The Carbon Market Rollercoaster

Guest: Renat Heuberger, Founder & Former CEO, South Pole

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Transcript:

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SAIF: On this episode, I spoke with Renat Heuberger, founder and former CEO of South Pole. For those with exposure to sustainability and carbon markets, South Pole will be a familiar name. Join us as we dive into the highs and lows of two decades of sustainability entrepreneurship — Renat has more than a little scar tissue there — and explore what the future holds for carbon credits.

Renat, I'm super excited to have you on the show. I've known South Pole as an organisation for a long time — even back when I was at McKinsey around 2016 to 2018, doing early scans of carbon markets, South Pole was already the recognised leader in the space. I've followed the highs and some of the lower points since then, and I know there's an exciting backstory and a compelling story ahead as well. A big welcome — great to have you here.

RENAT: Thanks so much. Very glad to be here.

SAIF: There are a few areas I want to cover. I'm increasingly interested in the cyclicality of the sustainability space. Many people I work with in corporate sustainability have only seen the boom of 2021–22, and now they're experiencing this downturn. I'm able to reassure them that this has happened before. You and I have both seen it play out. How has the rollercoaster felt, having been through it for as long as you have?

RENAT: You're completely right — sustainability has seen ups and downs before. We actually got started in the late '90s as students in Zurich. A professor came to us and said, essentially, "If you really want to make a difference, do climate — that's the new big thing." So we started what was probably Europe's first climate-focused organisation, called My Climate. It still exists today.

The first real boom came in 2005 with the Kyoto Protocol entering into force. For the first time, we had a global market for carbon credits emerging. That's when we founded South Pole, and the company grew very fast. Everyone believed this would become a trillion-dollar market that would save the world. And then the financial crisis hit in 2009. The Lehman Brothers collapse, the Greek debt crisis — with that, the Kyoto Protocol effectively collapsed, and for a few years climate and sustainability became niche topics again. So yes, we have been here before.

SAIF: I'd love to go deeper on that first decade — the early 2000s, the knocking-on-doors phase. I was a sustainability consultant around 2014 and considered myself lucky to land one project a year in the space. I imagine you had companies asking, "What are you even talking about?" Can you tell us a bit more about that early journey?

RENAT: I have a funny anecdote about McKinsey, actually. We created My Climate in 2002, and one of the first things we did was enter a university startup competition. We were assigned a McKinsey coach, to whom we presented our business idea — carbon offsetting for private individuals. We didn't even make it to round one. The coach's view was simply: "You don't have a business case."

And that was accurate, in a sense. Back then, climate change was only discussed in expert circles. Our problem was that we first had to explain to people that climate change exists, that they're contributing to it, and then convince them to buy a solution for it. That was quite a tough sale.

The saving grace in the early 2000s was that there was substantial political support for the Kyoto Protocol. Climate conferences were relatively small — people knew each other — and there was genuine drive, especially from the EU and Japan, to make something happen. That political momentum is ultimately what created the boom that followed.

SAIF: I remember around 2014 or 2015, the CEO of the Ellen MacArthur Foundation telling me his strategy for Davos was to get a hotel room nearby and use it to stage meetings — they weren't exactly invited to participate in the main event.

RENAT: Absolutely not. It was not a topic at all.

SAIF: Who was your first significant corporate client? Was it a CSR team? I imagine those early buyers were a specific type of person.

RENAT: Honestly, like any startup, your first clients are your friends and family. Through a professor at ETH Zurich, we were connected to the CEO of one of Switzerland's largest travel companies. I don't think he fully understood what we were proposing, but he said, "These are nice students, I like it — let me put your climate-neutral flights offering into all my travel packages." That was our first real anchor client, and he helped us convince others enormously.

SAIF: That's incredible. And having been through a similar journey myself, I find that the first four or five customers sign on to the vision, the team, the energy — they don't always fully know what they're buying. Two of our first four customers are still with us; the other two we either outgrew or the fit didn't quite work out. That's just the fascination of the early journey.

RENAT: Exactly right.

SAIF: When did you hit the flywheel — when did it feel like you were genuinely on a roll?

