Frequently Asked Questions
Frequently Asked Questions
General Questions
What does KUMO specialize in?
KUMO facilitates institutional debt financing in the carbon market. KUMO’s proven carbon debt financing platform combines financial expertise with software infrastructure to reduce costs while improving risk management and efficiency for capital providers and originators. This enables high-class project developers to build solutions for a livable future.
Within KUMO’s suite of tools, services, and solutions, the company specializes in three topics:
Data management: Aggregation, assessment, and monitoring before and throughout project engagement
Automation: Software, Frameworks, and Standardization
Collateral: Carbon as legal security via tokenization
What does KUMO specialize in?
KUMO facilitates institutional debt financing in the carbon market. KUMO’s proven carbon debt financing platform combines financial expertise with software infrastructure to reduce costs while improving risk management and efficiency for capital providers and originators. This enables high-class project developers to build solutions for a livable future.
Within KUMO’s suite of tools, services, and solutions, the company specializes in three topics:
Data management: Aggregation, assessment, and monitoring before and throughout project engagement
Automation: Software, Frameworks, and Standardization
Collateral: Carbon as legal security via tokenization
Who is on KUMO’s leadership team?
KUMO management brings over 30 years of experience in structured debt finance and carbon markets from Investment banking and consultancy, as well as a network of financiers, technologists, and climate experts unified in the mission to leverage the voluntary carbon market to drive decarbonization projects. Learn more at https://kumo.earth/about
Who is on KUMO’s leadership team?
KUMO management brings over 30 years of experience in structured debt finance and carbon markets from Investment banking and consultancy, as well as a network of financiers, technologists, and climate experts unified in the mission to leverage the voluntary carbon market to drive decarbonization projects. Learn more at https://kumo.earth/about
How does KUMO differ from other players in the market?
The team at KUMO is unified in our understanding that carbon-credits and offtake agreements are bankable, that collateralizing them will soon be mainstream, and that unlocking their financial utility will drive the growth of the voluntary carbon market. We bring together traditional finance and decentralized finance solutions to make carbon-secured lending a possibility.
Importantly, KUMO is more than a team, it represents a network of financiers, technologists, and climate experts unified in the mission to better leverage the value of the voluntary carbon market to drive projects to decarbonize our economy.
KUMO’s key differentiation is its focus on providing software infrastructure and optimized framkewoks to facilitate debt financing in the carbon maket. All that KUMO does is specifically build for debt finance in the carbon markets and builds on top of three pillars: Data, Automation, and Collateral.
We pioneer carbon-backed lending and faciliated the first carbon-secured loan transactions at COP28 with involvement of a tier-1 bank and a high-quality project developer. We are looking to make institutional debt finance accessible to carbon projects - which it currently is not.
How does KUMO differ from other players in the market?
The team at KUMO is unified in our understanding that carbon-credits and offtake agreements are bankable, that collateralizing them will soon be mainstream, and that unlocking their financial utility will drive the growth of the voluntary carbon market. We bring together traditional finance and decentralized finance solutions to make carbon-secured lending a possibility.
Importantly, KUMO is more than a team, it represents a network of financiers, technologists, and climate experts unified in the mission to better leverage the value of the voluntary carbon market to drive projects to decarbonize our economy.
KUMO’s key differentiation is its focus on providing software infrastructure and optimized framkewoks to facilitate debt financing in the carbon maket. All that KUMO does is specifically build for debt finance in the carbon markets and builds on top of three pillars: Data, Automation, and Collateral.
We pioneer carbon-backed lending and faciliated the first carbon-secured loan transactions at COP28 with involvement of a tier-1 bank and a high-quality project developer. We are looking to make institutional debt finance accessible to carbon projects - which it currently is not.
How can I get involved with KUMO?
Stay up to date with KUMO and the latest developments in the carbon market by subscribing to our newsletter.
Capital Providers: If you're interested in leveraging KUMO’s tech infrastructure and frameworks, book a call with us.
Project Developers: Start by using KUMO’s free carbon financing tools and get in touch with us.
Media Inquiries: For media inquiries, please email us at hello@kumo.earth, and we’ll respond within one business day.
Other Inquiries: For all other inquiries, please visit our contact page.
How can I get involved with KUMO?
Stay up to date with KUMO and the latest developments in the carbon market by subscribing to our newsletter.
Capital Providers: If you're interested in leveraging KUMO’s tech infrastructure and frameworks, book a call with us.
Project Developers: Start by using KUMO’s free carbon financing tools and get in touch with us.
Media Inquiries: For media inquiries, please email us at hello@kumo.earth, and we’ll respond within one business day.
Other Inquiries: For all other inquiries, please visit our contact page.
Intro to Carbon Markets
What is the role of carbon markets in addressing climate change?
Carbon markets are a vital component in the global strategy to combat climate change, providing a scalable solution for removing CO2 from the atmosphere. While reducing emissions is the first and most critical step, it’s not enough. Even with aggressive emission reductions, certain emissions are hard to abate or simply unavoidable.
This is where carbon markets come into play. They offer a mechanism to quantify and trade carbon removal, enabling companies to offset these unavoidable emissions. Over 5,000 of the world’s largest companies have pledged to halve their emissions by 2030 and achieve NetZero by 2050. However, about 20% of their emissions remain unavoidable and must be offset through carbon markets.
But there’s more at stake. Even if we were to achieve zero emissions globally, atmospheric CO2 levels would still be dangerously high. Currently, CO2 concentrations are around 420 parts per million (ppm), far exceeding the pre-industrial level of approximately 280 ppm. This excess CO2 continues to drive climate change, making carbon removal not just an option, but a necessity.
Carbon markets empower us to address this challenge head-on by funding projects that actively remove CO2 from the atmosphere. By bridging the gap between emissions reduction and carbon removal, these markets are essential to achieving NetZero and stabilizing our climate for the future
What is the role of carbon markets in addressing climate change?
