StanChart to offer first commercial debt to carbon credit firm after BA commitment

Willis Towers Watson

12/09/2024 24:01

* 
      BA will commit to buy 4,000 tons of credits
    

        * 
      Offtake deal, insurance help de-risk corporate loan
    

        * 
      Partners hope deal will be a template for others
    

  
    By Simon Jessop
       LONDON, Sept 12 (Reuters) - Standard Chartered will
offer the first commercial debt to a technological carbon
removal firm after British Airways agreed to an advance purchase
of more than 4,000 tonnes of credits from project developer
UNDO, the lender told Reuters.
    The ability to suck climate-damaging carbon emissions out of
the air is a central part of the world's attempt to combat
global warming, yet many of the technologies are nascent and
unproven at scale.
    While grants, pre-payments and venture capital have
typically provided early-stage financing, project developers
have been considered too risky for banks to offer them corporate
loans, StanChart  STAN.L  said. 
    By agreeing an advance purchase deal with BA  ICAG.L  and
backing it with insurance that pays out in the event not enough
carbon credits are produced to repay the loan, the credit risk
on project developer UNDO is lowered, it added. 
    UNDO uses so-called 'enhanced rock weathering' to speed up a
natural process by spreading silicate rock dust over farmland
that then captures carbon when it rains, locking it away for
more than 100,000 years.
    The partners in the deal, which also include offtake
intermediary CUR8, insurer CFC and broker WTW  WTW.O , hope its
structure can be replicated by other developers and help to
scale up the market. Financial terms were not disclosed.
    "We need a technological solution that can scale, allowing
carbon dioxide removals to become affordable across the market
and deliver the net in net-zero," said StanChart's Chris Leeds,
head of carbon markets development.
    "This transaction puts money into a project today in an
efficient way, through upfront bank finance." 
    Scientists have said around 10 billion tons of carbon
emissions may need to be taken from the atmosphere every year by
mid-century in order to hit the world's climate goal, yet such
removal credits currently form only a small slice of the market.
    Carrie Harris, director of sustainability at British
Airways, said carbon removals formed "a key part" of reaching
its climate goals.

 (Editing by Jan Harvey)
 ((simon.jessop@thomsonreuters.com; +44 (0) 207 542 5052;
Reuters Messaging: Reuters Messaging:
simon.jessop.thomsonreuters.com@reuters.net))