RENAT: The inflection point was 2005. The Kyoto Protocol, signed in 1997, finally entered into force once Russia was convinced to sign — because with the US out, Russia had to be in. What that meant was that instead of purely voluntary carbon credit purchases, we suddenly had a compliance market. Governments had binding obligations.

That was the moment we said: we need to create a company that can actually invest in projects, because now there's a seller's market. People are going to be short on carbon. That's when we founded South Pole. Our first clients were the governments of Austria and Switzerland, and the Portuguese Carbon Fund. We went from voluntary to 100% compliance overnight.

And like everyone else, we believed the compliance market would only grow — that eventually the entire world would have a price on carbon.

SAIF: And then there was the twist, because South Pole became best known for the voluntary market towards the end of the 2010s. When the Kyoto heat died down, voluntary markets started to look like a real opportunity.

RENAT: Exactly. In 2009, I was in Copenhagen myself at that conference that completely fell apart. It was shocking. People woke up and realised the Kyoto Protocol was dead — it wasn't going to be expanded. Over the following six months, you could watch the carbon price on screen go down, down, down, towards zero. No extension, no demand.

At South Pole we were left holding 50 to 100 projects we'd built up. They had clients through the end of 2012, but then nothing. Many companies in our space folded or went bankrupt. But we had all those projects, and our commitment was to save them — to take them into the future.

So we went back to our roots. Between 2009 and 2012 we had done some voluntary work at My Climate, so we returned to that model while we waited for a new compliance regime to emerge. We genuinely believed a new compliance market was two or three years away. We didn't know it would take nearly a decade.

The fact that we became significant in the voluntary market wasn't a strategic intention. We simply had no other option.

SAIF: That space you created in the voluntary market allowed you to build something meaningful there. My rough estimate from things I've seen and heard is that at one point South Pole was doing around 20% of the voluntary market — does that sound right?

RENAT: That's entirely possible, but you have to keep in mind: it was not difficult to have 20% of a market when the market is very small. For many years there was only South Pole and a handful of others, and a handful of clients. We were back at the World Economic Forum knocking on doors like in the early days — no space for us in the main conference programme. We were a big player because the market was tiny, not because we were a large company.

But within that market, we always believed the voluntary space was a stepping stone to a new compliance regime. That's why we kept pushing — developing methodologies, building projects — hoping that work would eventually convert into something much bigger.

SAIF: Leading question — feel free to disagree — do you think the market got really overheated around 2020 to 2022?

RENAT: It got completely overheated. But it's an interesting question, and worth understanding why.

We came out of a decade of stagnation. Then the IPCC's 2019 report landed with a message that still rings in my ears: "You have one decade. If we don't turn this around, we're going past 1.5 degrees, and even past 2." Here we were at South Pole — small in absolute terms, but relatively large in our space — and the mood was: if not now, when?

Greta Thunberg was in the streets. CEOs were listening to their children at the kitchen table asking why their company wasn't doing anything. Executives went out and made net zero commitments, science-based targets, climate-neutral pledges. It was a colourful, massive movement. Many didn't fully know what they were committing to — but the desire to act was real and strong.

In that environment, overheating is inevitable. It's a classic feature of capital markets: once the leash is loose, everyone jumps on the bandwagon. Money flooded in, startups multiplied, business plans proliferated — and not surprisingly, some of that proved less robust than intended.

SAIF: I have a pet thing around cook stoves. For me, around 2021–22, cook stoves somehow became symbolic of this strange backlash — at least in the circles I was in. There was this narrative that biochar is good, cook stoves are bad. And yet when I look at cook stove projects, I see genuine health outcomes, improved longevity, real environmental benefit. Do you feel that while the market was overheating, we also started nitpicking — good versus great versus ideologically pure?

RENAT: Now you're entering a space where we could go on for two hours. It's actually central to the book I just finished — The Carbon Paradox — because you're touching on some of those paradoxes that only became clear to me in hindsight.

One of the most fundamental is what we call the ethics paradox. Is it ethical to offset your emissions at all? Is it greenwashing? Is it ethical to invest money in a project in Kenya or Rwanda instead of cleaning up at home? But then there's the reverse ethical question: should all capital stay at home when it could make a real difference to communities in Kenya or Rwanda right now? It's ethical argument against ethical argument, and that dispute has lingered in carbon markets for decades.

