Standard Chartered's Groundbreaking Offer of Commercial Debt to Carbon Credit Firm

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 said.

By agreeing to an advance purchase deal with BA 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. UNDO uses so-called 'enhanced rock weathering' to speed up a natural process, capturing carbon when it rains and 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, 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.

Scientists have said around 10 billion tons of carbon emissions may need to be taken from the atmosphere every year by mid-century to meet global climate goals. However, such removal credits currently account for only a small slice of the market.

Carrie Harris, director of sustainability at British Airways, stated that carbon removals form "a key part" of reaching its climate objectives.