Integrating sustainability into climate finance by quantifying the co-benefits and market impact of carbon projects

High-quality development rooted in low-carbon growth, new jobs, energy security, and environmental quality will be a critical part of achieving multiple sustainable development goals (SDGs). Doing this will require the dramatic scaling up of new climate finance while maximizing co-benefits across multiple outcomes, including for local communities. We developed a comprehensive methodology to identify different levels of local co-benefits, followed by an econometric analysis to assess how the market values co-benefits through the clean development mechanism. We find that projects with a likelihood of delivering the highest co-benefits received a 30.4% higher price compared to projects with the lowest co-benefits. Project quality indicators such as the Gold Standard, in conveying higher likelihood of co-benefits, conferred a significant price premium between 6.6% and 29%. Our methodology of aligning co-benefits with SDGs and the results of co-benefits valued by the markets indicate approaches to bolstering social and political support for climate finance.