the transition to net zero to mitigate climate change.

II. Establish, host & curate

a) CCP eligibility guidelines and additional attributes;

b) CCP assessment framework for standard setters;

c) Eligibility principles for suppliers and VVBs.

III. Oversee

Provide oversight over standard setting organizations on adherence to CCPs and participant eligibility / oversight.

IV. Coordinate & foster

a) Coordinate work of and manage interlinkages between individual governance bodies;

b) Serve as the steward for the voluntary carbon market and endeavor to foster its responsible growth by defining a roadmap for success.

Exhibit 4: High-level view on the mandate of the new governance umbrella body

I. Mitigate & accelerate

Voluntary carbon markets exist to deliver a public purpose, the net reduction of greenhouse gases (GHGs) and acceleration of the transition to net zero in order to mitigate climate change and reach the goals of the Paris agreement. In order to meet the global goal of the Paris Agreement to limit warming to 1.5 degrees, it is essential to prioritize rapid and deep reductions in fossil fuel emissions across every sector of the economy. The global community needs to reach net zero emissions by no later than 2050. To credibly hit that target, we all need to act now.

The governance body will ensure that the VCM meets this public purpose by guaranteeing a high integrity of carbon credits and promoting the integrity, liquidity and responsible growth of the market. This can drive billions of dollars from those emitting carbon to those removing carbon or preventing its emission over the next years. For finance to flow to the right projects, a well-functioning voluntary carbon market with robust oversight and governance is needed. The body will address roadblocks to effectiveness of the market, so that offsets can lead to genuine carbon emissions reductions and environmental and social benefits.

II. Establish, host & curate

The governance body will establish, host and curate the Core Carbon Principles (CCPs) together with defining eligibility principles for standard setters, suppliers and Validation and Verification Bodies (VVBs).

Specifically, the tasks of the governance body in the setup phase are to establish CCPs and additional attributes (based on TSVCM recommendations), to develop credit eligibility guidelines for methodology types (leveraging the analysis

from the TSVCM Credit-level integrity working group), to develop a standard assessment framework (leveraging analysis from TSVCM), and to develop eligibility principles for suppliers and VVBs (the governance body is not a regulatory body, but will define principles for eligibility under the CCPs).

In the long term, to host and curate the CCPs, the governance body is required to disclose the above documentation transparently to all stakeholders and the public, to curate the documentation going forward, ensuring syndication with other stakeholders as part of a yearly revision process, and to conduct a review of each methodology type every three years. These reviews would be carried out on a rolling basis to smoothen the workload.

For all the above tasks, the Expert panel will make recommendations. Decisions will be taken by the Board of Directors.

Exhibit 5: Mandate: The Governance body will act on the methodology sub-type

III. Oversee

To further ensure integrity of the market, the new governance body will provide oversight over standard setters on adherence to CCPs. It will conduct assessments to approve standard setters that apply for eligibility, re-assessing standard eligibility every year (re-assessments follow a significantly lighter process than the initial standard assessment). The body will conduct frequent spot checks to ensure that 1) methodologies that standard setters mark as CCP approved adhere to all the specific eligibility criteria of the CCPs, and 2) underlying projects adhere to CCPs. It will issue public warnings for methodologies marked as CCP compliant, but failing the spot checks. The body will also disclose the developed recommendations transparently, including underlying methodologies and evaluation criteria.

The Expert panel will make recommendations for the oversight of standard setters. Decisions will be taken by the Board of Directors.

IV. Coordinate & foster

In addition to market oversight, the umbrella governance body will coordinate the Voluntary Carbon Market participants.

First, it will coordinate work with and manage interlinkages between existing governance bodies across supply, market intermediaries and demand (see landscape in Exhibit 3), by ensuring regular conversation and information exchange, mediating in conflicts between bodies, and lastly, by moderating the process to define and adapt scopes of individual governance bodies. Specifically, the governance body will link to the following organizations:

• Financial regulators (e.g., the Commodity Futures Trading Commission (CFTC), the Financial Industry Regula- tory Authority (FINRA) and the National Futures Association (NFA)): The governance body will engage with regulators to review their treatment of voluntary carbon credits with the aim of providing further guidance on their legal nature (e.g., whether CCP credits are considered to be financial instruments, the link to MiFID, UCITS, etc.) and achieve harmonization across jurisdictions. The body will ensure that the rules of the VCM and broader financial system are consistent, coherent and mutually supportive. It will further encourage financial regulators to increase their focus on the implications of climate change on assets, economies, and society as well as receive reports and guidance from regulators for tracking and transparency purposes.

• Expert bodies (e.g., ICROA setting participant eligibility principles, the World Bank and the International Emis- sions Trading Association (IETA) overseeing a meta-registry): The governance body will leverage the experiences and expertise of current expert bodies in the VCM and stay loosely associated.

• Standard setters for corporate claims and other bodies with the mandate to oversee buyers (e.g., the Science Based Targets Initiative (SBTi), the International Organization for Standardization (ISO) and the Voluntary Car- bon Market Integrity Initiative (VCMIi)): While these initiatives and organizations are independent, the governance body will establish links to help ensure the integrity on the demand side (for example, the use of high- quality CCP aligned credits should be reflected in corporate claims, including both removal and avoidance / reduction credits). In the mid-term, the governance body may decide to extend its mandate if necessary to provide oversight over integrated governance of carbon markets as a whole. Such strategic decisions will have to be taken by the Board of Directors. To support an accelerated implementation of the governance body, the TSVCM welcomes proposals for recommendations from members and the public on the transversal approach and operationalization of interlinkages to bodies on the demand side (ideally before August 9th).

• Related initiatives (e.g., VCMIi, World Business Council For Sustainable Development (WBCSD), SBTi, Natural Climate Solutions (NCS) Alliance, GHG protocol, Coalition for Negative Emissions): The governance body will explore to initiate and form a coordination group with related initiatives to align approaches, share progress and benefit from each other’s expertise and experiences.

• Legal and accounting firms (e.g., standard contract hosts, financial and carbon accounting standard setters and accounting firms verifying adherence to accounting rules): The governance body will establish a peer-to-peer relationship with legal and accounting firms. In addition, it will liaise with relevant international legal and/or intergovernmental bodies to initiate consideration of the legal nature of carbon credits and its harmonization.

• Governments and compliance market regulators: Failure to clarify and align the Corresponding Adjustment rules may be an impediment for scaling the voluntary carbon markets and only a clearly articulated, workable and credible resolution will provide assurance to the full range of voluntary carbon credit buyers. The Task- force cannot deliver policy guidance on CAs, and this is subject to ongoing international negotiations. The TSVCM position has been that once rules are negotiated, the voluntary market should comply with the rules of

the Paris Agreement and Article 6. Further work will need to be done by the governance body as the outcomes of the Article 6 negotiations become clearer in order to provide clear guidance to the market about the legitimate use of carbon credits. Along the way the governance body may engage and maintain an open dialogue with governments and compliance market regulators.

• Other bodies: The governance body will also interlink with other relevant bodies such as tax authorities, accreditation bodies and expert bodies outside of carbon market (e.g., international and multilateral organizations).

The governance body will also ensure the development of interoperable systems among individual bodies by defining appropriate standards (e.g., data). Specifically, it will work together with standard setters (e.g., VCS, Gold Standard, CDM, ACR, CAR and ART Trees) to promote an interoperable market.

Second, the governance body will serve as the steward for the voluntary carbon market and endeavor to foster its responsible growth by defining a roadmap for success. This includes addressing strategic issues, such as managing the needed shift in the market from avoidance / reduction credits to sequestration / removal credits over time (as set out in the TSVCM report published in January 2021), potential inclusion of governments at a later stage, and extension of scope to attribute markets. It will be the governance body’s task to pick up emerging trends and define how the VCM governance structure should evolve to include them.

Owner of the coordination tasks will be the Executive Secretariat, with decisions taken by the Board of Directors.

Phasing approach for the roll-out of the governance body

During the setup phase (first three years), the governance body will focus on establishing, hosting and curating CCPs and overseeing standard setters. This includes in particular intense work by the Expert Panel (with support from the Secretariat) in the first year to develop the standard assessment framework, conduct assessments to approve the first set of standard setters and develop initial credit eligibility guidelines. Over time the governance body will additionally adopt its coordination role by managing interlinkages between existing bodies and serving as the steward for the voluntary carbon market.

Organizational design

Organizational structure of the body

There will be five parts to the umbrella governance body: Board of Directors (consisting of Founding Sponsor representatives and Independent Board Members); Expert Panel; Executive Secretariat (hosted by the Executive Secretariat Host); member consultation group; and funders (see Exhibit 6). The governance body will ensure diverse expertise (e.g., carbon and financial markets, governance) and representation from all geographies (including the Global South) across the body and within each of its constituent groups.

The tasks, composition, nomination process and funding for each of the five constituent groups of the governance body are detailed below.

Exhibit 6: Design of the new body

Board of Directors

The Board of Directors (BoD) takes key decisions on CCPs (e.g., accepts / rejects credit eligibility guidelines, standard assessment framework and standard eligibility under CCPs) and the strategic roadmap of the governance body based on recommendations from the Expert Panel and Executive Secretariat.

The Board consists of representatives from three different groups: • Founding Sponsors are a group of NGOs, investor alliances and industry associations that provide public endorsement, legitimacy and authority to the new governance body. Their representatives serve on the Board during the initial phase (first 3 year term) to provide guidance and steering during the setup phase. There should be several Founding Sponsors to ensure diversity of expertise (e.g., financial and carbon markets, governance, climate change) and representation from all geographies; • Independent Board Members are experts, academics, former market participants5 and representatives from multilateral and international organizations that act in the global interest and provide expert input, governance and market knowledge and legitimacy to the governance body; • Member consultation group representatives are elected by all members and represent the opinions and interests from the member consultation group on the Board.

