CFC’s carbon insurance product has been used to support what is described as the largest non-recourse project financing to date in the voluntary carbon credit market.
Nature-based carbon removal developer Chestnut Carbon has secured a US$210 million project finance credit facility led by J.P. Morgan. The deal is backed by a large forest-focused carbon removal offtake agreement recently signed with Microsoft.
An exclusive carbon delivery insurance policy developed by CFC was incorporated into the financing structure. The product, which did not exist 18 months ago, was mandated by the lending panel as a condition of the deal. CFC said the requirement underlines the role insurance can play in enabling transactions in the voluntary carbon market, particularly in blended climate finance models.
The insurer stated that such products can help create viable economic models for the protection of natural assets, offering a framework that works for all parties involved in a transaction.
Chestnut Carbon’s chief financial officer Greg Adams said CFC’s structuring of a tailored carbon insurance programme was a key factor in securing the financing. He added that the inclusion of the policy enabled the company to access lower-cost, mainstream bank debt in a sector that is still developing.
The voluntary carbon market has seen growing interest from institutional investors, corporates, and financial institutions seeking to fund nature-based and technological carbon removal projects. However, the market remains fragmented and exposed to delivery, quality, and regulatory risks. Insurance products that address these uncertainties are emerging as a means to improve investor confidence, reduce transaction costs, and enable projects to attract bank financing.
Analysts note that while carbon credit insurance is still in its early stages, its adoption is expected to expand as climate-related investment targets increase and demand for verifiable, long-term carbon removal grows. The UK’s insurance market, with its specialist underwriting expertise and proximity to global capital markets, is well-positioned to play a central role in developing these solutions.