Carbon markets are a vital component in the global strategy to combat climate change, providing a scalable solution for removing CO2 from the atmosphere. While reducing emissions is the first and most critical step, it’s not enough. Even with aggressive emission reductions, certain emissions are hard to abate or simply unavoidable.
This is where carbon markets come into play. They offer a mechanism to quantify and trade carbon removal, enabling companies to offset these unavoidable emissions. Over 5,000 of the world’s largest companies have pledged to halve their emissions by 2030 and achieve NetZero by 2050. However, about 20% of their emissions remain unavoidable and must be offset through carbon markets.
But there’s more at stake. Even if we were to achieve zero emissions globally, atmospheric CO2 levels would still be dangerously high. Currently, CO2 concentrations are around 420 parts per million (ppm), far exceeding the pre-industrial level of approximately 280 ppm. This excess CO2 continues to drive climate change, making carbon removal not just an option, but a necessity.
Carbon markets empower us to address this challenge head-on by funding projects that actively remove CO2 from the atmosphere. By bridging the gap between emissions reduction and carbon removal, these markets are essential to achieving NetZero and stabilizing our climate for the future
Where is the demand for carbon removal credits coming from?
The demand for carbon credits comes from three different markets that are currently converging. According to studies from McKinsey and BCG, the carbon removal will be a trillion dollar industry by 2050.
Voluntary Carbon Market: NetZero commitments from over 5,000 of the world largest companies have set and publicly announced their emission targets. In order to achieve their goals, carbon removal credits are needed to offset the non-avoidable carbon footprint. Even though the commitments are voluntary, once announced, public companies are forced to achieve them due to stakeholder communication and potential manipulation of investors that invested in stocks of a company because of their NetZero ambitions.
Hybrid Carbon Markets: Hybrid carbon markets like Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and Paris Agreement Article 6 credits drive the demand for carbon credits in addition to the voluntary demand.
Compliance Markets: Compliance markets are opening up for carbon removal credits to be integrated into cap and trade or tax based system. First compliance schemes like the Singapore Carbon Tax and the Australia Safeguard Mechanism already allow for the integration of carbon credits inte the schemes. In addition, the largest compliance market at a volume of $800bn, the EU ETS, is working on the integration of carbon removal credits via the EU Carbon Removals and Carbon Farming Certification (CRCF) Regulation.
Where is the demand for carbon removal credits coming from?
The demand for carbon credits comes from three different markets that are currently converging. According to studies from McKinsey and BCG, the carbon removal will be a trillion dollar industry by 2050.
Voluntary Carbon Market: NetZero commitments from over 5,000 of the world largest companies have set and publicly announced their emission targets. In order to achieve their goals, carbon removal credits are needed to offset the non-avoidable carbon footprint. Even though the commitments are voluntary, once announced, public companies are forced to achieve them due to stakeholder communication and potential manipulation of investors that invested in stocks of a company because of their NetZero ambitions.
Hybrid Carbon Markets: Hybrid carbon markets like Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and Paris Agreement Article 6 credits drive the demand for carbon credits in addition to the voluntary demand.
Compliance Markets: Compliance markets are opening up for carbon removal credits to be integrated into cap and trade or tax based system. First compliance schemes like the Singapore Carbon Tax and the Australia Safeguard Mechanism already allow for the integration of carbon credits inte the schemes. In addition, the largest compliance market at a volume of $800bn, the EU ETS, is working on the integration of carbon removal credits via the EU Carbon Removals and Carbon Farming Certification (CRCF) Regulation.
What are risks and challenges in carbon markets?
The carbon market faces several key risks and challenges that can hinder its significant growth:
Lack of Data, Knowledge, and Transparency: The absence of comprehensive data and clear information flow creates uncertainty and slows decision-making, making it harder for investors to evaluate projects and their potential returns.
Reputational Risk: The carbon market has a history of integrity issues, which has been highlighted by major reports like those from The Guardian in early 2023. These concerns can deter investors and stakeholders who are wary of the market’s credibility.
Political Risk: Changes in government policies or approaches to Nationally Determined Contributions (NDCs) and carbon credit regulations can impact the viability of projects, particularly if jurisdictions alter their stance on carbon credit sales or project operations.
Climate Risk for Nature-Based Solutions: Projects that rely on natural assets, such as mangrove restoration or afforestation, face the risk of asset destruction due to climate events, which can jeopardize the project's success.
Technology Risk for Tech-Based Solutions: For technology-driven carbon removal solutions, there is a risk that the technology may not scale effectively or that measurement methods might prove inaccurate, leading to questions about the project's viability.
Missing Regulation: The regulatory landscape for carbon markets has been slow to evolve, creating uncertainty. However, this is gradually improving, with expectations that compliance markets and high-quality tech-based removals will eventually converge.
Merchant Risk: Despite the commitment of over 5,000 major companies to net-zero targets by 2030, there is still reluctance among some sectors to be early movers. This hesitancy, particularly outside of tech leaders like Microsoft, creates an uncertain demand profile.
Delivery Risk: Many carbon projects are still relatively small-scale with limited historical data on successful delivery. This can lead to concerns about the accuracy of future forecasts and the ability of projects to meet their targets.
KUMO looks to mitigate all of these risks with structural solutions or partnerships.
What are risks and challenges in carbon markets?
The carbon market faces several key risks and challenges that can hinder its significant growth:
Lack of Data, Knowledge, and Transparency: The absence of comprehensive data and clear information flow creates uncertainty and slows decision-making, making it harder for investors to evaluate projects and their potential returns.
Reputational Risk: The carbon market has a history of integrity issues, which has been highlighted by major reports like those from The Guardian in early 2023. These concerns can deter investors and stakeholders who are wary of the market’s credibility.
Political Risk: Changes in government policies or approaches to Nationally Determined Contributions (NDCs) and carbon credit regulations can impact the viability of projects, particularly if jurisdictions alter their stance on carbon credit sales or project operations.