When the market was tiny, not many people cared. But as it started scaling, all those unresolved questions surfaced.

Then there's what we call the crowd paradox. In the early days, a few thousand people attended climate conferences. In Dubai there were over 100,000 — mostly from banking and finance. You'd think a big crowd signals a thriving club, but paradoxically in climate, that crowd tends to produce chaos and competition. If you're promoting biochar technology, cook stove developers are your competitors. Instead of cooperating to grow the overall market, all the proponents started pointing at each other.

I find it genuinely shameful. Have you ever seen an oil company publicly throw dirt at another oil company? They compete, but they don't fight in public. In the environmental space, we love to fight, we love to find mistakes, we love to claim moral superiority. That's a damaging pattern.

SAIF: I want to come back to this because you have more scar tissue from that fight than most. I think it's telling how often in the environmental space we find an unsolvable problem and place it squarely in the path of doing something practical.

One version of that I've seen is the debate around nationally determined contributions — do you hold onto your emissions reductions budget to show a clean balance sheet in 2030, or do you let organisations like South Pole bring capital in now to finance projects, accept that those reductions will count as exports? I co-founded the Pakistan Environment Trust and we've seen this play out in developing local carbon markets there. From my perspective, money now doing projects locally is a good thing — we shouldn't let accounting conventions get in the way. What's your view?

RENAT: You're touching on what we call the ambitions paradox, and it really is bizarre in its simplicity. If a country accepts climate finance to meet its NDC — its nationally determined contribution — the logical incentive is to lower its ambition, because the lower your ambition, the more credits you can potentially sell. A country raising its ambition effectively prices itself out of carbon finance. That is a fundamental paradox with no automatic solution.

But it is solvable with conscious policy design. You make a top-down decision: in Pakistan or Kenya, we focus on technology X or Y. If you fund a cook stove project in Pakistan, 50% of the benefit accrues to the Pakistani government's climate account and 50% to the buyer's. The solution isn't complicated — but it requires active political will. Without it, you land in exactly the moral dilemmas we've been discussing.

[Mid-roll: AltruistIQ]

SAIF: Renat, I want to come back to greenwashing and green hushing, and the line between them. You've had a front-row seat — more than that, you've been caught right in the middle. Which do you think is worse? And I'd also love to understand how it felt to be, in some ways, a scapegoat for a much larger debate about the nature of carbon markets and corporate climate action.

RENAT: On the scapegoat question — honestly, that's the risk you take as an entrepreneur who happens to be the market leader. There were very strong interests in taking that market down, and South Pole was a highly visible target: a large company, a high valuation, prominent investors. That's part of the game.

The more important question is the greenwashing one. Let me be very clear: greenwashing is bad, it should not happen, and it did happen in certain cases. But the greenwashing debate in 2022 and 2023 went, in my view, completely out of control.

Consider the context. CEOs had made those net zero commitments two years earlier. They were experimenting with science-based targets and climate-neutral pledges entirely voluntarily — they had no legal obligation to do any of it. What I still don't understand is why campaigning NGOs chose to throw so much dirt at those same companies. Why not encourage them? Why not say: "That was already a good start — here's how you could do even better"?

The strategy of calling out every voluntary climate commitment as greenwashing has produced a predictable outcome: companies stopped talking, or stopped acting altogether. They green-hushed. And I genuinely believe that in twenty years, historians of climate action will look back at this period and judge the NGO focus on greenwashing as one of the most strategically damaging mistakes the movement has made. Many CEOs and CFOs are scared now. It's going to take time to bring them back.

SAIF: The Zimbabwe project was at the centre of a lot of the press coverage. There are a couple of angles on this. One is the angle most press took — double counting, questionable claims, high-profile brand partners caught up in the story. The other, looking at it as a recovering lawyer, is that South Pole's arrangements with its customers were essentially a private commercial dispute — a matter of contract — that got prosecuted in the court of public opinion when it could have been resolved between the parties. What's your perspective?

