In a major breakthrough for climate finance, global insurance broker Marsh has successfully delivered a first-of-its-kind carbon credit insurance policy to support a $210 million project finance deal for Chestnut Carbon, a U.S.-based developer of nature-based carbon removal solutions. This deal represents a significant step forward for the voluntary carbon market, helping accelerate large-scale restoration and carbon removal efforts across the United States.

Carbon Credit Insurance Unlocks Capital for Climate Restoration

The landmark insurance policy, underwritten by CFC in London, protects against the risk of non-delivery of carbon removal credits. This unique coverage enabled Chestnut Carbon to secure non-recourse financing from J.P. Morgan, a rare move in voluntary carbon markets that have historically struggled to attract large-scale investment. The deal is expected to unlock confidence in the bankability of nature-based carbon projects and signals a maturing market with increasing appetite from institutional lenders.

Microsoft Signs Major Credit Offtake Agreement to Support Climate Goals

At the heart of this financing arrangement is a long-term offtake agreement with Microsoft, which has committed to purchasing seven million tons of high-quality carbon removal credits from Chestnut Carbon. This commitment aligns with Microsoft’s ambitious target to become carbon negative by 2030, meaning it will remove more carbon from the atmosphere than it emits. The partnership reinforces the role of corporate buyers in driving demand for durable carbon removal and creating a viable ecosystem for project developers.

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Restoring 60,000 Acres and Planting 35 Million Trees Across the U.S. South

The project backed by this insurance-enabled financing will support the acquisition and restoration of 60,000 acres of degraded land in the Southern United States. Chestnut Carbon plans to plant over 35 million native trees, including both hardwood and softwood species, to create biodiverse and climate-resilient ecosystems. This reforestation initiative not only contributes to carbon drawdown but also provides habitat restoration, improved soil health, and local economic opportunities.

Insurance Innovation Helps Build Trust in Carbon Markets

Amy Barnes, Head of Climate and Sustainability Strategy at Marsh, highlighted the importance of insurance in scaling climate solutions. She explained that Marsh’s collaboration with CFC resulted in a customized policy that de-risks the project for investors and buyers alike. According to Barnes, such insurance instruments play a pivotal role in increasing confidence in voluntary carbon markets by making carbon removal a more secure and investable asset class.

Greg Adams, Chief Financial Officer of Chestnut Carbon, emphasized that having reliable insurance coverage was essential for unlocking the project’s financing. He likened the insurance package to those used in more traditional infrastructure projects, describing it as critical to enhancing bankability. Adams also noted that creating a replicable, sustainable financing model was crucial for maturing the voluntary carbon market and helping buyers like Microsoft meet their long-term sustainability targets.

A Blended Finance Model for the Climate Economy

George Beattie, Head of Innovation at CFC, described the deal as a reflection of the firm’s commitment to facilitating transactions that drive climate solutions. Beattie noted that CFC has quickly become known for its innovative approach to carbon-related risks and believes that insurance can be a powerful enabler of blended finance models. In his view, combining private capital, public policy, and insurance products is the key to building a robust economic system that supports climate mitigation at scale.

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Paving the Way for Scalable Carbon Removal Financing

This pioneering transaction marks a shift in how carbon removal projects can be financed, verified, and insured. As corporate climate goals grow more ambitious and scrutiny over offset integrity increases, solutions like Marsh’s carbon credit insurance could become standard practice in the development of high-quality carbon projects. The deal not only supports Microsoft’s climate strategy but also lays the groundwork for more innovative collaborations that blend risk mitigation with environmental impact.

The successful execution of this financing structure shows how risk-sharing mechanisms like insurance can bridge gaps between project developers and financiers, ultimately speeding up the deployment of nature-based solutions that are essential for reaching global climate targets.

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