Climate Risk for Nature-Based Solutions: Projects that rely on natural assets, such as mangrove restoration or afforestation, face the risk of asset destruction due to climate events, which can jeopardize the project's success.
Technology Risk for Tech-Based Solutions: For technology-driven carbon removal solutions, there is a risk that the technology may not scale effectively or that measurement methods might prove inaccurate, leading to questions about the project's viability.
Missing Regulation: The regulatory landscape for carbon markets has been slow to evolve, creating uncertainty. However, this is gradually improving, with expectations that compliance markets and high-quality tech-based removals will eventually converge.
Merchant Risk: Despite the commitment of over 5,000 major companies to net-zero targets by 2030, there is still reluctance among some sectors to be early movers. This hesitancy, particularly outside of tech leaders like Microsoft, creates an uncertain demand profile.
Delivery Risk: Many carbon projects are still relatively small-scale with limited historical data on successful delivery. This can lead to concerns about the accuracy of future forecasts and the ability of projects to meet their targets.
KUMO looks to mitigate all of these risks with structural solutions or partnerships.
What are off-take agreements and why are they important?
Off-take agreements, similar to Power Purchase Agreements (PPAs) commonly used in the energy sector, are essential contracts where a buyer commits to purchasing a specified amount of a project's output—such as carbon credits—at pre-agreed prices over a defined period
For project developers, these agreements are key to unlocking debt funding. They provide a predictable revenue stream, which is critical in securing the capital needed to scale your carbon projects. With an off-take agreement in place, you can present lenders with a clear path to future income, significantly reducing the financial risk and making your project more attractive for financing.
For capital providers, off-take agreements play a vital role in mitigating merchant risk—the uncertainty that a project might not sell its output at favorable prices. By securing a buyer at a predetermined price, the project is shielded from market volatility, offering a more stable and lower-risk investment opportunity. This assurance allows capital providers to extend more favorable financing terms, confident in the project's ability to generate returns.
What are off-take agreements and why are they important?
Off-take agreements, similar to Power Purchase Agreements (PPAs) commonly used in the energy sector, are essential contracts where a buyer commits to purchasing a specified amount of a project's output—such as carbon credits—at pre-agreed prices over a defined period
For project developers, these agreements are key to unlocking debt funding. They provide a predictable revenue stream, which is critical in securing the capital needed to scale your carbon projects. With an off-take agreement in place, you can present lenders with a clear path to future income, significantly reducing the financial risk and making your project more attractive for financing.
For capital providers, off-take agreements play a vital role in mitigating merchant risk—the uncertainty that a project might not sell its output at favorable prices. By securing a buyer at a predetermined price, the project is shielded from market volatility, offering a more stable and lower-risk investment opportunity. This assurance allows capital providers to extend more favorable financing terms, confident in the project's ability to generate returns.
How do debt and equity play different roles in funding carbon projects?
Carbon projects typically start with equity financing, where early investors take on higher risk in exchange for ownership. In the carbon market, equity-like financing vehicles, such as carbon streaming and pre-selling carbon credits, are also used at this stage to secure upfront capital needed to launch and develop projects.
As projects mature and generate steady revenue, debt financing becomes the key mechanism for market growth. Debt allows developers to access capital without giving up ownership, using future cash flows like off-take agreements as collateral. This non-dilutive capital is crucial for scaling projects efficiently and cost-effectively.
At KUMO, we believe institutional debt capital is essential to rapidly scale the carbon removal industry to a gigatonne level. The debt market’s size and stability make it the only viable way to fund the massive infrastructure needed to achieve global climate goals.
How do debt and equity play different roles in funding carbon projects?
Carbon projects typically start with equity financing, where early investors take on higher risk in exchange for ownership. In the carbon market, equity-like financing vehicles, such as carbon streaming and pre-selling carbon credits, are also used at this stage to secure upfront capital needed to launch and develop projects.
As projects mature and generate steady revenue, debt financing becomes the key mechanism for market growth. Debt allows developers to access capital without giving up ownership, using future cash flows like off-take agreements as collateral. This non-dilutive capital is crucial for scaling projects efficiently and cost-effectively.
At KUMO, we believe institutional debt capital is essential to rapidly scale the carbon removal industry to a gigatonne level. The debt market’s size and stability make it the only viable way to fund the massive infrastructure needed to achieve global climate goals.
How does KUMO contribute to the growth and integrity of carbon markets?
KUMO plays a pivotal role in bridging the finance gap needed to scale carbon removal projects to the gigatonne level. The carbon market is on track to become a trillion-dollar industry, but realizing this potential requires overcoming significant financing challenges.
KUMO addresses these challenges by providing innovative debt financing solutions tailored specifically for the carbon market. Our platform enables project developers to secure non-dilutive capital through carbon-backed loans, using future cash flows and off-take agreements as collateral. This approach not only helps scale individual projects but also contributes to the overall growth of the carbon market by making it more accessible and attractive to institutional capital.
To ensure the integrity of the carbon market, KUMO adheres to best practices and leading standards, such as those set by the Integrity Council for the Voluntary Carbon Market (ICVCM). We are committed to building a trustworthy ecosystem where high-quality carbon credits are financed and traded transparently.
KUMO’s scalable software infrastructure is designed to meet the demands of a trillion-dollar problem with a trillion-dollar solution. By automating data aggregation, risk assessment, and project monitoring, we streamline the financing process, reduce costs, and improve risk management. This enables the carbon market to grow with integrity, ensuring that climate finance becomes both a lucrative and impactful industry
How does KUMO contribute to the growth and integrity of carbon markets?
KUMO plays a pivotal role in bridging the finance gap needed to scale carbon removal projects to the gigatonne level. The carbon market is on track to become a trillion-dollar industry, but realizing this potential requires overcoming significant financing challenges.
