Financing model supported by JPMorgan and Microsoft expands to boost carbon capture from natural projects
J.P. Morgan Secures $210 Million Credit Facility for Chestnut Carbon's Nature-Based Carbon Removal Project
In a groundbreaking move, J.P. Morgan has led a $210 million project finance credit facility for Chestnut Carbon's nature-based carbon removal project. This innovative deal, backed by Microsoft, is set to revolutionize the voluntary carbon market and scale afforestation and carbon removal in the U.S.
The credit facility applies traditional project finance principles, typically seen in energy infrastructure, to nature-based carbon removal. This structure isolates financial risk to the project itself, making it appealing to lenders and demonstrating a maturing voluntary carbon market.
Led by J.P. Morgan, the lending syndicate includes CoBank, Bank of Montreal, and East West Bank. Advisors such as ERM, Marsh, and law firms like McDermott Will & Emery helped tailor the financing framework for this sector.
Chestnut Carbon, a nature-based carbon removal startup launched in 2022 by energy sector-focused alternative asset manager Kimmeridge, will use the funds to develop large-scale afforestation by planting over 35 million native trees suited to local ecology. The goal is to restore over 100,000 acres and remove 100 million tons of carbon by 2030.
Microsoft, through a 25-year offtake agreement, commits to purchase over 7 million tons of high-quality carbon removal credits generated from restored forests across about 60,000 acres in Arkansas, Louisiana, and Texas. This long-term partnership provides financial certainty, underpinning the loan and exemplifying Microsoft's commitment to durable, verifiable carbon removal credits.
Vijnan Batchu, Global Head of Center for Carbon Transition at J.P. Morgan, expressed pride in being a part of this significant deal. He noted that it is among the first large-scale uses of structured project finance for nature-based carbon removal, potentially catalyzing investment and scaling in an underfunded sector.
Brian Marrs, Senior Director of Energy & Carbon Removal at Microsoft, expressed encouragement in seeing new financing models emerge that support the growth of durable carbon removal supply. He emphasized that this deal supplies Microsoft with carbon credits to meet its carbon-negative goals.
The collaboration between Chestnut, Microsoft, and the lending syndicate aims to adapt proven infrastructure finance frameworks for large-scale nature-based carbon removal projects. This innovative financing model mirrors successful renewable energy financing, providing developers like Chestnut a stable runway at attractive capital costs to fulfill contracts and scale impact.
The new credit facility is expected to help Chestnut Carbon expand its afforestation footprint and carbon removal capacity. It also positions the project as a breakthrough for scaling credible carbon removal efforts and voluntary carbon markets.
Microsoft remains committed to advancing the voluntary carbon markets through long-term offtake agreements that help unlock investment and innovation. This deal is a testament to how such partnerships can align corporate sustainability goals with tangible impact delivery.
In summary, this credit facility is a landmark financing innovation blending project finance expertise with nature-based solutions, backed by a major tech company, positioning it as a breakthrough for scaling credible carbon removal efforts and voluntary carbon markets.
[1] Chestnut Carbon Secures $210 Million Project Finance Credit Facility Led by J.P. Morgan (businesswire.com) [2] J.P. Morgan Secures $210 Million Project Finance Credit Facility for Chestnut Carbon’s Nature-Based Carbon Removal Project (jpmorgan.com) [3] J.P. Morgan and Microsoft Team Up to Scale Afforestation and Carbon Removal in the U.S. (greenbiz.com) [4] J.P. Morgan and Microsoft Announce First Financing of Its Kind for a U.S. Voluntary Carbon Removal Afforestation Project (microsoft.com)
- By securing a $210 million credit facility, Chestnut Carbon will use the funds to decarbonize the environment through large-scale afforestation, aiming to restore over 100,000 acres and remove 100 million tons of carbon by 2030.
- This innovative financing model, led by J.P. Morgan, demonstrates the maturity of the voluntary carbon market by adapting traditional project finance principles for nature-based carbon removal projects.
- Microsoft's long-term partnership with Chestnut Carbon, through a 25-year offtake agreement, underpins the loan and signifies a commitment to sustainable finance while focusing on addressing climate-change impacts.
- The collaboration between Chestnut, Microsoft, and the lending syndicate contributes to advancing the voluntary carbon markets, showcasing how investing in environmental-science can help businesses meet their carbon-negative goals and generate sustainable returns.
