Nature-based carbon dioxide removal (CDR) developer Chestnut Carbon has secured first-of-its-kind non-recourse financing for its afforestation project in the United States.
The landmark credit transaction of up to $210,000,000 was led by J.P. Morgan and a syndicate of established lenders like CoBank, Bank of Montreal, and East West Bank.
This transaction sets a precedent for bank financing provided to a voluntary afforestation CDR initiative, paving the way for scaling this kind of efforts in the future.
The novel financing is founded on the long-term carbon removal agreement signed between Chestnut and Microsoft, which includes afforestation, reforestation, and revegetation (ARR) projects set across different U.S. states.
ERM is one of the companies that served as a technical advisor to the lenders in this transaction, providing due diligence to evaluate and prevent risks around the CDR project.
This screening process covered various project aspects, including validation and verification timelines, supply chain management, ICVCM Core Carbon Principles alignment and compliance with market standards, as well as community engagement, environmental impact, and additionality and permanence.
Greg Adams, Chief Financial Officer at Chestnut, shared that the company is thrilled to have completed this pioneering transaction that can prove to be transformative not only for Chestnut, but for the industry as a whole.
Expressing gratitude to the partners that made this possible, he stated, “Not only does this facility provide the capital to accelerate our afforestation and carbon removal initiatives, but it establishes a replicable model for sustainable finance in the voluntary carbon sector.”
Relevant: Microsoft Extends Collaboration With Chestnut With New 7M Tons Of CDR
Vijnan Batchu, Global Head of Center for Carbon Transition at J.P. Morgan, believes this kind of financing sets CDR developers up for success at an attractive cost of capital, letting them focus on delivering impactful projects and fulfilling their contractual obligations.
Commenting on the significance of this transaction, Adams said, “Together, Chestnut and its partners seek to establish a transformative yet sustainable finance model, which is essential in enabling the industry to obtain long-term, competitively priced capital support that it needs to succeed and grow.”
Read more: Chestnut Carbon Successfully Issues First Batch Of Improved Forest Management Credits