KUMO addresses these challenges by providing innovative debt financing solutions tailored specifically for the carbon market. Our platform enables project developers to secure non-dilutive capital through carbon-backed loans, using future cash flows and off-take agreements as collateral. This approach not only helps scale individual projects but also contributes to the overall growth of the carbon market by making it more accessible and attractive to institutional capital.
To ensure the integrity of the carbon market, KUMO adheres to best practices and leading standards, such as those set by the Integrity Council for the Voluntary Carbon Market (ICVCM). We are committed to building a trustworthy ecosystem where high-quality carbon credits are financed and traded transparently.
KUMO’s scalable software infrastructure is designed to meet the demands of a trillion-dollar problem with a trillion-dollar solution. By automating data aggregation, risk assessment, and project monitoring, we streamline the financing process, reduce costs, and improve risk management. This enables the carbon market to grow with integrity, ensuring that climate finance becomes both a lucrative and impactful industry
For Capital Providers
What data services does KUMO provide?
KUMO offers a suite of advanced data services designed to assess the financeability of carbon projects from a debt investor’s perspective. Our platform automates data aggregation and standardization at the project level, ensuring that all relevant data and documents are organized in secure data rooms for seamless due diligence.
One of our standout offerings is KUMO’s benchmarking data, which is created using cutting-edge analytic tools that draw from both public and proprietary datasets. This enables capital providers to compare individual projects against industry benchmarks and indices. Our indices cover critical aspects such as the cost curve of various carbon credit types, delivery risk, and detailed cash flow analyses, giving investors the insights they need to make informed decisions.
Additionally, KUMO provides continuous monitoring services post-loan issuance, offering 24/7 tracking of project progress. This allows us to identify potential issues early, ensuring that investments remain secure and on track. By leveraging KUMO’s comprehensive data services, capital providers can mitigate risks and optimize their investment strategies in the carbon market.
What data services does KUMO provide?
KUMO offers a suite of advanced data services designed to assess the financeability of carbon projects from a debt investor’s perspective. Our platform automates data aggregation and standardization at the project level, ensuring that all relevant data and documents are organized in secure data rooms for seamless due diligence.
One of our standout offerings is KUMO’s benchmarking data, which is created using cutting-edge analytic tools that draw from both public and proprietary datasets. This enables capital providers to compare individual projects against industry benchmarks and indices. Our indices cover critical aspects such as the cost curve of various carbon credit types, delivery risk, and detailed cash flow analyses, giving investors the insights they need to make informed decisions.
Additionally, KUMO provides continuous monitoring services post-loan issuance, offering 24/7 tracking of project progress. This allows us to identify potential issues early, ensuring that investments remain secure and on track. By leveraging KUMO’s comprehensive data services, capital providers can mitigate risks and optimize their investment strategies in the carbon market.
How does KUMO assess the debt financeability of projects?
KUMO employs a rigorous, data-driven approach to assess the debt financeability of carbon projects, ensuring they meet the stringent criteria required by debt investors. We aggregate comprehensive data directly from project developers, public sources, and proprietary benchmarks to evaluate projects within the broader carbon market context.
All these data points are integrated into KUMO’s Financeability Framework, a sophisticated tool specifically designed to assess projects from a debt investor’s perspective. Our framework focuses on key factors that determine a project’s ability to repay principal and interest, which is the cornerstone of debt financeability.
The Financeability Framework evaluates projects across five critical sectors, including collateral, cash flow modeling, and borrower profile, each analyzed through multiple data points. This detailed assessment provides capital providers with a clear understanding of the project's risk profile and its potential to generate reliable returns, enabling informed and confident lending decisions.
How does KUMO assess the debt financeability of projects?
KUMO employs a rigorous, data-driven approach to assess the debt financeability of carbon projects, ensuring they meet the stringent criteria required by debt investors. We aggregate comprehensive data directly from project developers, public sources, and proprietary benchmarks to evaluate projects within the broader carbon market context.
All these data points are integrated into KUMO’s Financeability Framework, a sophisticated tool specifically designed to assess projects from a debt investor’s perspective. Our framework focuses on key factors that determine a project’s ability to repay principal and interest, which is the cornerstone of debt financeability.
The Financeability Framework evaluates projects across five critical sectors, including collateral, cash flow modeling, and borrower profile, each analyzed through multiple data points. This detailed assessment provides capital providers with a clear understanding of the project's risk profile and its potential to generate reliable returns, enabling informed and confident lending decisions.
How can I use KUMO to onboard and assess projects I intend to finance?
KUMO offers comprehensive solutions for capital providers to seamlessly onboard and rigorously assess the financeability of potential projects before to make faster and more informed descions. Our onboarding process creates a complete data profile for each project, organizing all relevant information in a secure data room, enhanced with industry benchmarks and proprietary insights.
Using KUMO’s robust Financeability Framework, we conduct a thorough assessment of each project, focusing on key factors such as collateral, cash flow, and borrower profile. This analysis provides you with detailed data and clear, text-based evaluations, empowering you to make informed financing decisions with confidence.
To learn how to integrate KUMO’s onboarding services into your business, please get in touch. We’re here to help you streamline your investment process and optimize your financing strategies.
How can I use KUMO to onboard and assess projects I intend to finance?
KUMO offers comprehensive solutions for capital providers to seamlessly onboard and rigorously assess the financeability of potential projects before to make faster and more informed descions. Our onboarding process creates a complete data profile for each project, organizing all relevant information in a secure data room, enhanced with industry benchmarks and proprietary insights.
Using KUMO’s robust Financeability Framework, we conduct a thorough assessment of each project, focusing on key factors such as collateral, cash flow, and borrower profile. This analysis provides you with detailed data and clear, text-based evaluations, empowering you to make informed financing decisions with confidence.
To learn how to integrate KUMO’s onboarding services into your business, please get in touch. We’re here to help you streamline your investment process and optimize your financing strategies.
