CarbonPool, a pioneering Carbon Credit Insurance Firm, positioning itself as the world’s first insurance company with a carbon credit balance sheet, has successfully concluded a $12 million funding round.
The climate-focused startup is co-founded by former Allianz executives. The funding round is led by Heartcore Capital and Vorwerk Ventures, including support from HCS Capital, and Revent Ventures.
The raise marks the largest European climate-focused seed funding round in over a year. Globally, it is the second-biggest seed funding in climate finance, highlighting significant interest for innovative approaches to carbon credits insurance.
The World’s First In-Kind Carbon Credit Insurance
In an era where companies heavily rely on carbon credits to achieve their net zero targets, the turbulence in carbon credit markets has marked the importance of credit integrity, rigorous risk underwriting, and assurance of real environmental gains.
CarbonPool addresses the need for such assurances by offering in-kind insurance to mitigate risks related to reaching net zero commitments. The carbon credit insurer will acquire high-quality carbon credits, keeping them on its balance sheet for future payouts.
This coverage extends to shortfalls, reversals, business interruptions, and natural disasters that might hamper the contracted carbon dioxide removals. It also applies to events that accidentally contribute to increased atmospheric CO2 levels such as wildfires.
The company’s interdisciplinary team, comprising insurance experts, climate scientists, weather modelers, geographers, and engineers, evaluates each risk to develop customized risk models.
Premiums collected from clients, combined with CarbonPool’s capital, are strategically invested in high-quality carbon removal projects. This unique approach ensures that claims can be in-kind, enhancing the credibility and reliability of carbon credit commitments.
A report by AlliedOffsets, covering 2000 to 2023, indicates a modest 45% average success rate in the issuance of carbon credits. This poses a significant challenge for corporate buyers striving to achieve their climate objectives.
Notably, current insurance offerings cover the assets underpinning carbon credits but don’t provide compensation for the credits’ real value. This is where CarbonPool’s in-kind insurance comes in to address the uncertainties and risks associated with carbon credit issuance.
Mitigating Climate Risks with CarbonPool’s Carbon Credit Assurance
Former regional CEO of Allianz Africa and Co-founder/CEO of CarbonPool, Coenraad Vrolijk, highlighted their unique approach to insurance, saying:
“CarbonPool’s in-kind payments make it unique among insurers in not only offering protection to holders of carbon credits in cases of natural disaster or technology breakdown but also in providing a guarantee that carbon credits live up to their promises, giving purchasers certainty and ensuring that they can meet their net zero goals.”
Christian Jepsen, a founding partner at Heartcore, emphasized the significant potential of insurance in the carbon trading space. He noted that while insurance typically constitutes 5-10% of mature markets’ revenue, it is just beginning to make an impact in carbon markets.
Participants in the carbon markets, where revenues will increase 4x to $2 trillion by 2050, have little access to these insurances. And the CarbonPool team aims to fill in this gap.
The insurer is actively progressing its insurance license application in Switzerland. Already engaging with clients, including corporations, institutional investors, and carbon removal developers, the company offers assessments and pre-underwriting agreements.
Additionally, CarbonPool is in talks with government bodies such as the United Nations and the State of California. The company is contributing insights on how insurance can effectively address key challenges within the industry.
Within the same tree but in a separate branch, climate focus startups are also attracting investors’ attention.
The Growing Support for Innovative Climate Solutions
Per Crunchbase data, investors are funding better, lower-carbon ships and boats. Their analysis reveals that companies focusing on reducing the carbon footprint of ships and watercraft have raised a total of over $1 billion.
The startups are using the funds to improve research and commercialization of electric motors, wind-powered ships, and other low-carbon ships.
For instance, Pure Watercraft, a startup providing battery-electric propulsion systems for boats, raised over $200 million in total equity funding. A French Ocean Zero portfolio company, Ayro, focusing on decarbonizing cargo ships through wind propulsion has closed over $32 million.
Climate tech startups and their backers continue to show that their carbon reduction innovations are here to stay. Despite the challenges ahead, they are driven by their visions to impact the industry and help in propelling the world towards net zero.
Fighting alongside these nautical startups is CarbonPool. The company’s successful funding round positions it as a key player in the emerging space of climate-focused startups. Together, they show the increasing recognition and support for innovative solutions addressing climate challenges.