5 For details on guardrails applying to active market participants to avoid conflicts of interest see section Conflicts of interest

The TSVCM Advisory Board recommends organizations to become Founding Sponsors and the initial Independent Board Members in September 2021. In parallel, TSVCM members will elect the initial member consultation group representatives (see more details in Chapter Call for expressions of interest).

Tasks for the Board of Directors • During the first year: o Take decisions on standard assessment framework and initial credit eligibility guidelines (based on recommendations from the Expert Panel and prepared by the Executive Secretariat); o Approve initial standard setters to be eligible under the CCPs, based on recommendations from the Expert Panel; o Take strategic decisions for the governance body during the setup phase (e.g., how the governance body can support all recommendations of the TSVCM, etc.). • After the first year: o Approve (re-)assessment of standard setter eligibility, which methodology types are eligible and revi- sions of CCPs (based on recommendations from the Expert Panel and prepared by the Executive Secre- tariat); o Call for review of standard setters and spot checks if concerns are raised; o Take decisions on the strategic roadmap for the governance body (e.g., shift in the market from avoidance / reduction credits to sequestration / removal credits over time, inclusion of governments at a later stage, extension of scope to attribute markets, etc.) and emerging trends for VCMs (e.g., how to include digital initiatives such as remote monitoring, reporting, and verification (MRV) in VCM governance structure).

Composition of the Board of Directors • The Board targets to have 9-11 Directors (uneven number to enable decision making, number may be increased to account for required diversity of expertise and geographies) distributed as follows: o Representatives of the Founding Sponsors during the initial setup phase. Each of the Founding Spon- sors appoints one representative from their organization. Sponsor representatives only serve on the Board during the setup phase and are replaced by Independent Board Members after the first 3-year term; o Independent Board Members acting in the global interest (e.g., experts, academics or former market participants6), including representatives from multilateral and international organizations. These Direc- tors need to be in the majority on the Board to ensure its independence7;

o Representatives from the member consultation group (3 Directors) representing the opinions and interests from members on the Board. There will be one seat each for representatives of suppliers (e.g.,

6 For details on guardrails applying to active market participants to avoid conflicts of interest see section Conflicts of interest 7 The Board needs to ensure a majority of independent Directors overall. Some Founding Sponsor representatives may also be classified as independent by the Advisory Board in the recommendation process if they do not have material conflicts of interest. This could be the case for representatives of organizations that are not active market participants (i.e., developing, financing or trading carbon credits) or that do not directly represent interests of market participants (e.g., industry associations of buyers)

project developers, standards setters and VVBs), intermediaries (e.g., banks, exchanges, investors) and buyers.

• The Board will be made up of Directors from across geographies (including the Global South) and with diverse expertise on, e.g., carbon and financial markets as well as governance (in particular during the setup phase). Special consideration will be given to having an adequate representation of women.

• The Board of Directors will be led by a Chair, which is chosen among the Board members. • The Board has observers from the Executive Secretariat (Secretary-General and Deputy) and the Expert Panel (Chair and Deputy), who do not have voting rights. • Board decisions are taken by majority vote. • Board Members are expected to commit sufficient time to ensure an efficient and informed decision process of the governance body. During the setup phase, the time commitment may be higher than in the steady state to accelerated the estab-lishment of the new body.

• All Board Members act in their personal capacity. Directors are required to fill out and sign a declaration on real and perceived conflicts of interest, which will be publicly disclosed by the governance body.

Steady state nomination process of Board Members • Rolling Board seats: terms are staggered and last 3 years, each year 3-4 Board Members are appointed. • Founding Sponsor representatives only serve on the Board during the initial phase (first term of 3 years) and are assigned by Founding Sponsors. • Independent Board Members: o Candidates submit applications to the Executive Secretariat; o The Executive Secretariat assesses candidates against nomination criteria8; o Independent Board Members are elected by the Board of Directors (majority vote) for a period of 3 years; • Member representatives need to be members of and are elected by the member consultation group of the governance body (majority vote) for a period of 3 years. Each organization has one vote; independent members also have a vote if they are not affiliated with another organization on the governance body. Individuals from any organization may put themselves forward as a Board candidate, indicating which part of the value chain they primarily wish to represent (e.g., suppliers, intermediaries, buyers). • The Chair of the Board is elected by the Board for a one year term. The first Chair will be appointed by the Founding Sponsors among all Board members for an initial one year term to accelerate the establishment of the governance body.

Guidelines for steady-state nomination process may evolve and will be determined by the Board of Directors in their final form.

8 Steady state nomination criteria to be determined by Board of Directors

Funding

Independent Board Members are compensated by philanthropic donations and / or public funding to ensure the independence of the Board. Representatives from Founding Sponsors and the member consultation group receive in-kind contributions from their organizations.

Expert Panel The Expert Panel makes recommendations for key decisions on CCPs for approval by the Board of Directors (e.g., develops standards assessment framework and credit eligibility guidelines for methodology types, assesses whether standards should be eligible under the CCPs). The Board of Directors provides oversight over the agenda of the Expert Panel.

Tasks for the Expert Panel • During the first six months: o Develop standard assessment framework leveraging analysis from the TSVCM Credit-level integrity working group; o Conduct assessments to approve the first set of standard setters (approx. 5-6) with input from the member consultation group, focusing on the most relevant programs that are already approved by CORSIA and / or ICROA (VCS, Gold Standard, ACR, CAR, ART Trees); o Develop initial credit eligibility guidelines leveraging analysis from the TSVCM Credit-level integrity Work- ing Group by defining a whitelist of 3-4 most relevant methodology types (e.g., avoided ecosystem damage, renewables, energy efficiency, fuel switching, which together cover more than 80 percent of the current market); o Identify shortcuts to accelerate the process, in particular the review process of methodology types and standard setters. • In the following six months: o Conduct assessment to approve remaining standard setters (approx. 8-9), with input from the member consultation group; o Continue to develop initial credit eligibility guidelines leveraging analysis from the TSVCM Credit-level integrity working group by defining whitelist of 3-4 most relevant methodology types (e.g., avoided ecosystem damage, renewables, energy efficiency, fuel switching, which together cover more than 80 percent of the current market); o Develop eligibility principles for suppliers and VVBs; o Conduct frequent spot checks to ensure that methodologies that standard setters mark as CCP approved adhere to all the specific eligibility criteria of the CCPs and that underlying projects adhere to CCPs (1 methodology per month). Issue public warnings for methodologies marked as CCP compliant, but failing the spot checks. • After the first year: o Re-assess standard eligibility every year (re-assessments will follow a significantly lighter process than the initial standard assessment); o Conduct assessments to approve upcoming standards;

o Conduct a review process of existing and upcoming methodology types with input from the member consultation group (2 methodology types per year); each project type category is evaluated on a rolling basis (re-assessment every three years); Panel composition can vary depending on which methodologies are being reviewed; o Curate the documentation of the standard assessment framework and credit eligibility guidelines, ensuring syndication with other stakeholders, and revise CCPs to keep them up to date; o Conduct frequent spot checks to ensure that methodologies that standard setters mark as CCP approved adhere to all the specific eligibility criteria of the CCPs and that underlying projects adhere to CCPs (1 methodology per month). Issue public warnings for methodologies marked as CCP compliant, but failing the spot checks.

The Expert panel will take into account social and other co-benefits of carbon projects when developing recommendations on the CCPs. Topics around the market structure, interlinkages with existing bodies (e.g., financial intermediaries) and the strategic road map for the VCM are within the mandate of the Secretariat.

Composition of the Expert Panel • The Expert Panel is a group of experts (e.g., academics, experts from multilateral and international organizations, market participants (overall in minority)9), which are grouped in sub-panels based on required expertise for assessments of standard setters to be eligible under CCPs and of different methodology types. • In order to fulfil all the tasks described above and to ensure the widest possible breadth and depth of expertise and a broad geographic representation, the panel consists of about 20-22 members, out of which 5-10 experts serve for a 3-year term. The remaining 10-17 experts serve on an ad-hoc basis corresponding to the currently required expertise. Special consideration will be given to have an adequate representation of women. • Experts form several sub-panels, which are led by a Coordinator. Sub-panels either focus on one or several CCP principles (e.g., additionality, permanence, leakage, etc.) with the main task to assess standard setters, or alter- natively on a specific methodology type to develop credit eligibility guidelines (the initial sub-panels focusing on methodology types will be formed around avoided ecosystem damage, renewables, energy efficiency and fuel switching). Expert Panel Members can be part of several sub-panels depending on their expertise. Sub- panel Coordinators ensure an efficient, focused and timely exchange between relevant experts. While sub- panels are focusing on one or several CCP principles (e.g., additionality, permanence, leakage, etc.) or on a specific methodology type, the governance body will ensure a mix of expertise in the sub-panels to provide challenge and a creative mix (e.g., by allowing experts to be part of several sub-panels). • The Expert Panel is led by a Chair and Deputy, which are part of all sub-panels and serve for a 3-year term. The Chair and Deputy are responsible for the integration of views and analyses of all sub-panels and for developing recommendations for the Board of Directors. Chair and Deputy have an observer role on the Board. • During the first 6 months, all 20-22 experts are expected to commit at least 40 percent of their time in order to finalize the standards assessment framework (based on work from the TSVCM), approve initial standards and develop initial credit eligibility guidelines. Experts can optionally increase their time commitment up to 100 percent and take on a secondment role (with honorarium). After the first 6 months, the time commitment is likely to reduce to 10-20 percent.

9 For details on guardrails applying to active market participants to avoid conflicts of interest see section Conflicts of interest

• All Expert Panel Members act in their personal capacity. Expert Panel Members are required to fill out and sign a declaration on real and perceived conflicts of interest, which will be publicly disclosed by the governance body.

Steady state nomination process of Expert Panel Members • Experts submit applications to the Executive Secretariat. • Secretariat drives the nomination process (assesses candidates against nomination criteria10). • Expert Panel Members, Chair and Deputy are appointed by the Board of Directors. Guidelines for the steady-state nomination process may evolve and will be determined by the Board of Directors in their final form.