What loan portfolio services does KUMO offer?
KUMO provides a comprehensive suite of loan portfolio services designed to streamline the entire financing process for capital providers. Our services are tailored to support every stage of your investment journey, ensuring that you can efficiently source, assess, and manage your carbon project investments with confidence.
Deal Sourcing: Access a curated selection of high-quality projects that align with your investment goals, pre-vetted through KUMO’s rigorous standards.
Onboarding: Seamlessly onboard projects with our efficient process that results in a complete data profile and secure data room, ready for due diligence.
Assessment: Leverage KUMO’s Financeability Framework to conduct a thorough evaluation of each project’s debt financeability, focusing on critical factors like collateral, cash flow, and borrower profile.
Benchmark and Index Data: Utilize our proprietary benchmark and index data to gain deep insights into the carbon market and compare projects against industry standards.
Comparison Tool: KUMO’s Project Comparison Tool allows for easy benchmarking across individual assessed projects, making it simple to compare opportunities that have been pre-vetted by our Financeability Framework.
SPV for Collateralization: Use KUMO’s Special Purpose Vehicle (SPV) to collateralize carbon credits from your loan portfolio, holding them in legal custody to secure loans and reduce investment risk.
Portfolio Management System with Automated Project Monitoring: Manage your loan portfolio with ease using KUMO’s Portfolio Management System, featuring automated project monitoring that provides 24/7 tracking and early issue detection.
KUMO’s loan portfolio services are designed to empower capital providers with the tools they need to invest in carbon projects confidently and effectively.
What loan portfolio services does KUMO offer?
KUMO provides a comprehensive suite of loan portfolio services designed to streamline the entire financing process for capital providers. Our services are tailored to support every stage of your investment journey, ensuring that you can efficiently source, assess, and manage your carbon project investments with confidence.
Deal Sourcing: Access a curated selection of high-quality projects that align with your investment goals, pre-vetted through KUMO’s rigorous standards.
Onboarding: Seamlessly onboard projects with our efficient process that results in a complete data profile and secure data room, ready for due diligence.
Assessment: Leverage KUMO’s Financeability Framework to conduct a thorough evaluation of each project’s debt financeability, focusing on critical factors like collateral, cash flow, and borrower profile.
Benchmark and Index Data: Utilize our proprietary benchmark and index data to gain deep insights into the carbon market and compare projects against industry standards.
Comparison Tool: KUMO’s Project Comparison Tool allows for easy benchmarking across individual assessed projects, making it simple to compare opportunities that have been pre-vetted by our Financeability Framework.
SPV for Collateralization: Use KUMO’s Special Purpose Vehicle (SPV) to collateralize carbon credits from your loan portfolio, holding them in legal custody to secure loans and reduce investment risk.
Portfolio Management System with Automated Project Monitoring: Manage your loan portfolio with ease using KUMO’s Portfolio Management System, featuring automated project monitoring that provides 24/7 tracking and early issue detection.
KUMO’s loan portfolio services are designed to empower capital providers with the tools they need to invest in carbon projects confidently and effectively.
What are the key risks for providing debt to a project developer?
At KUMO, we have identified the key risks associated with providing debt to project developers and have implemented mitigants throughout our process to address these effectively:
Merchant Risk (Inability to Monetize Assets): The risk that carbon credits may not be sold as expected. To mitigate this, our framework emphasizes the legal quality and the creditworthiness of off-takers, particularly focusing on blue-chip companies with strong off-take agreements, which help secure predictable revenue streams.
Delivery Risk: The risk that future carbon credits may not be generated or delivered as planned. We address this by partnering with insurance providers to cover delivery risks and by prioritizing projects with proven technologies and a track record of credit generation under scientifically robust frameworks.
Reputational Risk: The risk associated with the quality and perception of the underlying assets. KUMO mitigates this by focusing on high-quality tech removals in Europe, secured through off-take agreements with blue-chip companies that have conducted thorough due diligence. We prioritize credits that are CCP/Article 6/CORSIA aligned, and, where applicable, projects may also be rated by Sylvera or BeZero. For nature-based solutions, we ensure the highest quality issuance backed by the latest science, such as Verra’s ABACUS methodology.
Legal Risk (Ownership and Monetization of Assets): The risk that legal challenges could arise in taking ownership of and monetizing carbon credits. We work with top global law firms, including A&O Shearman, to establish robust legal frameworks that secure the securitization and ownership of the underlying assets, ensuring that these assets can be effectively monetized.
Through these strategies, KUMO provides a comprehensive approach to managing the risks associated with debt financing for carbon projects, ensuring that both project developers and capital providers are protected throughout the process.
What are the key risks for providing debt to a project developer?
At KUMO, we have identified the key risks associated with providing debt to project developers and have implemented mitigants throughout our process to address these effectively:
Merchant Risk (Inability to Monetize Assets): The risk that carbon credits may not be sold as expected. To mitigate this, our framework emphasizes the legal quality and the creditworthiness of off-takers, particularly focusing on blue-chip companies with strong off-take agreements, which help secure predictable revenue streams.
Delivery Risk: The risk that future carbon credits may not be generated or delivered as planned. We address this by partnering with insurance providers to cover delivery risks and by prioritizing projects with proven technologies and a track record of credit generation under scientifically robust frameworks.
Reputational Risk: The risk associated with the quality and perception of the underlying assets. KUMO mitigates this by focusing on high-quality tech removals in Europe, secured through off-take agreements with blue-chip companies that have conducted thorough due diligence. We prioritize credits that are CCP/Article 6/CORSIA aligned, and, where applicable, projects may also be rated by Sylvera or BeZero. For nature-based solutions, we ensure the highest quality issuance backed by the latest science, such as Verra’s ABACUS methodology.
