CarbonPool, a startup co-founded by three former executives of German major Allianz (ETR: ALV), has successfully concluded the largest European climate-focused seed funding round in over a year, securing $12.17 million (10.5 million Swiss francs) for its innovative approach to carbon credits insurance.
According to industry tracker PitchBook, this marks the second-largest global seed funding round in climate finance and the largest in Europe since the beginning of 2023, Reuters said Monday.
CarbonPool’s model addresses a key concern in the market by ensuring companies receive the carbon credits they purchase, even if the issuer faces challenges in delivery, such as due to forest destruction by wildfires.
To accomplish this, CarbonPool intends to acquire high-quality carbon credits, maintaining them on its balance sheet for future payouts.
Talking to Reuters, co-founder and COO Nandini Wilcke highlighted the current market uncertainty, where buyers lack guarantees that purchased offsets will materialize in the expected quantities, affecting financial disclosures.
Thus, the Swiss-based company’s strategy, currently under evaluation by regulators, addresses a critical gap in the market.
Data from 2000 to 2023, shared by industry tracker AlliedOffsets, revealed a meager 45% average issuance success rate for carbon permits, posing challenges for corporate buyers in meeting their climate goals.
While existing insurance options cover the assets supporting carbon permits, none currently compensate for the actual value of the carbon credits themselves.
CarbonPool aims to rectify this, offering a solution where companies, in the event of unforeseen circumstances like wildfires, receive compensation not just for the financial investment in planting trees but for the lost carbon credits—an essential aspect often overlooked in current insurance offerings.