RENAT: Something important needs to be said clearly: many of the stories about that project and about South Pole were factually wrong. The double-claiming narrative, for example. We have conducted multiple internal and external investigations, and the conclusion is unambiguous — South Pole sold only issued, verified, certified Verra-verified emission reductions. Full stop. That is also why there are no pending legal cases. Methodologically and legally, nothing was wrong.

The project — and South Pole by association — got swept up in a general mood in 2023 of destabilising the voluntary carbon market.

Having said that: the Zimbabwe project itself was far from perfect. The developers launched in 2011, when Robert Mugabe was still president. The country was completely impoverished. There were food shortages, no functioning legal system, no functioning banking system, wildly distorted exchange rates. Every challenge you can imagine was present simultaneously.

We chose that project deliberately. We wanted to prove that climate finance could make a genuine difference for communities under the hardest possible conditions. Perhaps we were naive, perhaps idealistic — but the intent was real. And for about ten years, the project actually ran reasonably well.

Because it was so large and so visible, it became an easy target for scrutiny. And of course it had flaws. The question is: are those flaws a learning curve, a feature of operating in fragile environments — or a reason to throw the whole thing out?

The sad postscript is that the project still exists, but it struggles for funding, and there has been no comparable large-scale forest conservation programme in Zimbabwe since. It got shut down and replaced by nothing. That, personally, is what makes me sad — all that energy directed at tearing something down without proposing or building an alternative.

SAIF: If you could do it again, would you?

RENAT: Knowing what I know now — honestly, no. We shouldn't have gone to Zimbabwe. Carbon markets were still at such an early stage; methodologies were still being established, regulatory frameworks were still forming. We should have been less ambitious and chosen more stable operating environments.

SAIF: It's bittersweet, though. As an entrepreneur I understand the risk management argument. But what's implicit in what you're saying is that you wanted South Pole to make a difference where it was needed most — and those are almost by definition the hardest places to operate. From a business perspective, the backlash and exposure simply weren't worth it in the end.

RENAT: Correct. From a pure business perspective, yes. From an impact perspective, it's more nuanced — but that nuance leads us into the future of carbon markets.

The reality is that carbon credits are a complex commodity. As much as I would have loved them to trade like cotton or coffee or palm oil — and yes, that was the dream, a commodity bigger than oil that could change the world — they are far from that level of commoditisation. The paradoxes are simply too many.

For carbon to stand any chance of making a real difference, we have to come to terms with that complexity. We have to accept that projects will have flaws, that mistakes will happen, that not everything will be perfect. If you wait for the perfect credit that is 100% certified and unimpeachable, you will never launch a project. That is the conversation the sector needs to be having now.

SAIF: My closing question: flash forward to the end of the decade. You're a corporate sustainability professional at a Nestlé or a Unilever or a Diageo, building your sustainability strategy. What are two or three things you would do with respect to carbon markets?

RENAT: The waves we talked about at the start — the tides of climate action — will come back. I'm very sure of that.

The first thing that has to happen over the next five years is better, more robust regulation on carbon. I know Article 6.4 of the Paris Agreement looks hopelessly complex right now, but the urgency is high enough that I have genuine hope that within three to four years some governments will figure it out, and we may see meaningful south-to-south learning on how to address the structural paradoxes.

The reason that matters is this: if we had a universally recognised carbon currency — we've proposed calling them "climate units," deliberately dropping the word "carbon" and all its baggage — endorsed and validated by governments, sustainability managers could buy them with confidence. The fear of being on the front page of a newspaper would diminish significantly if the currency were backed by credible sovereign endorsement.

And let's not lose sight of what these projects actually do. Cook stoves, forest conservation, community energy — these generate health benefits, time savings, cleaner air, more reliable energy. Participating in these credits means making a real difference to real people.

My hope, and my belief, is that in five years we will have a market that is more honest, more humble, and clearer about its limitations and paradoxes — but that we'll have recovered the shared vision we had in 2019, when Fridays for Future was electrifying boardrooms. That movement can come back, and it will.

SAIF: Renat, that's a great note to end on. Thank you so much for joining us — a really rich conversation, and I'm sure one of several we'll continue to have on this topic.

RENAT: I look forward to it. Thanks so much.

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