Legal Risk (Ownership and Monetization of Assets): The risk that legal challenges could arise in taking ownership of and monetizing carbon credits. We work with top global law firms, including A&O Shearman, to establish robust legal frameworks that secure the securitization and ownership of the underlying assets, ensuring that these assets can be effectively monetized.
Through these strategies, KUMO provides a comprehensive approach to managing the risks associated with debt financing for carbon projects, ensuring that both project developers and capital providers are protected throughout the process.
How can KUMO help me de-risk lending to carbon projects?
KUMO’s structural approach uses multiple strategies to de-risk lending. The initial layer is a robust proprietary Financeability Framework with weighted assessments of 30+ key criteria. On top of this, we ensure that lending is backed by collateral (primarily contracted off-takes) worth multiple times the loan (LTV below 75%) and supplement this with insurance across the portfolio. The amalgamation of projects into one SPV also allows us to diversify risk across multiple projects. In addition, the criteria for inclusion require detailed project information disclosure and reporting to ensure robust ongoing monitoring and the ability to step in and liquidate assets as required.
KUMO employs a comprehensive, multi-layered approach to de-risk lending for carbon projects. Our proprietary Financeability Framework forms the foundation, utilizing weighted assessments of 50+ key criteria to rigorously evaluate each project’s potential.
Beyond this, we ensure that loans are backed by solid collateral, primarily through contracted off-takes, with loan-to-value (LTV) ratios kept below 75%. This collateral can be further secured by (portfolio-wide) insurance, providing an additional safety net.
In the case of a portfolio approach, we aggregate multiple projects into a single Special Purpose Vehicle (SPV), spreading risk across various assets. Projects must also meet strict criteria for inclusion, including detailed information disclosure and ongoing reporting. This allows for robust monitoring and the ability to step in and liquidate assets if necessary.
By integrating these layers of protection, KUMO helps you confidently lend to carbon projects, knowing that risks are effectively managed at every stage.
How can KUMO help me de-risk lending to carbon projects?
KUMO’s structural approach uses multiple strategies to de-risk lending. The initial layer is a robust proprietary Financeability Framework with weighted assessments of 30+ key criteria. On top of this, we ensure that lending is backed by collateral (primarily contracted off-takes) worth multiple times the loan (LTV below 75%) and supplement this with insurance across the portfolio. The amalgamation of projects into one SPV also allows us to diversify risk across multiple projects. In addition, the criteria for inclusion require detailed project information disclosure and reporting to ensure robust ongoing monitoring and the ability to step in and liquidate assets as required.
KUMO employs a comprehensive, multi-layered approach to de-risk lending for carbon projects. Our proprietary Financeability Framework forms the foundation, utilizing weighted assessments of 50+ key criteria to rigorously evaluate each project’s potential.
Beyond this, we ensure that loans are backed by solid collateral, primarily through contracted off-takes, with loan-to-value (LTV) ratios kept below 75%. This collateral can be further secured by (portfolio-wide) insurance, providing an additional safety net.
In the case of a portfolio approach, we aggregate multiple projects into a single Special Purpose Vehicle (SPV), spreading risk across various assets. Projects must also meet strict criteria for inclusion, including detailed information disclosure and ongoing reporting. This allows for robust monitoring and the ability to step in and liquidate assets if necessary.
By integrating these layers of protection, KUMO helps you confidently lend to carbon projects, knowing that risks are effectively managed at every stage.
How does the collateralization of carbon credits work?
At KUMO, the collateralization of carbon credits transforms these credits into legal security, significantly reducing the risk for lenders. By collateralizing spot credits (already issued credits), future carbon credits, and contracted cashflows via off-take agreements, KUMO ensures that these assets can be used to secure loans, making them fully bankable.
Our collateralization process is built on strong legal foundations, including:
Legal contracts from a tier-1 law firm
Tokenization as a legal wrapper
SPV set-up to hold legal rights
These measures ensure that carbon credits are legally recognized and securely held within a Special Purpose Vehicle (SPV). This structured approach allows project developers to unlock non-dilutive capital while giving capital providers the confidence that their investments are protected by legally sound, low-risk collateral.
How does the collateralization of carbon credits work?
At KUMO, the collateralization of carbon credits transforms these credits into legal security, significantly reducing the risk for lenders. By collateralizing spot credits (already issued credits), future carbon credits, and contracted cashflows via off-take agreements, KUMO ensures that these assets can be used to secure loans, making them fully bankable.
Our collateralization process is built on strong legal foundations, including:
Legal contracts from a tier-1 law firm
Tokenization as a legal wrapper
SPV set-up to hold legal rights
These measures ensure that carbon credits are legally recognized and securely held within a Special Purpose Vehicle (SPV). This structured approach allows project developers to unlock non-dilutive capital while giving capital providers the confidence that their investments are protected by legally sound, low-risk collateral.
How can I use KUMO’s collateralization services for carbon credits?
KUMO has developed the capacity to offer collateralization of carbon credits as a comprehensive service for debt investors. By leveraging our expertise, you can securely collateralize spot credits, future carbon credits, and contracted cashflows via off-take agreements, transforming them into legal security that reduces investment risk and unlocks non-dilutive capital.
To explore how KUMO’s collateralization services can be tailored to your specific needs, we invite you to schedule a call with our experts. We’ll work closely with you to ensure the proper set-up and implementation of a collateralization solution that aligns with your specific requirements.
How can I use KUMO’s collateralization services for carbon credits?
KUMO has developed the capacity to offer collateralization of carbon credits as a comprehensive service for debt investors. By leveraging our expertise, you can securely collateralize spot credits, future carbon credits, and contracted cashflows via off-take agreements, transforming them into legal security that reduces investment risk and unlocks non-dilutive capital.
To explore how KUMO’s collateralization services can be tailored to your specific needs, we invite you to schedule a call with our experts. We’ll work closely with you to ensure the proper set-up and implementation of a collateralization solution that aligns with your specific requirements.