Funding

Expert Panel Members are compensated for their work.

Executive Secretariat The Executive Secretariat develops recommendations for strategic decisions of the governance body for approval by the Board of Directors, carries out operational tasks (e.g., coordinate work, organize meetings, manage memberships, support experts) and coordinates other individual bodies in the VCM governance landscape. For the setup phase, it is hosted within the Executive Secretariat Host organization. In the steady state, the Board of Directors can establish or appoint another legally independent institution to run the Executive Secretariat.

Tasks for the Executive Secretariat

• During the first year: o Take operational lead in setting up the new governance body. Take frequent decisions on and carry out operational tasks, including: › Setup infrastructure of governance body (rent building, setup IT infrastructure, etc.); › Coordinate work of different groups within the body, e.g.: » Coordinate work of Expert Panel, divide members into different sub-panels to work on standard assessment framework and credit eligibility guidelines; » Compile terms of reference for membership, identify and invite suitable organizations to become members. › Setup cadence and organize meetings for Board of Directors and Expert panel, prepare meeting materials; › Communicate with all relevant stakeholders (Board, experts, members, other market participants, multilateral and international organizations, governments and compliance market regulators, etc.). o Drive work and prepare recommendations for strategic decisions for approval by the Board of Directors (e.g., how can the governance body support all recommendations of the TSVCM, etc.);

10 Steady state nomination criteria to be determined by Board of Directors

o Assist Expert Panel in content work to develop standard assessment framework and credit eligibility guidelines by running analyses, reviewing output, compiling material to be signed off by the Board of Directors. • After the first year: o Carry out operational tasks of the governance body: › Coordinate work of different groups within the body (e.g., collect and incorporate input of members on strategic topics and on work of the Expert Panel); › Receive and approve membership applications; › Set up cadence and organize meetings for Board of Directors and Expert panel, prepare meeting materials; › Communicate with all relevant stakeholders (Board, experts, members, other market participants, multilateral and international organizations, governments and compliance market regulators, etc.). o Assist Expert Panel in content work to conduct (re-)assessments to approve standard setters and review methodology types and curate the documentation, revise CCPs and run spot checks by running analyses, reviewing output, compiling material to be signed off by the Board of Directors; o Manage interlinkages between and coordinate work of individual bodies in the governance landscape: › Ensure regular conversation and information exchange between individual bodies; › Moderate the process to define and adapt scopes of individual governance bodies; › Play intermediation role in conflicts between bodies. o Prepare recommendations for strategic decisions to scale the voluntary carbon market for approval by the Board of Directors, including: › Define and help coordinate long-term strategic roadmap for the governance body (e.g., shift in the market from avoidance / reduction credits to sequestration / removal credits over time, inclusion of governments at a later stage, extension of scope to attribute markets, etc.); › Pick up emerging trends and define approach to include them in VCM governance structure, including digital initiatives such as remote MRV.

Composition of the Executive Secretariat • During the setup phase (initial three years), the Executive Secretariat is hosted within and run by the Executive Secretariat Host. This organization should not be a Founding Sponsor in order to ensure a clear separation between the development of content and preparation of materials (Executive Secretariat) and decision making (Board of Directors). In the steady state, the Board of Directors can establish or appoint another legally independent institution to run the Executive Secretariat. • The precise setup will be determined by the Executive Secretariat Host. In order to fulfil all the tasks described above, it likely consists of 17-25 full-time employees during the first year. After the first year, it contains 15-22 full-time employees. These ranges were obtained by a combination of bottom-up analysis (based on concrete tasks described above), a comparison to similar bodies (e.g., ICAO TAB) and expert interviews. The Executive Secretariat Host will also decide on the precise roles within the Secretariat (beyond Secretary-General and Deputy) to address the governance body’s needs.

• The Executive Secretariat has a Secretary-General and a Deputy with relevant expertise and leadership experience, which are observers to the Board of Directors. • Secretariat employees require experience in running similar organizations in highly complex setups and analytical capabilities to support the expert panel in review processes. In addition, the Executive Secretariat is to bring extensive expertise in governance (e.g., experience in establishing governance arrangement for complex markets) and technology (e.g., DLT, blockchain, digital security, etc.).

Steady state nomination process of the Executive Secretariat

The Executive Secretariat Host, the Secretary-General and Deputy are appointed by the Board of Directors. Executive Secretariat employees are nominated by the Executive Secretariat Host. Guidelines for the steady-state nomination process may evolve and will be determined by the Board of Directors in their final form.

Funding

Secretariat employees are compensated for their work.

Member consultation group

Tasks for the member consultation group

The member consultation group provides regular input to the Expert Panel and Executive Secretariat through a consultation process with regular meeting cadence.

Members will be vital to provide market expertise and state of the art knowledge on financial and environmental issues to inform the decisions of the governance body. By publicly endorsing the work and position of the governance body, they will contribute to promoting the mission of the body and the VCM as a whole to reduce GHG emissions and accelerate the transition to net zero.

Composition

The member consultation group contains representatives from all stakeholders of the voluntary carbon market, including market participants (suppliers, project developers, standard setters, market intermediaries, investors, buyers), NGOs, experts / academics, international and multilateral organizations, and others. The member group should be as diverse as possible, reflecting a broad range of opinions, expertise and geographies including the Global South. The governance body will ensure equitable access especially for vulnerable communities such as girls and women, ethnic minorities, indigenous population, and representatives from Least Developed Countries. The governance body aims to include both established players as well as new entrants in the carbon markets.

The members may form specific groups around focus areas, leveraging their expertise to provide targeted feedback on specific topics.

Steady state nomination process of members

All private and public sector institutions and individuals can request to become members and are confirmed by the Executive Secretariat. In order to be accepted as a member, candidates need to sign that they agree with the mission and mandate of the governance body.

Funding

The member consultation group is neither compensated nor required to provide funds. In the steady state (after first 3 years), the Board may decide to introduce a membership fee that varies depending on the size and financial means of member organizations.

Funders

Tasks for the funders

Funders provide funding for the governance body in particular during the setup phase (first 3 years). Funders will be recognized for their contribution, but will not obtain any rights or privileges (e.g., decision power) associated with their funding.

Composition

Funders consist of corporates, philanthropic institutions and governments / public institutions.

Steady state

The decision on the steady state funding model will be taken by the Board of Directors. The governance body will aim to be self-sustaining with potential additional contributions from corporates, philanthropic institutions and governments / public institutions.

Nomination process

Initial fundraising for the setup phase is a responsibility of Founding Sponsors and the TSVCM Operating Team.

Funding

The governance body will operate on a not-for-profit basis. Funding for the new umbrella body will follow a phased approach.

Setup phase (first three years)

The first three years require seed funding of approximately USD 23 to 33 million (8 to 11 million per year).

Fundraising will be the joint responsibility of the Founding Sponsors and the TSVCM. Main sources of funding will include: • Governments / public institutions; • Contributions from corporates; • Donations from philanthropic organizations.

Funders will be recognized for their contribution, but will not obtain any rights or privileges (e.g., decision power) associated with their funding. In addition to the sources above, Founding Sponsors and the Executive Secretariat Host may contribute to funding in cash or kind (not a requirement, but desirable). In kind contributions could for example include office space and infrastructure or seconded employees to support the Executive Secretariat and Expert Panel.

The main part of the budget will be used for compensations of Independent Board Members, Expert Panel Members and the Executive Secretariat. In addition, there will be overhead costs for, e.g., building infrastructure, IT, etc. Finally, part of the seed funding will be used to finance research that is required to inform the recommendations of the Expert Panel on the CCPs.

Steady state

In the steady state, funding needs will amount to approximately USD 7 to 10 million per year to cover expenses. The final decision on the steady state funding model will be taken by the Board of Directors. The funding model might for example follow a hybrid approach: • Independent Board Members are compensated by philanthropic donations and / or public funding to ensure the independence of the Board. Founding Sponsor representatives are compensated through in kind contributions from Sponsor organizations for the time they are represented on the Board (first term of 3 years). • There are two options to secure funding for the Expert Panel Members and Executive Secretariat in the steady state: o Membership fees (dependent on size and financial means of the organization, similar funding models are used by, e.g, Fairtrade International, ISDA or IAF) and / or o A service-based user fee (e.g., fees based on CCP credit issuance or retirement (potentially levied on buyers purchasing CCPs) per ton CO2, not based on transactions to avoid wrong incentives to artificially increase trade volumes). Potential additional sources are contributions from Founding Sponsors and the Executive Secretariat Host, public funding, and philanthropic donations. The funding needs correspond to less than 0.4 percent of the predicted VCM market size in 2024 (and less in subsequent years), assuming that the market will grow by a factor of 6-7 between 2020 and 2024 (following the market size analysis in TSVCM report from January 2021). Funders will be recognized for their contribution, but will not obtain any rights or privileges (e.g., decision power) associated with their funding.

Operating model and principles

• General operating principles and participant rights to ensure both short- and long-term success of the organization as well as due procedural fairness;

• Transparency mechanism to ensure maximum transparency on a procedural and transactional (i.e., trades of carbon credits in the VCM) level;

• Key performance indicators (KPIs) to measure the success of the voluntary carbon market overall and of the governance body in reducing GHG emissions and accelerating the transition to net zero.

