The multi-billion dollar International Finance Corp. is working with FootPrint Coalition Ventures-backed neobank, Aspiration; carbon offset marketplace, Cultivo; and blockchain developer Chia Network on a new carbon credit fund... on the blockchain.
The Carbon Opportunities Fund will use voluntary carbon offsets that are verified and recorded on a immutable public ledger developed by Chia to expand offset access to consumers.
The world needs to spend roughly $8 trillion every year to manage the energy transition, and engaging consumers and businesses through voluntary offsets is one way that financial institutions are hoping to move that money
These voluntary offset markets -- especially those associated with cryptocurrencies and targeting consumers -- have had any number of problems.
As Bloomberg News reported, an early experiment from KlimaDAO and Toucan in retiring carbon offsets and opening up voluntary offsets to cryptocurrency buyers actually backfired.
The offset buyers wound up spending money on credits that were not actually additional and were funneled into projects that did not remove more carbon dioxide from the atmosphere.
While the project had intended to remove the opacity from carbon markets by putting prices in the open on a blockchain ledger -- and buy up cheap credits so corporate purchasers would spend more -- what actually happened was old renewable projects began issuing new cheap credits flooding the market with low quality inventory.
“You can see blockchain technology actually having a really important role because it's a way in which you can create more security and transparency,” Hugh Salway, head of environmental markets at Gold Standard, a major carbon offset registry, told Bloomberg. “But the way that this has been done in some examples is unhelpful.”
The IFC, Cultivo, Aspiration, and Chia partnership hope to address the transparency issue.
This new model for the carbon trading ecosystem will deploy innovative technologies to help identify, monitor, evaluate and natively tokenize verified carbon credits, according to a statement from the partnership.
"This new partnership will foster the standardization of carbon credits generated in emerging markets and help mitigate climate change," said Paulo de Bolle, Senior Global Director, Financial Institutions Group, IFC. "Nature-based solutions can deliver up to 40% of the carbon removal required to combat the climate crisis. This new framework that will use new blockchain technologies is an innovative way for capital markets to fully engage in carbon credit trading in a transparent, secure, fair, and beneficial manner."
Cultivo and Aspiration, leading originators and investors in nature-based carbon credits, will lead the Fund's strategy and execution, according to a statement.
"Aspiration is excited to be the first anchor investor of this IFC platform to scale the voluntary carbon markets," said Aspiration co-founder and chief executive, Andrei Cherny. "We look forward to contributing the insight we have from the significant global investments we have made into carbon credits projects around the world to advise and guide this institutional-quality platform to accelerate near-term, scalable investments into nature-based solutions that can meet the growing demands of large corporate and government buyers."