Standard Chartered, British Airways, CUR8, CFC and WTW recently announced the completion of a global first transaction to unlock finance for UNDO, a UK-founded carbon removal project developer specialising in enhanced rock weathering. The breakthrough transaction, which specifically provides debt financing for UNDO, now paves the way to scale finance for Carbon Dioxide Removal (CDR) projects elsewhere.
The precise and novel structure of the transaction helps to overcome significant barriers when providing finance to carbon removal project developers like UNDO. It separates the cost of a project from the sale of its credits, giving the project developer financial flexibility, while reducing risks relating to delivery. In developing this financing solution, Standard Chartered, British Airways and CUR8, alongside CFC and WTW, as specialist insurance providers, have procured a multi-year removals offtake, with Standard Chartered providing the debt financing needed to help UNDO scale up its activities.
The approach shows significant potential for scale across removal methods by unlocking the smaller amounts of finance needed for projects, and helping to de-risk finance through guaranteed offtake agreements that deliver the upfront capital required to scale supply. It paves the way for an increase in carbon removal sales, by lowering the barriers to entry for buyers.
Marisa Drew, Chief Sustainability Officer, Standard Chartered, said: “In the field of sustainability, we will need innovation and experimentation to be applied toward our hardest to abate sectors. In these spaces, novel financial solutions and partnerships are key to unlocking opportunities that have scale potential. This transaction provides a bridge to bankability for high quality carbon removal projects and creates a solution that can be replicated across the airline industry to help ramp up a robust carbon removals market and accelerate ambition to achieve net zero.”
CDR refers to technologies and practices that remove and durably store CO2 from the atmosphere. These solutions are needed to neutralise residual and historic emissions and do not substitute emissions reductions. Today, roughly 3% of credits on the carbon market are classified as removals.
According to the Intergovernmental Panel on Climate Change (IPCC), we need to be capable of annually removing upwards of up to 10 billion tonnes of CO2 from the atmosphere every year to reach net zero by 2050. Conventional CDR methods currently remove 2 billion metric tonnes of CO2 per year, pointing to an urgent need to scale durable and novel CDR methods. This scale up will require billions of dollars of private capital to flow towards high-quality projects and so testing bankable models is a critical unlock for the industry overall.
Marta Krupinska, CEO and Co-Founder, CUR8, said: “Building a trillion-dollar carbon removals market requires fit-for-purpose financial infrastructure, and we’re delighted to have created a mechanism to unlock finance at scale for carbon removals. We hope that this deal creates a flywheel effect whereby buyers can access highest quality carbon removals, de-risked by CUR8’s due diligence, with low upfront costs. With this first-of-a-kind transaction, we want to demonstrate that financing not only makes carbon removal more affordable, but also reduces buyer delivery risk, which stands to drive demand and scale this industry at the rate that it needs to.”
Carrie Harris, Director of Sustainability, British Airways, said: “Carbon removals are vital for urgently reducing the concentrations of carbon dioxide in the atmosphere and meeting global net zero emissions. At British Airways, they form a key part of our roadmap to reach our climate goals. We’re therefore delighted that this pilot has succeeded and whilst our initial purchase was relatively small, the partnership hopes to demonstrate the art of the possible and unlock future investment in carbon removals to help accelerate the scale-up of carbon removals solutions.”
George Beattie, Head of Innovation, CFC, said: “It is clear that the private sector has a vital role to play in helping achieve our climate goals, with the IMF estimating the world will need to invest $2 trillion annually into carbon removal to reach net zero by 2050. CFC has been delighted to collaborate with Standard Chartered and key partners on this transaction. The closure of this groundbreaking deal paves the way for one of the biggest lending opportunities for banks and financial institutions in history in the global drive to address climate change. Insurance can play an essential role in helping banks and institutions to de-risk these financing activities, and in the process drive more lending and finance to the high-quality carbon removal projects.”
Oliver Colman, Director, Financial Solutions, WTW, said: “Carbon removal methods play a pivotal role in combatting climate change, which need to scale at pace to support global climate commitments. These groundbreaking projects require equally innovative financing and insurance solutions to match. WTW is proud to have worked with all key stakeholders in this achievement to help inventive climate technologies and concepts become reality, in turn driving the development of sustainable solutions into the future.”
Jim Mann, Founder and CEO, UNDO, said: “Enhanced rock weathering represents one of the most robust carbon dioxide removal solutions available today because it is permanent, highly scalable, and provides a host of co-benefits. Sectors like the aviation industry will require large amounts of high-quality carbon removal to meet their net zero commitments. UNDO and the carbon removal market need many more progressive partnerships like this to scale and meet the IPCC’s carbon removal goal of 10 billion tonnes a year by 2050.”
A CDR industry capable of delivering gigaton-scale removals could be worth up to $1.2 trillion by 2050. To meet this potential, intervention is needed from investors, suppliers, buyers, traders, and other stakeholders, to help identify solutions that will help to scale the market.