General operating principles and participant rights

• Being highly collaborative – Unites players across the value chain (e.g. supply market, demand, intermediaries, NGOs) and links into other ongoing efforts in the space to achieve a comprehensive global solution. The body will take stock of and seek to integrate other ongoing activities to scale voluntary carbon markets, assessing and indicating which other initiatives are better placed to address pain-points;

• Building on current momentum – Including the acceleration of net zero commitments, investments into trading technology, improving standards, focus from prominent investors, etc.;

• Aiming to obtain buy-in from private sector – In order to make sure solutions developed are appropriate for, and will be adopted by, the entities that are ultimately supposed to use them;

• Being transparent in decision making – Decisions made and recommendations provided by all stakeholders in the governance body are publicly disclosed. All individuals serving in a role for the governance body act in their personal capacity and do not represent the views of their organizations. Board and Expert Panel Members are required to fill out and sign a declaration on (real and perceived) conflicts of interest;

• Ensuring high integrity in managing conflicts – The governance body groups and sub-groups (Board of Direc- tors, Executive Secretariat, Expert Panel, member consultation group and subgroups thereof) will aim to for- mulate views, positions, and recommendations on the basis of informal consensus. In the event of any material disagreement between members of the consultation group on views, positions, recommendations and / or other aspects of the work of the governance body that cannot be resolved by consensus, the Secretary-General will resolve the disagreement or escalate it to the Board of Directors. Disagreements between members of the Expert Panel and / or Secretariat will be resolved by the Expert Panel Chair and Secretary-General, respectively, or escalated to the Board of Directors. Formal decision-making rights will be reserved by the Board of Directors (majority of votes);

• Ensuring equitable access to all – The governance body is to ensure equitable access especially for vulnerable communities such as girls and women, ethnic minorities, indigenous populations, and representatives from Least Developed Countries. Likewise, the body will include new market players to drive innovation and creativ- ity.

Across the governance body, care should be taken to ensure due process / procedural fairness. Elements of process / procedural fairness include independence, freedom from bias and from conflicts of interest, right to expertise and the rights for proponents to be heard, make submissions, receive notice of pending decisions that affect them, get written reasons for decisions, and have a right of challenge for the most serious decisions. Great care should be taken to consider diversity and balanced representation in the body’s ranks, especially in relation to representation of the Global South, where many projects are hosted, and whose views should be central to these discussions. Finally, given the global nature of voluntary carbon markets, it will be important for international regulators and governance bodies to communicate and coordinate to promote safe and transparent markets across jurisdictions.

Conflicts of interest

The governance body will include market participants in its governance structure in various ways (see Exhibit 7). It will include active and former market participants on the Board, on the Expert Panel and as members of the member consultation group, with guardrails where necessary to prevent compromising its integrity, in both perceived and real ways. Inclusion of market participants with guardrails will bring necessary up-to-date expertise to the body including expertise in current most pressing issues without compromising the integrity of the body.

Exhibit 7: Inclusion of market participants in the governance body

The conflicts of interest policy requires those with a conflict (or who think they may have a conflict) to disclose the (potential) conflict, and prohibits Board members from voting on any matter in which there is a conflict. In addition, the body will have multiple measures in place to avoid conflicts of interests (see Exhibit 8). The precise process to manage conflicts of interest is part of the five key governance topics that will be further developed ahead of the establishment of the new body (see section Initial establishment and transition from setup phase to steady state). To support an accelerated implementation of the governance body, the TSVCM welcomes proposals for processes to manage conflicts of interest from members and the public ideally before August 9th.

As people are often unaware that their activities or personal interests are in conflict with the best interests of the organization, the governance body will raise awareness, encourage disclosure and discussion of anything that may be a conflict, and constantly encourage a “culture of candor”.

Organizational Conflict of Interest: Founding Sponsor(s) and Executive Secretariat Host

To ensure the highest integrity of the governance body and to prevent conflicts of interest, the governance body will only consider Founding Sponsor and Executive Secretariat Host organizations that are not-for-profit NGOs, industry / investor associations or public organizations (e.g., academic, international or multilateral institutions). These types of organizations may also be considered if they are actively participating in the market (e.g. as project developers). How- ever, they are required to disclose any carbon market activities and justify how they will minimize conflicts of interests linked to these activities. Significance of conflict of interest will be a point for consideration in the recommendation by the Advisory Board. One exception are not-for-profit NGO standard setters. These may not be Founding Sponsors or Executive Secretariat Hosts as these bodies are foreseen to be directly overseen by the new governance body and may have more significant Conflict of Interest.

For-profit organizations11 that are generating revenue in VCMs (e.g., suppliers, for-profit standard setters, VVBs, intermediaries, investors with significant holdings in VCM revenue generating companies), buyers or investors in the market and non-profit standard setters are not eligible (these may be member consultation group representatives).

Individual conflicts of interest: All Board Members and Expert Panel Members

Exhibit 8: Prevention of conflicts of interest

11 For-profit also include companies include Certified B Corporations, Benefit and Social Purpose Corporations

In addition, conflicts of interest on the Board of Directors (as Founding Sponsor representative, Independent Board Member and member consultation group representative) and Expert Panel will be prevented by a set of guardrails. These guardrails will allow for the inclusion of market participants, but avoid significant conflicts of interest (see Exhibit 8).

There will be four sets of guardrails:

• Composition rules:

o Independent Board Members: Overall in the majority on the Board12;

o Member consultation group representatives: 3 representatives (one each for suppliers, intermediaries and buyers);

o Expert panel: The total number of employees of organizations that are generating revenues in VCMs (e.g., suppliers, for-profit standard setters, VVBs, intermediaries, investors with significant holdings in VCM, revenue generating companies), buyers, investors and non-profit standard setters need to be in the minority on the Board (i.e., max 9-10 Experts out of 20-22).

• Guardrail on cooling off period (applies to Independent Board Members only):

o Independent Board Members need a minimum of two years cooling off period since the last employment for an organization that is generating revenues in VCMs (e.g., suppliers, for-profit standard setters, VVBs, intermediaries, investors with significant holdings in VCM revenue generating companies);

o Independent Board Members cannot be current employees of buyers, investors or non-profit standard setters;

o No cooling off period required for other organizations (industry / investor association and public organizations), i.e. active employees are eligible.

• Disclosure of commercial or financial interest (applies to Founding Sponsor representatives, Independent Board Members, and Expert Panel Members to ensure they do not have vested interests; member consultation group representatives may have financial interest). Individuals (independent of their affiliation) need to declare any potential conflict of interest in relation to any commercial or financial interest in any organization, project or program that may prepare, develop, operate, verify, commercialize or transfer carbon credits. The following types of accounts are excluded from this policy: mutual funds, index funds and ETFs, government securities, accounts under which an independent advisor or broker has written instructions to trade without consultation.

12 The Board needs to ensure a majority of independent Directors overall. Some Founding Sponsor representatives may also be classified as independent by the Advisory Board in the recommendation process if they do not have material conflicts of interest. This could be the case for representatives of organizations that are not active market participants (i.e., developing, financing or trading carbon credits) or that do not directly represent interests of market participants (e.g., industry associations of buyers)

• Plan for how to minimize conflicts of interest resulting from current or former market activities (applies to Founding Sponsor representatives and Independent Board Members that currently are and / or have been active market participants) Individuals need to disclose any carbon market activities and justify how they plan to minimize conflicts of interests linked to these activities. Significance of conflict of interest will be a point for consideration for inclusion on the Board of Directors (by Advisory Board in initial recommendation process and Board of Directors in the steady state).

All Board and Expert Panel Members are to fulfill the prescribed guardrails at all times during their mandate. Should they change affiliation and enter employment and / or other significant relationship with a restricted organization resulting in potential subsequent violation of guardrails, they must step down from their position on the governance body no later than last day before commencement of such new employment or relationship.

Member consultation group and Funders

Transparency mechanism

Following a guiding principle of maximum transparency, the governance body will put measures in place to ensure full transparency of

• The body’s procedures (e.g., decision process);

• Trades of carbon credits in the VCM.

Procedural transparency

In the interest of transparency and making the most informed decisions, all recommendations from the Expert Panel and Executive Secretariat and decisions taken by the Board of Directors will be disclosed transparently to the public. This includes both recommendations and decisions on CCPs (e.g., credit eligibility guidelines, standard assessment framework and standard eligibility under CCPs) as well as the strategic roadmap of the governance body. The governance body will publish a list of the project types, standards and methodologies and their review status (approved, pending, rejected) on its website.

Recommendations from the Expert Panel and Executive Secretariat to the Board will be published, including a rationale for each recommendation. The member consultation group and broader public can provide comments and suggest modifications to the recommendations. Following this consultation process the final recommendations will be submitted to the Board for approval. The Board will publicly disclose its decisions including an explanation for its choice. If recommendations by the Expert Panel are rejected, there will be a public and transparent discussion on the rejection, including opportunity for rebuttal or appeal. The governance body will decide on details of such a process after its establishment.

The body will provide full disclosure detailed financials. To this end, the financial statements of the governance body, the list of funders and their contributions, and the compensations of Board Members will be published. In addition, the governance body will require projects to provide annual financial reporting.

Furthermore, Board and Expert Panel Members are required to fill out and sign a declaration on (real and perceived) conflicts of interest, which will be publicly disclosed by the governance body.

In addition, the governance body will provide the market and the public with annual reports on its activities and devel- opments in the evolution of the voluntary carbon market. It will also hold annual general meetings with all its members.

After the setup phase of the governance body (first 3 years), there will be a formal evaluation of the governance body and the success of the voluntary carbon market. To this end, the Board will commission a third party effectiveness review to assess the advancement of the body in fulfilling its mandate and the success of the VCM in contributing to climate action and reaching the goals of the Paris agreement. This evaluation will be the first one in a series of period stock takes that the governance body will undergo every 3 years.

Trading transparency

The governance body will strive to ensure transparency of trades in the voluntary carbon market. The Board of Director will decide what kind of information should be publicly disclosed (e.g., ownership / retirement of credits and parties participating in trades should be publicly disclosed) and how (e.g., in real time).

