Mark Carney Joins Cultivo As It Scales Up Its Mission To Fix The Upstream Carbon Markets

Sustainability Mark Carney Joins Cultivo As It Scales Up Its Mission To Fix The Upstream Carbon Markets Felicia Jackson Contributor Opinions expressed by Forbes Contributors are their own. I write about innovation, finance, energy, climate and sustainability. Following New! Follow this author to stay notified about their latest stories.

Got it! Oct 5, 2022, 10:59am EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin Photographer: David Gray/Bloomberg © 2020 Bloomberg Finance LP 2021 saw the voluntary carbon markets hit over $1 billion in value, as increasing numbers of brands are setting net zero targets. Yet those markets are in upheaval as pressure increases for standardisation around the transparency and credibility of credits. Less attention however has been paid to the continuing supply of high quality credits – a key concern for net zero brands.

An enormous increase in demand has led to price pressure, which carbon intelligence platform Sylvera warned about in June 2021. Its 2022 Carbon Credit Crunch doubled down, with a warning that since 2020 carbon credit inventory has been falling. Cultivo is scaling up to address just that problem, a climate focused fintech with a mission of accelerating investment into nature.

It’s looking over the longer term to generate credits over 1% of the world’s surface, land the size of Mongolia, or twice the size of Texas. How Cultivo addresses the upstream carbon credit supply issue Cultivo’s technology platform has been purpose-built to solve the ‘ upstream ’ supply issue, and is optimized to originate new nature-based projects and provide the pre-financing that is required to get these projects off the ground. The company finds greenfield projects where its customers, both financial institutions and corporates, want to invest.

Obviously these include landowners but also those who don’t have land assets but still want to invest in nature. All of this is done, says Chief Strategy Officer James Clifton, in light of strong social and environmental safeguards. MORE FOR YOU Livestream Shopping Stays Hot As Whatnot Valuation More Than Doubles To $3.

7 Billion The 10 Best Space Heaters To Keep Your Home Perfectly Warm ‘Overwatch 2’ Has Review Scores, Somehow Its search engine looks for distressed natural assets under selected parameters, e. g. geography, land size, ecosystem to identify land areas with high regeneration potential.

It then calculates its components: natural capital density, biodiversity potential, carbon capture potential etc, in order to understand the credits (and benefits) that might be generated. Cultivo’s system is based around algorithms using geospatial analysis trained, not simply on relevant datasets, but also on ground data like soil samples. A wide range of technologies are deployed in the projects in order to ensure measurability, from widespread use of sensors, camera traps, DNA sequencing.

So while the initial analysis may use high resolution satellite data, its complemented by data that is not natively digital e. g. social data.

That data then flows through the databases and can be made visible to registries through the PDD. That means availability of digital data for auditing and verification. By doing this, Cultivo can unlock a future supply of reliably high quality carbon credits.

This approach is very different to most other tech players in the market who are focusing ‘downstream’ and bringing transparency to existing carbon credits. What makes a carbon credit high quality? While the value of nature based solutions is becoming increasingly important, understanding what makes a credit high quality is key – and that means asking about additionalities. What are the species above and below ground, where are they being introduced? How is the community being engaged? Is there traceability on how funds are flowing to members, how much soil moisture is increasing, how more resilient is the area becoming? Downstream customers want to know that data because that’s how they build their own credibility in the use of offsets.

Chief Executive Officer Dr. Manuel Piñuela says that this means the table stakes are carbon capture with additionality and permanence and no leakage. But positive benefits for climate, community and biodiversity can all be added to a specific PDDs.

And the company’s platform can add data over the life of the project, meaning that all stakeholders have access to what’s actually happening on the ground. He says: “The market for such credits already exists. The market is demanding this type of quality but there is not yet a sufficient supply for this demand.

” The markets are already correcting some of the carbon markets current quality challenges. A high quality project usually has a higher cost of carbon credit and therefore it filters poor projects out – and that means it attracts customers with nature positive commitments. A corporate with a clear biodiversity target and strong disclosure will often pay a premium today to ensure supply.

While the carbon credit markets are growing, biodiversity is becoming a mainstream expectation and it seems likely that water supply will follow soon. Data is transforming our understanding of credits and their benefits Piñuela says that what makes the Cultivo approach stand out is that all the data is observable all the way through the lifetime of the credit. In recent years the market was taking credits at face value.

Now, according to Piñuela, “customers downstream are asking for more information and context – sometimes to the underlying datapoints e. g. where was the ocelot spotted – level of specificity that customers want already demands this level of observability.

” Today the company has roughly 15 million hectares under different stages of development, with multiple ecosystems including grasslands, wetlands, savannah, forests and mangroves too. Tens of thousands of Cultivo’s credits have already been sold and Piñuela says that the pipeline consists of millions of credits. The investment platform allows investment platform allows investors and offtakers to review portfolios of nature-based projects primarily for three things: pre-finance of nature-based projects; forward contracts; data review showing performance over time.

Another factor is the increasing democratisation of access to carbon credits. Piñuela says, “This market is increasing. It’s no longer just FTSE 100 but syndicates of SMEs.

One example is in the fashion industry, where many companies are starting to align to climate neutral/SBTi targets. As they are reviewing their Scope 1, 2 and 3 emissions they are being approached by companies doing carbon accounting which are pooling offers. For a syndicate of 50+ the purchase price is at par of price and volume.

” There is increasing focus on the tokenzation of credits Further developments around access to credits and the use of new technologies can also be seen in the August 2022 announcement that Cultivo is to be part of the Carbon Opportunities Fund, an IFC-led platform for scaling nature-based carbon projects. It’s also exploring the potential for tokenization technologies, such as blockchain, in the trading of verified credits. The fund’s carbon credits will be tracked by the World Bank’s Climate Warehouse, which was launched on Chia’s public blockchain, to build market trust through transparency and integrity.

Combine the supply development with the platform and the scaling potential looks exciting. There seems to be an ongoing battle between nature based solutions and technology based carbon removals, such as Direct Air Capture. Yet Piñuela believes that there are greater benefits with nature though.

He says, “You can have carbon removal with nature-based projects, one where the quality is significantly higher than non-nature based carbon removal. Customers who were looking at tech driven carbon removal are also making significant bets in nature. Then the onus is about proving with data that the carbon is being permanently stored.

The way we can mitigate wider risks has supporting science, and the market loves that it comes with co-benefits. ” Scale is built through network, trust and collaboration One of the things that Cultivo prides itself on is what it calls its ‘ecosystem of partners’. Piñuela says that “Our ecosystem of partners allows us to move capital at the speed of trust.

” It starts with landowners, local partners with knowledge on the ground, relevant technology providers, registries, auditors, offtakers – all have same access to data and how project is performing and who the other parties are. ” Such transparency makes it easier for Cultivo to package up the projects and credits and find investment. That desire for transparency, trust and accountability is reflected at board level too.

Not only has it welcomed former Governor of the Bank of England to the board, but Brace Young, Chair of Social Finance, Mark Tercek former CEO of the Nature Conservancy, Lucy Thomas, Head of Sustainable Investing at UBS Asset Management, Gabriel Holschneider, Chairman of the Rainmaker Group and Francisco Martinez, CEO of Reaseguradora Patria. Piñuela says, “The reason we have the board we have, as well as our team of scientists, operators and financiers, is because we’re so focused on the supply issue and that’s fundamental to the triple crisis of climate, biodiversity and water stress. We’re not just talking about carbon – biodiversity and water gains help us with long term storage – our board joined to help us growth the quality and volume of supply.

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