For Project Developers
How can I benefit from working with KUMO?
Partnering with KUMO offers project developers a unique advantage in navigating the complexities of carbon project financing. Here’s how you can benefit:
Expertise and Guidance: KUMO brings deep expertise in climate finance and carbon markets, guiding you through the process of securing debt financing tailored to your project’s needs. Our team helps you structure your project for success, ensuring it meets the stringent criteria of institutional investors.
Access to an Capital Providers Network: Gain access to KUMO’s extensive network of capital providers, including leading institutional investors who are actively seeking high-quality carbon projects to finance. This network opens up significant funding opportunities that might otherwise be out of reach.
Leverage Carbon Credits as Collateral: With KUMO, you can unlock the value of your carbon credits by using them as collateral to secure non-dilutive loans. This allows you to finance your project without sacrificing ownership, giving you the capital needed to scale while retaining future upside potential.
Benchmark Your Project: Compare your project against industry benchmarks using KUMO’s proprietary data. Our tools allow you to assess how your project stacks up against others in the market, providing valuable insights to enhance your financing strategy.
Access Free Financing Tools: KUMO offers free tools that empower you to assess debt financing availability and structures with ease. These resources are designed to simplify the financing process and help you make informed decisions.
With KUMO, you’re placing your project in the hands of experts who will help you secure debt financing and benefit from our toolset to optimize the entire process.
How can I benefit from working with KUMO?
Partnering with KUMO offers project developers a unique advantage in navigating the complexities of carbon project financing. Here’s how you can benefit:
Expertise and Guidance: KUMO brings deep expertise in climate finance and carbon markets, guiding you through the process of securing debt financing tailored to your project’s needs. Our team helps you structure your project for success, ensuring it meets the stringent criteria of institutional investors.
Access to an Capital Providers Network: Gain access to KUMO’s extensive network of capital providers, including leading institutional investors who are actively seeking high-quality carbon projects to finance. This network opens up significant funding opportunities that might otherwise be out of reach.
Leverage Carbon Credits as Collateral: With KUMO, you can unlock the value of your carbon credits by using them as collateral to secure non-dilutive loans. This allows you to finance your project without sacrificing ownership, giving you the capital needed to scale while retaining future upside potential.
Benchmark Your Project: Compare your project against industry benchmarks using KUMO’s proprietary data. Our tools allow you to assess how your project stacks up against others in the market, providing valuable insights to enhance your financing strategy.
Access Free Financing Tools: KUMO offers free tools that empower you to assess debt financing availability and structures with ease. These resources are designed to simplify the financing process and help you make informed decisions.
With KUMO, you’re placing your project in the hands of experts who will help you secure debt financing and benefit from our toolset to optimize the entire process.
How can I access financing via the KUMO platform?
Accessing financing through KUMO is a straightforward process designed to connect you with the capital you need. Start by using KUMO’s free tools to model your project’s cash flow and assess its readiness for debt financing. From there, KUMO guides you through a structured process, including data aggregation, project assessment, and matching with institutional investors.
To begin, explore our free tools and learn more about the financing process on our website.
Access KUMO’s Free Tools | Learn About the Financing Process
How can I access financing via the KUMO platform?
Accessing financing through KUMO is a straightforward process designed to connect you with the capital you need. Start by using KUMO’s free tools to model your project’s cash flow and assess its readiness for debt financing. From there, KUMO guides you through a structured process, including data aggregation, project assessment, and matching with institutional investors.
To begin, explore our free tools and learn more about the financing process on our website.
Access KUMO’s Free Tools | Learn About the Financing Process
Is debt finance the right funding strategy for my project?
To find out if debt financing is right for your project, start with KUMO’s free assessment and loan forecasting tools. These tools provide a comprehensive analysis, helping you determine whether debt financing aligns with your project’s financial needs and risk profile.
Is debt finance the right funding strategy for my project?
To find out if debt financing is right for your project, start with KUMO’s free assessment and loan forecasting tools. These tools provide a comprehensive analysis, helping you determine whether debt financing aligns with your project’s financial needs and risk profile.
What are the benefits of debt financing?
Debt financing offers significant advantages for carbon projects compared to equity investments, carbon streaming, or pre-selling carbon credits:
Non-Dilutive Capital: Secure the funds needed to finance your operations or invest in new projects without giving up ownership or control. This allows you to retain full equity in your project, benefiting fully from its success.
Retain Ownership of Carbon Credits: Unlike other funding methods, debt financing allows you to keep ownership of your carbon credits, enabling you to participate in any future value appreciation and maximize long-term returns.
Leverage Off-Take Agreements and Carbon Credits as Collateral: Use your off-take agreements and carbon credits as legal collateral to reduce risk for lenders and secure the financing you need to grow your project.
Lower Cost of Capital: Debt financing typically comes with a lower cost of capital compared to equity, making it a more cost-effective option for funding large-scale projects.
Flexible Financing Solutions: Debt financing can be tailored to match the specific needs of your project, offering flexibility in how you structure your financing to align with your project’s timeline and risk profile.
By choosing debt financing through KUMO, you unlock these benefits, maintaining control over your project while accessing the capital required to scale effectively and efficiently.
What are the benefits of debt financing?
Debt financing offers significant advantages for carbon projects compared to equity investments, carbon streaming, or pre-selling carbon credits:
Non-Dilutive Capital: Secure the funds needed to finance your operations or invest in new projects without giving up ownership or control. This allows you to retain full equity in your project, benefiting fully from its success.
Retain Ownership of Carbon Credits: Unlike other funding methods, debt financing allows you to keep ownership of your carbon credits, enabling you to participate in any future value appreciation and maximize long-term returns.
Leverage Off-Take Agreements and Carbon Credits as Collateral: Use your off-take agreements and carbon credits as legal collateral to reduce risk for lenders and secure the financing you need to grow your project.