Key tasks during the initial establishment of the governance body

The operationalization of the transparency mechanisms on a procedural and transactional level will be a key task for the governance body after its establishment (first 3-6 months of operations). A possible transparency mechanism for the governance body to consider is open book accounting: Every transaction, in digitally-enabled real-time, needs to be fully transparent to everybody, including all particulars of the deal, the project baseline and proof of additionality, counterparties, ultimate beneficiaries, benefit-sharing arrangements, etc. At the same time, the body should consider if there would be cost and administrative benefit with somewhat delayed transparency.

To support an accelerated implementation of the governance body, TSVCM welcomes proposals for recommendations on transparency mechanisms from members and the public ideally before August 9th.

Grievance mechanism

The governance body will define a grievance mechanism that includes:

• A process to address complaints of stakeholders about procedures and decisions of the governance body;

• Privileges and immunities against these claims for individuals serving in a role for the governance body;

• A process to resolve conflicts among market participants (suppliers, VVBs, standard setters). This includes a system for ensuring that grievances and their resolution feed directly into the decision making of the Govern- ance Body and enable the continuous improvement of the CCPs and their implementation.

Grievances about the governance body and privileges and immunities for individuals serving on it

The governance body will put in place a structured process to allow stakeholders to bring forward complaints about the procedures and decisions of the body (including a process for legal arbitration). Furthermore, the body will ensure that privileges and immunities are defined for individuals serving in a role for the governance body.

Grievances regarding the governance body can include (but are not restricted to) complaints about violating procedures (e.g., operating and transparency principles) or taking substantially incorrect decisions. The governance body will provide a publicly available complaint form to bring forward grievances about the governance body, which stakeholders submit to the Executive Secretariat. The complaints will be reviewed by the Executive Secretariat. The governance body has to comment on the complaint and aim to resolve the conflict within three months after submission of the form. All complaints and answers from the governance body will be disclosed publicly.

Furthermore, it is important that the governance body manages and seeks appropriate mechanisms to ensure privileges and immunities for individuals serving in a role for the governance body. Possible disputes, complaints and claims that may be brought against individuals serving on the governance body can include (but are not restricted to) acting outside of the delegated, substantially incorrect decisions, conflict of interest, breach of confidentiality, violation of procedural or bias in decision-making.

Conflicts among market participants

The governance body will set up a grievance mechanism to resolve conflicts among market participants. Governance body will decide whether it should limit such grievance mechanisms to disputes related to conformity with CCPs. As the body is defining participant eligibility guidelines for suppliers, VVBs and standard setters as part of its mandate, it might focus on resolving conflicts among these market participants as well as grievances about them (e.g., buyers rais- ing issues on standard setters).

In order to resolve most conflicts without intervention of the governance body, the standard assessment framework will require standard setters to have a grievance mechanism in place in order to apply for eligibility under the CCPs. Liabilities by each player in the chain will also be defined in the standard assessment framework. The governance body will also decide on a mechanism to revoke or invalidate any credits that lack environmental integrity, incl. provisions in place and clarity of where liability lies.

Furthermore, the governance body will mediate conflicts that cannot be resolved among market participants. Topics of such conflicts can for example include grievances regarding adherence to CCPs (e.g., projects not adhering to CCPs, insufficient and / or incorrect validation and verification of projects, methodologies marked as CCP approved not adhering to all specific eligibility criteria of the CCPs, etc.).

In order to facilitate the conflict management process, the governance body will provide a publicly available form to bring forward grievances about suppliers, VVBs and standard setters, which stakeholders can submit to the Executive Secretariat. The governance body will comment on the complaint and aim to resolve the conflict. All complaints and answers from the governance body will be disclosed publicly.

Finally, the governance body will set up a process for how grievances about market participants inform the decisions of the body. This includes for example adjustments to the CCPs (e.g., credit eligibility guidelines, additional attributes, etc.), the standard assessment framework and the eligibility principles for suppliers and VVBs. Furthermore, it will inform the assessment process and the governance body’s oversight over standard setting organizations on adherence

to CCPs. At regular intervals, the Executive Secretariat will present key themes of grievances to the member consultation group and the Expert Panel, which will subsequently develop recommendations to the Board on required adjustments to the CCPs, eligibility principles and the body’s oversight over standard setters.

Key tasks during the initial establishment of the governance body

The operationalization of the grievance mechanism will be a key task for the governance body after its establishment (first 3-6 months of operations). A possible grievance mechanism for the governance body to consider is open governance (or strategic grievance mechanism): Any party impacted by any actual transaction can level a grievance that is visible on submission, linked to and flagged against the specific transaction, handled separately from the executive of the initiative or market, and fed directly into the Board for its strategic consideration and oversight. In addition, the governance body should consider to include an independent ombudsman, an external compliance function, third party mediation and a complaints board.

To support an accelerated implementation of the governance body, TSVCM welcomes proposals for recommendations on grievance mechanisms from members and the public ideally before August 9th.

Key performance indicators (KPIs)

During the establishment of the governance body (initial 3-6 months ramp up phase), the body will define KPIs for

• The voluntary carbon market overall;

• The governance body and individual entities of it, including the Board of Directors, Expert Panel and Executive Secretariat.

Possible KPIs could be the success of the governance body to deliver its mandate of reducing net GHG reductions and accelerating the transition to net zero (e.g., amount of tons of CO2e reduced by and / or investments in high-integrity carbon credits (by a certain date) validated by the governance body), the average price of carbon credits, the number of methodologies that the governance body reviewed, the percentage of credits in the VCM that qualify under CCPs, the adoption rates of CCPs (e.g., number of tonnes traded by each standard, number of companies that purchase high- integrity CCP credits by a certain date), the number of grievances that were successfully settled, CCPs credits counted in the SBTi reduction pathways, the representation from all genders, vulnerable communities and the Global South in all governance structures, impact on communities and indigenous population, and others.

The decision on KPIs will be taken by the Board of Directors with input from all members, the Expert Panel and Execu- tive Secretariat. To support an accelerated implementation of the governance body, TSVCM welcomes proposals for recommendations on KPIs from members and the public ideally before August 9th. KPIs will be the basis for the regular effectiveness reviews that the governance body will undergo every three years (see section on Transparency mechanism).

Initial establishment and transition from setup phase to steady state operations

Exhibit 9: Transition from setup phase to steady state operations

Setup phase

In the setup phase (first 3 years), the body will first focus on establishing, hosting and curating CPPs, as well as on providing oversight over standard setters on adherence to those principles. The Board of Directors will have Founding Sponsor representatives as members (alongside with a majority of Independent Board Members) to provide public endorsement and give initial authority and legitimacy to the body. The Executive Secretariat will be run by a Host organization (not a Founding Sponsor). The seed funding for the first 3 years will be sourced from philanthropic donations, governments, public institutions and / or corporates.

• Establish the body as a legal entity and enable its functioning

o Align on foundational considerations for the governance body (e.g., decisions on jurisdiction and legal structure including key implications for the establishment process, distribution of roles that are formally required within the chosen legal structure, list of responsibilities within the establishment process);

o Prepare legal requirements and formally establish the body (e.g., commissioning a law firm to gather the documentation needed and to manage the registration process, commissioning a financial intermediary (i.e., a bank) to establish the necessary accounts);

o Answer operational questions (e.g., compliance with legal and tax requirements under the law of jurisdiction (e.g., recurring processes, internal functions, regular document submission), contraction of an insurer, process for trademark registration, process for in-kind donations from Founding Sponsors and the Execu- tive Secretariat Host);

o Establish the process for disbursement of initial funds (e.g., development of a budget for the governance body’s initial funds, development of an approval process for the disbursement of funds and specification of key responsibilities of each actor, establishment of an internal reporting cadence to evaluate progress on a weekly, bi-weekly or monthly basis, establishment of a reporting cadence to the funding organizations to provide visibility of fund usage);

o Establish the relevant trademark protections (e.g., determination of the body’s Intellectual Property and protected names and branding that should be legally protected, evaluation of jurisdictions where trademark will be sought, commissioning a law firm to begin the trademarking process across jurisdictions for name registration and copyright / trademark protection for associated names and intellectual property);

o Setup IT infrastructure and determine how to address digital (e.g., decide on data management strategy and local systems, decide on real-time reporting, address digital security of transactions and registries);

o Finalize a mission statement and ToR (e.g., taking inputs beyond this ToR from newly appointed individuals, finalization of a purpose statement, holding votes to officialize aforementioned documents).

o Modalities and procedures for the Board of Directors: Develop details on the decision process of the Board (e.g., process to manage conflicts of interest, transparency of Board decisions, opportunity for rebuttal or appeal);

o Transparency mechanism: Operationalize a transparency mechanism on a procedural and transactional level, following a guiding principle of maximum transparency. A possible transparency mechanism for the governance body to consider is open book accounting: Every transaction, in digitally-enabled real-time, needs to be fully transparent to everybody, including all particulars of the deal, the project baseline and proof of additionality, counterparties, ultimate beneficiaries, benefit-sharing arrangements, etc. At the same time, the body should consider if there would be cost and administrative benefit with somewhat delayed transparency;

o Grievance mechanism: Operationalize a grievance mechanism including a system for ensuring that grievances and their resolution feed directly into the decision making of the Governance Body and enable the continuous improvement of the CCPs and their implementation. A possible grievance mechanism for the governance body to consider is open governance (or strategic grievance mechanism): Any party impacted by any actual transaction can level a grievance that is visible on submission, linked to and flagged against the specific transaction, handled separately from the executive of the initiative or market, and fed directly

into the Board for its strategic consideration and oversight. In addition, the governance body should consider to include an independent ombudsman, an external compliance function, third party mediation and a complaints board;

o KPIs and definition of success: Determine how to measure the effectiveness of the governance body and the voluntary carbon market overall in reducing GHG emissions and accelerating the transition to net zero (e.g., KPIs to objectively measure and track success by region, definition of criteria for effectiveness reviews that the governance body will undergo every three years);

o Transversal approach to ensure integrity across the value chain. Considerations include:

▪ Approach to manage interlinkages between bodies operating in the governance of voluntary carbon markets;

▪ Potential to – in the mid-term – extend the mandate of Governance body to provide more direct oversight over integrated governance of carbon markets as a whole (e.g. including demand side).

