By Alexandra Connac, Chief Corporate Affairs and Impact Officer, Climate Impact Partners
Recent comments from Genevieve Ding, Head of APAC Sustainability at JPMorgan, on banks’ reluctance to take risks on “vague” contracts will attract groans of recognition from anyone working seriously in the carbon market.
It’s no secret to those of us on the inside, that nature-based solutions are complex. They operate over long timelines and are exposed to variables such as weather, local regulation and supply chains; layered on top of shifting methodologies and evolving regulatory frameworks.
A good contract should reflect that complexity – making it clear who is accountable; setting realistic expectations; and grounding commitments in operational reality. That is what creates confidence. Yet, in practice, too many contracts are still written to get deals signed, rather than to ensure projects are delivered.
As a result, obligations are often unclear; timelines overly optimistic; and there is limited clarity on what happens if credit issuance is delayed or fails to materialise. Financial liability does not always align with how projects operate in practice. As Ding puts it, investors do not avoid risk; they avoid ambiguity. So when information is incomplete or unclear, is it any surprise that confidence in the market is eroded?
Why Contract Quality Remains A Market Challenge?
Rather than treating contract quality as the problem in isolation, it is more useful to see it as a symptom of something deeper.
Robust due diligence at the outset; clear project design and implementation structures; and ongoing monitoring all play a critical role in determining whether a project can deliver. Active management – including the ability to respond and remediate as conditions change – is equally important. Without that foundation, contracts can only go so far.
When this groundwork is in place, however, contracts become far more than a protective layer. They become a transparent articulation of how a project is expected to perform. They should go beyond simply listing remedies and instead define how delivery will be achieved; how parties will work together when challenges arise; and what practical remediation looks like if performance deviates.
This is why good faith negotiations should be seen as a feature, not a weakness. In a market shaped by real-world variability, rigid, pre-defined outcomes rarely reflect reality; preserving delivery focus, partnership and impact is often far more effective.
Buyers and financiers also need to move beyond relying on punitive remedies if quality is challenged. The objective should not be to fall back on legal protections when things go wrong; it should be to create upfront certainty that due diligence is robust and proportionate, that risks are properly understood, and that projects are supported by credible data, governance and independent checks where appropriate. Otherwise, the focus shifts away from delivery and towards dispute.
This is a core part of how we approach the market at Climate Impact Partners. The focus is not on presenting projects as risk free, but on ensuring risks are properly understood and actively managed – through both project design and contract structure. Long-term offtake agreements, clearly defined delivery frameworks, and upfront alignment on contingencies all contribute to that.
Carbon Market Deals Need Flexibility, Not Just Remedies
This matters because contract quality does not just influence individual transactions; it shapes whether entire categories of projects can be financed.
Afforestation and restoration projects are a clear example. These are areas where the market is keen to see more investment, yet they require significant upfront capital and operate over extended timeframes. If contracts – and the underlying project structures – do not reflect that reality, it becomes difficult for capital to engage at the scale required.
There is also a broader shift underway. Corporate buyers are becoming more sophisticated, with stronger procurement processes and closer alignment to science-based climate strategies. That progress is encouraging; but it also highlights where parts of the market have not yet kept pace.
Moving from transactional purchasing to long-term partnerships requires a different level of discipline. Contracts are where that discipline becomes visible; but they can only ever be as strong as the projects they represent.
Realistic Agreements Will Be Key To Scaling The Market
If the carbon market is to scale in a meaningful way, the focus needs to be as much on building high-quality, well-managed projects as it is on improving contracts and the financial rigour that sits around them.
Let’s not be naive – parties will always seek to secure terms in their own interest. But approaching negotiations with the aim of making expectations, risk allocation and delivery pathways explicit helps build a durable partnership, rather than a document designed primarily to avoid liability.
It is also where you learn whether you are relying on the right counterparty. If a partner is willing to accept liabilities without demonstrating the credibility of what they offer – or without questioning unreasonable risk allocations – it raises legitimate questions about long-term reliability and alignment.
It is important to remember that sellers in the carbon market are not simply selling tonnes; they are committing to deliver long-term impact for the projects and communities they support, and that commitment should not be diluted. Where alignment with the Sustainable Development Goals forms part of the value proposition, contracts should recognise that these outcomes are integral to performance; they depend on continuity of funding, stable implementation conditions, and collaborative problem-solving – not stop-start delivery driven by short-term pressures.
Overall, a well-constructed contract does not just protect downside. It makes a project legible, credible and ultimately investable; helping turn ambition into something that can be delivered in practice.
