#United States #New York #Microsoft #Carbon Market #Chestnut Carbon

Chestnut Carbon's Revolutionary Financing for U.S. Afforestation

Chestnut Carbon, a frontrunner in nature-based carbon removal initiatives, recently achieved a significant milestone by securing a groundbreaking non-recourse project finance credit facility worth up to $210 million. This marks a first-of-its-kind bank financing for a U.S. afforestation project within the voluntary carbon market, a sector poised for transformative growth. The deal was orchestrated with the support of J.P. Morgan and a consortium of prominent lenders, including CoBank, Bank of Montreal, and East West Bank.

This innovative financing mechanism is expected to scale nature-based carbon projects significantly, positioning Chestnut Carbon and the broader voluntary carbon space for commercial viability. At the core of this agreement lies a pivotal long-term carbon removal supply contract established earlier this year between Chestnut and Microsoft Corporation, underscoring one of the largest carbon removal accords in the United States.

Establishing a New Standard for Financing in the Carbon Market

Chestnut Carbon’s CFO, Greg Adams, expressed his enthusiasm at the successful conclusion of this transaction, which he believes not only accelerates afforestation and carbon removal projects but also paves the way for sustainable finance models in the voluntary carbon market. He stated, "This facility provides the necessary capital to expand our initiatives while creating a replicable model for the industry. We appreciate the unwavering support from Microsoft, our lenders, and partners who played a crucial role in making this possible.”

The structure of the deal integrates features from traditional finance, particularly renewable energy projects, reinforcing it with credit discipline and rigorous underwriting practices. The partnership among Chestnut, Microsoft, and the lending syndicate involved a team of experienced advisors who adapted proven frameworks from infrastructure finance for this large-scale nature-based carbon removal initiative. These advisors included firms such as ERM and Marsh.

Impact and Promise for the Future of Carbon Markets

The successful conclusion of this financing signals a growing confidence in the voluntary carbon market among lenders while broadening the scope for new investors. For Chestnut Carbon, this funding is crucial for expanding its afforestation efforts and enhancing carbon removal to meet climate and biodiversity objectives, while simultaneously providing Microsoft with high-quality carbon credits to fulfill its commitment to becoming carbon negative.

Vijnan Batchu, the Global Head of the Center for Carbon Transition at J.P. Morgan, emphasized that this type of financing ensures that developers can effectively deliver sizable carbon projects at attractive capital costs. He stated, "Financing models like these will enable developers to focus on their primary goals while fulfilling contractual obligations efficiently.”

As this non-recourse financing sets a new benchmark in the voluntary carbon market, it has the potential to stir further innovation and investments needed to transition to a sustainable low-carbon economy.

Brian Marrs, Senior Director of Energy and Carbon Removal at Microsoft, added, "This transaction represents a significant step in proving that nature-based carbon removal can be effectively structured and funded through high-integrity financing. We are excited to see new financing vehicles emerge that can bolster the renewable carbon markets".

About Chestnut Carbon

Founded in 2022 with the backing of Kimmeridge, Chestnut Carbon is dedicated to developing nature-based carbon removal solutions within the United States. The company focuses on generating high-quality forest carbon offsets that not only adhere to environmental regulations but actively contribute to sustainability across various sectors. By leveraging a proprietary methodology on family-owned forestland and under-utilized agricultural areas, Chestnut promotes environmental stewardship and helps accelerate the journey to achieving net-zero emissions. For further insights into their operations and environmental initiatives, visit their website at Chestnut Carbon.

Join the Movement: As the world shifts towards sustainability and climate responsibility, the importance of innovative financial structures in the carbon credit market cannot be understated. Chestnut Carbon's groundbreaking financing is a step forward in making carbon removal projects scalable and financially viable, ultimately benefiting the environment and businesses alike.