Whenever feasible and practical, the body is to obtain insights from related case studies and follow best practices during establishment of all governance structures and processes.

To support an accelerated implementation of the governance body, TSVCM welcomes proposals for recommendations on these five topics from members and the public ideally before August 9th. The TSVCM Operating Team will collect proposed recommendations and update the TSVCM Advisory Board on received proposals. The Advisory Board may review proposals and make a non-binding recommendation to the Board of Directors of the governance body. After the establishment of the new body, the TSVCM Operating Team will facilitate sharing the proposed recommendations with the Executive Secretariat and Board of Directors. The Board of Directors of the new body will decide on ac- ceptance or rejection of the proposed recommendations.

• In the first 6 months, the body will finalize and approve the standard assessment framework based on inputs from Credit-level integrity working group of the Taskforce and conduct assessments to approve the first set of standards (approx. 5-6) leveraging inputs from the member consultation group. Additionally, the body will develop initial credit eligibility guidelines by defining a whitelist of the most relevant methodology types (approx. 3-4) and identify shortcuts to accelerate the review process of methodology types and standard setters;

• In the following 6 months, the body will conduct assessments to approve the remaining standards setters (approx. 8-9) and continue to develop initial credit eligibility guidelines. Furthermore, it will develop eligibility principles for suppliers and VVBs and conduct frequent spot checks to ensure that approved standard setters adhere to CCPs;

• Afterwards, the body will continue exercising its mandate by re-assessing standards eligibility every year, conducting assessments to approve upcoming standards, conducting a review process of existing and upcoming methodology types and by curating its assessment documentation as it progressively transitions closer to steady state operations.

Transition to steady state operations

The transition to the steady state operations including the coordination role should be accelerated as much as possible to the extent determined by limited resources. If feasible, it is desirable that the body takes up its coordination role before the three year mark.

Before the transition to steady state operations, the body is to formally evaluate its market success against previously defined criteria in an effectiveness review.

II. CALL FOR EXPRESSIONS OF INTEREST

The Taskforce is calling for expressions of interest to be a Founding Sponsor, Independent Board Member, representative of the member consultation group on the Board, Expert Panel Member and Executive Secretariat Host of the new umbrella governance body. In addition, TSVCM is calling for funding contributions from corporates, philanthropic institutions and public sources. The following section outlines the implementation timeline and process, gives the guidelines to inform recommendations on who can be a Founding Sponsor, Independent Board Member, Expert Panel Mem- ber and Executive Secretariat Host, and outlines which information interested parties need to provide for their expression of interest in July / August.

Timeline and process for the implementation of the governance body

Implementation timeline

Exhibit 10: Implementation timeline

With the publication of the final recommendation guidelines in this report, parties interested to become Founding Sponsors, Independent Board Members, representatives of the member consultation group on the Board, Expert Panel Members or the Executive Secretariat Host are encouraged to submit their final expression of interest by August 9th (including interested parties who did not yet engage during the public consultation in May / June). Founding Sponsors, Independent Board Members, Expert Panel Members and the Executive Secretariat Host will be recommended by the TSVCM Advisory Board in September 2021. Representative of the member consultation group on the Board will be elected by the Taskforce members (see details on the recommendation process below). In parallel, corporates, philanthropic institutions and public institutions are encouraged to contribute to the seed funding of the new governance body.

Recommendation process

Process for the recommendation of Founding Sponsors, Independent Board Members, Expert Panel Members and Executive Secretariat Host by the TSVCM Advisory Board

Exhibit 11: Recommendation process

All interested parties are encouraged to submit an expression of interest to the TSVCM by August 9th. Parties should submit an expression of interest form, which can be accessed at www.iif.com/TSVCM. In these forms, parties are to

comment on a range of topics, summarizing amongst others their prior expertise and track record, legitimacy and authority, commitment to high integrity of carbon credits, and their motivation (see section Required information to express interest below for more information). TSVCM continues to offer the facilitation of meetings with interested parties to answer questions and explain the recommendation process. Names of all parties submitting an official expression of interest for a role in the governance body will be made public on the TSVCM website in mid-August. In addition, all expressions of interest forms submitted by organizations (i.e., for the Founding Sponsor and Executive Secretariat Host roles) will be published.

Expressions of interest to become a Founding Sponsor, Independent Board Member, Expert Panel Member or the Ex- ecutive Secretariat Host will be examined against the recommendation guidelines set out in section Recommendation Guidelines below. These were jointly developed by the Taskforce with input from the public through the consultation process between May 21st and June 21st. Expressions of Interest will be scored against the recommendation guidelines using a scoring matrix, assessing candidate(s)’ fulfillment of the guidelines. On each dimension, the scoring will range between distinctive, high, medium/neutral and low.

Between August and September, the TSVCM Advisory Board will assess expressions of interest based on the scoring output. Special consideration will be given to ensure the governance body is representative of all relevant stakeholders, expertise, and geographies. Advisory Board members who express interest to become a Founding Sponsor, Inde- pendent Board Member, Expert Panel Member or Executive Secretariat Host will recuse themselves for the relevant part of the decision process.

In a first step of its recommendation process, the Advisory Board will define a shortlist of interested parties and give feedback to the Operating Team on potential member combinations and scoring of the expressions of interest. The Operating Team will optionally hold clarification sessions with shortlisted parties as necessary to give feedback and broker joint expressions of interest. Afterwards, the Advisory Board will recommend parties for Founding Sponsors, Executive Secretariat Host, Independent Board Members and Expert Panel Members.

Advisory Board members will have to recuse themselves from the decision process if they expressed interest for a role under consideration in a given session, but can take part in decisions on roles that are taken in a separate session. For example, an Advisory Board member expressing interest to become an Independent Board Member can decide on the recommendation for Founding Sponsors and Executive Secretariat Host if this decision is taken in a separate Board session.

In the last phase of the recommendation process, Founding Sponsor will appoint their representatives on the Board of Directors as well as the first Chair of the Board for an initial one year term (subsequent Chairs will be elected by the

whole Board). The Secretary-General, nominated by the Executive Secretariat Host, will be appointed by the newly formed Board of Directors.

Process for the election of Board representatives from the member consultation group by TSVCM members

Member consultation group representatives on the Board will be elected by TSVCM members. Each organization represented in the TSVCM (as Taskforce member, Consultation group member or observer) by the date of the last plenary meeting (June 25th, 2020) has one vote. Independent members also have a vote if they are not affiliated with another organization in the TSVCM. Parties expressing an interest to become a member consultation group representative need to recuse themselves from the election process.

Individuals from any organization may put themselves forward as a Board candidate. Interested parties are encouraged to submit an expression of interest to the TSVCM by August 9th, indicating which part of the value chain they primarily wish to represent (e.g., suppliers, intermediaries, buyers). Parties should summarize amongst others their prior expertise and track record, legitimacy and authority, commitment to high integrity of carbon credits, and their motivation for the role. In addition, candidates need to sign that they agree with the mission and mandate of the governance body (like all members of the member consultation group).

The TSVCM Operating Team will share submissions with the Taskforce in mid-August. Afterwards, TSVCM members will examine candidates and elect representatives of the member consultation group on the Board in mid-September.

Benefits for parties taking on a role in the governance body

Parties are encouraged to submit their interest due to the multiple benefits they gain from playing a role in the new governance body: • Founding Sponsors will be publicly recognized as leading organizations to drive climate action. In addition, they will have influence on key decisions affecting voluntary carbon markets and provide guidance on content development through their representation on the Board of Directors in the first 3 years; • Independent Board Members will be publicly recognized as leading voices and experts in the climate and sustainable finance space. In addition, they will have influence on key decisions affecting voluntary carbon markets and provide guidance on content development. Finally, they receive a competitive compensation for their work; • Expert Panel Members will be publicly recognized as leading experts for voluntary carbon markets and individual project methodologies. In their role they will develop the CCPs, which are likely going to be a key credit integrity standard for voluntary carbon markets. They directly report to the Board of Directors and make key recommendations on the body’s decisions. In addition, they receive a competitive compensation for their work; • The Executive Secretariat Host will be publicly recognized as leading organization to drive climate action. It will be shaping the work and agenda of the new governance body and develop key content as well as the strategic roadmap for the voluntary carbon market. Compensation for Executive Secretariat employees is covered through funding sources of the governance body; • The member consultation group representatives will be publicly recognized as leading voices of the voluntary carbon market. They will have the mandate to represent and give a voice to a wide group of stakeholders in the market. In addition, they will have influence on key decisions affecting voluntary carbon markets and provide guidance on content development.

Recommendation guidelines

The following section outlines the recommendation guidelines, which will inform the recommendations of TSVCM of who can be a Founding Sponsor, Independent Board Member, Expert Panel Member, Executive Secretariat Host, member consultation group representative on the Board and Funder.

Founding Sponsors

Type Category Guidelines

Guidelines Type of organization NGO / non-profit organization, investor alliances, industry associations, potentially multilateral / international organization

Endorsement Endorses and supports the main positions and recommendations of the Taskforce (e.g., climate mitigation hierarchy, need for high-integrity carbon credits, need for successful and scaled VCMs, need for removal and avoidance / reduction credits in the short term, support of high-level CCPs, etc.)

Legitimacy & Authority Trusted and legitimate organization in either the environmental or financial /carbon market space

Leading voice in their space with ability to drive action among peers

Conflict of interest13 Minimal conflicts of interest as direct market participant: All non- profit NGOs, irrespective of whether they are actively participating in the market (e.g. as project developers), may express interest to become Founding Sponsor. However, they are required to disclose any carbon market activities and justify how they will minimize conflicts of interests linked to these activities. Significance of conflict of interest will be a point for consideration in the recommendation by the Advisory Board

Declaration of conflicts of interest: Individuals serving as Founding Sponsor representatives on the Board need to declare any potential conflict of interest in relation to any commercial or financial interest in any organization, project or program that may prepare, develop, operate, verify, commercialize or transfer carbon credits.

13 For details on guardrails to avoid conflicts of interest see section Conflicts of interest

Geographic representation Organization internally and / or collective of Founding Sponsors represent stakeholders from all geographical areas, including the Global South

Expertise Market experience and proven track record of engaging in carbon markets and / or sustainable finance, advancing content discussions as experts in the field

Expertise and experience in establishing governance arrangement for complex markets, especially those for public goods

Resourcing Sufficient resources and efficient internal decision processes to support an efficient implementation of the governance body

Ability to nominate a Board representative and to provide their in- kind compensation during the setup phase (first 3 years)

Bonus Funding It is desirable (but not required) that interested organizations contribute to funding, either in cash or in kind

Main funding needs of the governance body during the setup phase (first 3 years) will be covered by philanthropic donations, public funding and contributions from corporates

Independent Board Members

Category Guidelines

Affiliation Academic, NGO / non-profit organization, multilateral or international organization, former market participant14, independent

Endorsement Endorses and supports the main positions and recommendations of the Taskforce (e.g., climate mitigation hierarchy, need for high-integrity carbon credits, need for successful and scaled VCMs, need for removal and avoidance / reduction credits in the short term, support of high-level CCPs, etc.)

Legitimacy & Authority Trusted individual and leading voice in their space with ability to drive action among peers

14 For details on guardrails applying to active market participants to avoid conflicts of interest see section Conflicts of interest

Conflict of interest15 Minimal conflicts of interest as market participants: Minimum of 2 years since last engagement for a for-profit active market participant generating revenue in VCM (e.g., suppliers, for-profit standard setters, VVBs, intermediaries, investors with significant holdings in VCM revenue generating companies), no current employment with buyers / investors or non-profit standard setters

All interested parties that have previously been affiliated with a market participant or standard setter or that are currently employed by a non-profit NGOs (irrespective of whether they are actively participating in the market, e.g. as project developers), may express interest to become Independent Board Member. However, they are required to disclose any carbon market activities and justify how they will minimize conflicts of interests linked to these activities. Significance of conflict of interest will be a point for consideration in the recommendation by the Advisory Board

Declaration of conflicts of interest: Independent Board members need to declare any potential conflict of interest in relation to any commercial or financial interest in any organization, project or program that may prepare, develop, operate, verify, commercialize or transfer carbon credits

Geographic representation Board of Directors as a whole needs to represent stakeholders from all geographical areas, including the Global South

Expertise Market experience and proven track record of engaging in carbon markets and / or sustainable finance

Experience as Board Member in comparable organizations

Expertise and experience in establishing governance arrangement for complex markets, especially those for public goods

Resourcing Ability to dedicate sufficient time to Board activities (including e.g. monthly to quarterly meetings, pre-reading of materials, etc.). Board Members are expected to commit sufficient time to ensure an efficient and informed decision process of the governance body. During the setup phase, the time commitment may be higher than in the steady state to accelerated the establishment of the new body

Expert Panel

Category Guidelines

15 For details on guardrails to avoid conflicts of interest see section Conflicts of interest

Affiliation All organizations eligible (e.g., academic, NGO / non-profit organization, multilateral or international organization, market participant16, independent)

Legitimacy & Authority Leading voice in the space with a track record (e.g. publications, methodology development)

Conflict of interest17 Declaration of conflicts of interest: Expert Panel Members need to declare any potential conflict of interest in relation to any commercial or financial interest in any organization, project or program that may prepare, develop, operate, verify, commercialize or transfer carbon credits

Composition rule: The total number of employees of organizations that are generating revenues in VCMs (e.g., suppliers, for-profit standard setters, VVBs, intermediaries, investors with significant holdings in VCM revenue generating companies), buyers, investors and non-profit standard setters need to be in the minority in the Expert Panel (i.e., max 9-10 Experts out of 20-22)

Geographic representation Panel should have diverse geographical participation, including the Global South

Expertise Deep and extensive relevant experience in carbon markets / carbon credits is required, such as experience with carbon credit programmes and methodologies, project development, environmental policies or similar

Technical expertise of the panel needs to be sufficiently diverse to make informed recommendations on CCPs (e.g., assessments of standard setters, ability to develop eligibility guidelines for all relevant methodology types such as REDD+, renewables, energy efficiency, emerging technologies (e.g., DACCS, BECCS), etc.)

Specifically, preferred candidates will have proven technical expertise in multiple of the following areas:

1) Carbon markets, carbon credits standards and methodologies, carbon offsetting programmes, or similar

2) Carbon trading / emissions units registries, emissions trading systems

16 For details on guardrails applying to active market participants to avoid conflicts of interest see section Conflicts of interest 17 For details on guardrails to avoid conflicts of interest see section Conflicts of interest

3) Creation of carbon credits or allowances, quantification of GHG emissions, carbon credit evaluation and assessment

4) Expertise in market making and / or market scaling

Ideally expertise and experience in establishing governance arrangement for complex markets, especially those for public goods

Resourcing 5-10 experts serve for a 3-year term, the remaining 10-17 experts serve on an ad- hoc basis corresponding to the currently required expertise

During the first 6 months, all 20-22 experts are expected to commit at least 40 percent of their time in order to finalize the standards assessment framework, approve initial standards and develop initial credit eligibility guidelines. Experts can optionally increase their time commitment up to 100 percent and take on a secondment role (with honorarium)

After the first 6 months, the time commitment is likely reduced to 10-20 percent

Executive Secretariat Host

Type Category Guidelines

Guidelines Type of organization NGO / non-profit organization, investor alliances, industry associations, potentially multilateral / international organizations

Endorsement Endorses and supports the main positions and recommendations of the Taskforce (e.g., climate mitigation hierarchy, need for high-integrity carbon credits, need for successful and scaled VCMs, need for removal and avoidance / reduction credits in the short term, support of high-level CCPs, etc.)

Legitimacy & Authority Trusted and legitimate organization in either the environmental or financial /carbon market space

Leading voice in their space with ability to drive action among peers

Conflict of interest18 Minimal conflicts of interest as direct market participant: All non-profit NGOs, irrespective of whether they are actively participating in the market (e.g. as project developers), may apply as Executive Secretariat Host. However, they are required to disclose any carbon market activities and justify how they will minimize conflicts of interests linked to these activities. Signifi- cance of conflict of interest will be a point for consideration in the recommendation by the Advisory Board

Geographic representa- Secretariat Host should have diverse geographical participation tion

Expertise Expertise and experience in establishing governance arrangement for complex markets, especially those for public goods

Experience in running similar organizations in highly complex setups involving many stakeholders

Ideally analytical capabilities to support expert panel in review process as well as technological expertise

Resourcing Executive Secretariat Host is to nominate experienced leadership for the Executive Secretariat (Secretary-General and Dep- uty, to be appointed by Board of Directors)

Bonus Funding It is desirable (but not required) that interested organizations contribute to funding, either in cash or in kind. Main funding needs of the governance body during the setup phase (first 3 years), including funding of the Executive Secretariat, will be covered by philanthropic donations, public funding and contributions from corporates

Executive Secretariat Host preferably nominates some employees from their organization to support the Executive Secretariat

Member consultation group representatives

Individuals from any organization may put themselves forward as a member consultation group representative on the Board. Interested parties need to indicate which part of the value chain they primarily wish to represent, i.e. suppliers

18 For details on guardrails to avoid conflicts of interest see section Conflicts of interest

(e.g., project developers, standard setters, VVBs), intermediaries (e.g., banks, exchanges, investors), or buyers. In addition, candidates need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.

Funders

Funders will be corporates, philanthropic institutions and governments / public institutions that provide funding for the governance body in particular during the setup phase (first 3 years). Funders will be recognized for their contribution, but will not obtain any rights or privileges (e.g., decision power) associated with their funding. In addition, Fun- ders need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.

Required information to express interest

Interested organizations and individuals are to comment on a range of topics as part of their submission of interest in July / August. The topics are oriented around the guidelines that will inform recommendations on who could be a Founding Sponsor, Independent Board Member, Expert Panel Member, Executive Secretariat Host, member consultation group representative on the Board and Funder. All parties can express their interest by submitting an expression of interest form until August 9th. The expression of interest form for each role can be found on the TSVCM website at www.iif.com/tsvcm, covering the topics outlined below. TSVCM offers to facilitate meetings with interested parties to answer any outstanding questions about the topics to be commented on or about the broader recommendation process. Interested parties can engage with TSVCM via [email protected].

Joint expressions of interest

The Taskforce is encouraging joint expressions of interest for the Founding Sponsor(s) and/or Executive Secretariat Host roles from a consortium as this setup allows for greater diversity of expertise and geographical representation. Such expressions of interest will be assessed as a consortium, looking at, e.g., joint expertise and geographical representation. During the recommendation process, the TSVCM Operating Team will optionally engage with interested parties as necessary to provide feedback on the recommendation process and potentially broker joint expressions of interest. In case a consortium contains both organizations that are interested in the Founding Sponsor and Executive Secre- tariat Host roles it needs to be ensured that these institutions operate completely separately. This separation of Founding Sponsors and Executive Secretariat Host is necessary to avoid any conflicts of interest and to ensure the independence and objectivity of each individual organization.

To submit a joint expression of interest, parties need to submit a cover sheet to provide information on all members of the consortium. For the Founding Sponsor(s) role, the consortium needs to additionally submit one expression of interest form for all parties combined. If a member of the consortium is also interested to be the Executive Secretariat Host, an expression of interest form for the Executive Secretariat Host needs to be submitted in addition. Parties interested in the Founding Sponsor role can suggest individuals to represent their organization on the Board, the Executive Secre- tariat Host may recommend suitable candidates to become Secretary-General and Deputy.

A consortium may additionally suggest Independent Board Members from other organizations that are not interested to become a Founding Sponsor and / or Executive Secretariat Host. In this case, the suggested individual needs to submit an expression of interest form for Independent Board Members. Similarly, a consortium may suggest and / or sponsor a member of the Expert Panel (not mandatory, may be from their own or other organizations), in which case the

individual needs to submit an expression of interest form for Expert Panel Members in addition. In both cases, the recommendation of the consortium will be independent from the recommendation of these individuals as Independent Board Members or Expert Panel Members.

Founding Sponsors

Required information to express interest in Founding Sponsor role: I. Information on organization(s) that are submitting interest: Organization name(s), who will be representing the organization(s) during the recommendation process (2 representatives), type(s) of organization(s), geographic representation, potential Board Member(s)

II. Summary of your submission of interest: Description why you think your organisation(s) would be suited to become Founding Sponsor(s) for the new governance body. We suggest your answer covers the following topics:

• Prior expertise and track record

• Commitment to high integrity of carbon credits

• Motivation and vision for the new governance body

• Why you would be a good fit for the role

III. Type of organization: Comments on the type of your organization(s), e.g., what nature of organization it is, how you are active and involved in carbon markets, which type of members / stakeholders you represent, etc.

IV. Endorsement: Comments on your stance on the main positions and recommendations of the Taskforce, e.g., provide a proven track record of endorsement of the climate mitigation hierarchy, need for high-integrity carbon credits, need for successful and scaled VCMs, need for removal and avoidance / reduction credits in the short term, support of high-level CCPs, etc.

V. Legitimacy & authority: A description of how you are a trusted and legitimate leading voice in either the environmental, financial or carbon market space, e.g., your track record of driving action among peers in the past such as origination of related initiatives/ programmes / conferences / recommendations / regulations or similar

VI. Conflict of interest: Comments on your market participation in the past 5 years and any activities that could be perceived as a conflict of interest, e.g., supplying, verifying, standard setting, trading or buying carbon credits in the market, holding equity in market players. Please outline how you will minimize conflicts of interests linked to these activities. Potential representatives on the Board need to declare any potential conflict of interest in relation to any commercial or financial interest

VII. Geographic representation: Comments on geographies that you represent, e.g. in which countries are you based, have members and / or represent stakeholders

VIII. Expertise: Comments on your expertise and experience in carbon markets, sustainable finance and / or climate change, e.g., your track record of engagement and advancing content discussions, expertise on governance, or other relevant experience

IX. Resourcing: Comments on resources available to fulfil your role as Founding Sponsor, e.g., ability to nominate a Board representative and to provide their in-kind compensation during the first 3 years, support of an expeditious implementation through efficient decision processes, alignment of internal stakeholders, mandate of the Board Members to autonomously vote etc.

X. Funding: Are you able and willing to contribute funding in cash or kind? If so, please provide specifics:

• Type of funding (e.g., cash, office space, personnel to support the Executive Secretariat or Expert Panel, expert skills and knowledge, IT, media presence and goodwill,…)

• Funding amount and frequency (e.g., recurrent annual, one-time,...)

In addition, candidates need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.

Independent Board Members

Required information to express interest in Independent Board Member role: I. Personal information: Personal details, type of organization (incl. independent)

II. Summary of your submission of interest: A description of why you think you would be suited to become an Independent Board Member for the new governance body. We suggest your answer covers the following topics:

• Prior expertise and track record

• Commitment to high integrity of carbon credits

• Motivation and vision for the new governance body

• Why you would be a good fit for the role

III. Type of organization: Comments on the organization you are affiliated to (e.g. university, NGO, non-profit, multilateral or international organization, independent) and on relevant past roles in organizations participating in voluntary carbon markets

V. Legitimacy & authority: A description of how you are a trusted and legitimate leading voice among your peers, e.g., your track record of driving action in the environmental, financial or carbon market space in the past, origination of related initiatives/ programmes / conferences / publications or similar

VI. Conflict of interest: Comments on whether you actively participated in voluntary carbon markets in the past and, more broadly, on any activities that could be perceived as a conflict of interest, e.g., supplying, verifying, standard setting, trading or buying carbon credits in the market, holding equity in market players. Please outline how you will minimize conflicts of interests linked to these activities. Please declare any potential conflict of interest in relation to any commercial or financial interest

VII. Geographic representation: Comments on geographies that you represent, e.g. your country of origin, the country in which you are based, countries where you have worked for extended periods of time and/or had extensive interaction with local stakeholders, etc.

VIII. Expertise: Comments on your expertise and experience in carbon markets and / or sustainable finance, as well as acting as a Board Member in comparable organizations, e.g. your track record of stakeholder engagement and advancing content discussions, expertise on governance, strategy, and leading organizations, or other relevant experience

IX. Resourcing: Comments on your availability to fulfil your role as an Independent Board Member, e.g., ability to dedicate sufficient time to ensure an efficient and informed decision process of the governance body

In addition, candidates need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.

Expert Panel

Required information to express interest in Expert Panel Member role: I. Personal information: Personal details, type of organization (incl. independent)

II. Summary of your submission of interest: A description why you think you would be suited to become an Expert Panel Member for the new governance body. We suggest your answer covers the following topics:

• Prior expertise and track record

• Commitment to high quality and integrity of carbon credits and vision on how a respective standard should be defined

• Specific technical and methodological expertise on carbon markets

• Why you would be a good fit for the role

III. Type of organisation: Comments on the organization you are affiliated to (e.g. university, NGO, non-profit, multilateral or international organization, independent) and on relevant past roles in organizations participating in voluntary carbon markets

V. Legitimacy & authority: A description of how you are a leading voice in the environmental space, e.g., your track record of publications and/or methodology development, driving actions among peers, providing advice and recommendations, etc.

VI. Conflict of interest: Comment on any activities that could be perceived as a conflict of interest, including your participation in the carbon market (e.g., supplying, verifying, standard setting, trading or buying carbon credits in the market). Please declare any potential conflict of interest in relation to any commercial or financial interest. Please outline how you will minimize conflicts of interests linked to these activities and relationships.

VII. Geographic representation: Comment on geographies that you represent, e.g. your country of origin, the country in which you are based, countries where you have worked for extended periods of time and/or had extensive interaction with local stakeholders, etc.

VIII. Expertise: Comments on your expertise in carbon markets, e.g. your specialty, proofs of expertise for all methodology types you are expert in, relevant past academic, analytical, or advisory work, and additional expertise, e.g. in governance

IX. Resourcing: Comment on your ability to dedicate time to Taskforce activities, e.g. monthly, daily, etc., both in the short term (first 6 months), and in the long term. Please also indicate whether you would be interested in a secondment role for the governance body (with honorarium)

In addition, candidates need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.

Executive Secretariat Host

Required information to express interest in Executive Secretariat Host role: I. Information on organization(s) that are submitting interest: Organization name(s), who will be representing the organization during the recommendation process (2 representatives), type(s) of organization(s), geographic representation, potential leadership for Executive Secretariat (Secretary-General and Deputy)

II. Summary of your submission of interest: A description why you think your organization would be suited to become Executive Secretariat Host for the new governance body. We suggest your answer covers the following topics:

• Prior expertise and track record

• Commitment to high integrity of carbon credits

• Motivation and vision for the new governance body

• Why you would be a good fit for the role

VII. Geographic representation: Comments on geographies that you represent, e.g. in which countries are you based, have members and / or represent stakeholders

VIII. Expertise: Comment on your experience and capabilities establishing and running organizations in highly complex, multi-stakeholder setups and providing analytical support for expert work, e.g., your track record supporting and coordinating different interconnected bodies, your experience involving and managing large num- bers of stakeholders, your expertise on governance, your analytical capabilities to support work of the Expert Panel, technological or other relevant experience

IX. Resourcing: Comments on resources available to fulfil your role as Executive Secretariat Host, e.g., ability to nominate a Secretariat Leadership and to provide their in-kind compensation, support of an expeditious implementation and effective operations of the governance body through efficient decision processes, alignment of internal and external stakeholders, etc.

X. Funding: Are you able and willing to contribute funding in cash or kind? If so, please provide specifics:

• Type of funding: E.g., cash, in kind personnel to support the Executive Secretariat (including ability to nominate full-time employees from your organization that can commit to the governance body for longer periods of time, geographic locations in which are you able to nominate such employees, experience and expertise of such employees in supporting analytical processes) or other in kind funding (e.g., office space, IT, media presence and goodwill,…)

• Funding amount and frequency (e.g., recurrent annual, one-time,...)

In addition, candidates need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.

Member consultation group representatives

Required information to express interest to be a member consultation group representative on the Board: I. Personal information: Personal details, type of organization (incl. independent)

II. Representation: Indication which part of the value chain you primarily wish to represent (e.g., suppliers, intermediaries, buyers)

III. Summary of your submission of interest: A description why you think you would be suited to become an member consultation group representatiave for the new governance body. We suggest your answer covers the following topics:

• Prior expertise and track record

• Commitment to the mandate of the governance body incl. high integrity of carbon credits

• Motivation and vision for the new governance body incl. how you will represent the interests of the member consultation group

• Why you would be a good fit for the role

In addition, candidates need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.

Funders

Required information to express interest in Funder role: I. Information on organization that is submitting interest: Organization name, who will be representing the organization during the recommendation process (2 representatives), type of organization (e.g., corporate, philanthropic or public institution)

II. Details on funding contribution: What cash or in-kind funding are you able and willing to contribute? Please provide specifics:

• Type of funding (e.g., cash, office space, personnel to support the Executive Secretariat or Expert Panel, expert skills and knowledge, IT, media presence and goodwill,…)

• Funding amount and frequency (e.g., recurrent annual, one-time,...)

In addition, candidates need to sign that they support the recommendations of TSVCM and agree with the mission and mandate of the governance body.