Lower Cost of Capital: Debt financing typically comes with a lower cost of capital compared to equity, making it a more cost-effective option for funding large-scale projects.
Flexible Financing Solutions: Debt financing can be tailored to match the specific needs of your project, offering flexibility in how you structure your financing to align with your project’s timeline and risk profile.
By choosing debt financing through KUMO, you unlock these benefits, maintaining control over your project while accessing the capital required to scale effectively and efficiently.
How much interest do I need to pay?
The interest rate for your project depends on several factors, including the project type, region, stage of development, contracted cash flow, and more. To understand how the interest rate will impact your cash flow and to assess the financeability of your project, we recommend using KUMO’s free tools. These tools provide a tailored analysis, helping you explore different scenarios and get a clearer picture of the financing terms specific to your project
How much interest do I need to pay?
The interest rate for your project depends on several factors, including the project type, region, stage of development, contracted cash flow, and more. To understand how the interest rate will impact your cash flow and to assess the financeability of your project, we recommend using KUMO’s free tools. These tools provide a tailored analysis, helping you explore different scenarios and get a clearer picture of the financing terms specific to your project
What is collateral and what does borrowing against carbon credits mean?
Collateral is an asset pledged by a borrower to secure a loan, providing the lender with assurance that the loan will be repaid. If the borrower is unable to meet their repayment obligations, the lender can seize the collateral to recover their funds.
Borrowing against carbon credits means using your carbon credits as collateral to secure a loan. Through KUMO, you can leverage different types of collateral, including:
Spot Credits: Already issued carbon credits that can be used immediately as collateral.
Future Credits: Carbon credits that will be issued based on future carbon removal activities, allowing you to secure financing against anticipated project outcomes.
Carbon Off-Take Agreements: Contracts that commit buyers to purchasing carbon credits in the future, which can also be used as collateral.
By leveraging these forms of collateral, KUMO enables you to access non-dilutive capital while retaining ownership of your carbon credits. Our platform uses legal frameworks and advanced technology to transform these assets into secure, bankable collateral, reducing the risk for lenders and unlocking financing opportunities for your project.
What is collateral and what does borrowing against carbon credits mean?
Collateral is an asset pledged by a borrower to secure a loan, providing the lender with assurance that the loan will be repaid. If the borrower is unable to meet their repayment obligations, the lender can seize the collateral to recover their funds.
Borrowing against carbon credits means using your carbon credits as collateral to secure a loan. Through KUMO, you can leverage different types of collateral, including:
Spot Credits: Already issued carbon credits that can be used immediately as collateral.
Future Credits: Carbon credits that will be issued based on future carbon removal activities, allowing you to secure financing against anticipated project outcomes.
Carbon Off-Take Agreements: Contracts that commit buyers to purchasing carbon credits in the future, which can also be used as collateral.
By leveraging these forms of collateral, KUMO enables you to access non-dilutive capital while retaining ownership of your carbon credits. Our platform uses legal frameworks and advanced technology to transform these assets into secure, bankable collateral, reducing the risk for lenders and unlocking financing opportunities for your project.
Can I repay in carbon credits?
Yes, loans can be structured to allow partial repayment in carbon credits, depending on factors such as the lender's appetite for direct carbon credit exposure. At KUMO, we offer flexible financing solutions, including hybrid loan structures that combine cash and carbon credit repayments.
Repaying in carbon credits offers several benefits for project developers:
Reduced Merchant Risk: By repaying directly in carbon credits, you avoid the merchant risk associated with fluctuating carbon credit prices and market conditions.
Less Direct Sales Needed: With the option to repay in carbon credits, you reduce the pressure to sell credits on the open market, allowing you to focus on project development.
Improved Access to Capital: Lenders who accept carbon credits as repayment may be more willing to finance your project, as this structure aligns their interests with the success of your carbon credit generation.
This hybrid approach can optimize your financing, helping you maintain financial flexibility while leveraging the value of your carbon credits.
Can I repay in carbon credits?
Yes, loans can be structured to allow partial repayment in carbon credits, depending on factors such as the lender's appetite for direct carbon credit exposure. At KUMO, we offer flexible financing solutions, including hybrid loan structures that combine cash and carbon credit repayments.
Repaying in carbon credits offers several benefits for project developers:
Reduced Merchant Risk: By repaying directly in carbon credits, you avoid the merchant risk associated with fluctuating carbon credit prices and market conditions.
Less Direct Sales Needed: With the option to repay in carbon credits, you reduce the pressure to sell credits on the open market, allowing you to focus on project development.
Improved Access to Capital: Lenders who accept carbon credits as repayment may be more willing to finance your project, as this structure aligns their interests with the success of your carbon credit generation.
This hybrid approach can optimize your financing, helping you maintain financial flexibility while leveraging the value of your carbon credits.
How can I access finance against off-take agreements?
KUMO facilitates the process of turning your off-take agreements into legal collateral, offering collateralization as a service for both project developers and capital providers. By leveraging your contracted future cash flows, KUMO enables you to enhance your project’s credit quality, allowing you to secure loans based on the strength of your off-take agreements.
This service decreases your project’s risk profile, as lenders gain confidence from the stability of contracted cash flows, making it easier for you to access the capital needed to grow your project. KUMO’s expertise in collateralization ensures that your off-take agreements are effectively used to unlock financing opportunities tailored to your project’s unique needs.
How can I access finance against off-take agreements?
KUMO facilitates the process of turning your off-take agreements into legal collateral, offering collateralization as a service for both project developers and capital providers. By leveraging your contracted future cash flows, KUMO enables you to enhance your project’s credit quality, allowing you to secure loans based on the strength of your off-take agreements.
This service decreases your project’s risk profile, as lenders gain confidence from the stability of contracted cash flows, making it easier for you to access the capital needed to grow your project. KUMO’s expertise in collateralization ensures that your off-take agreements are effectively used to unlock financing opportunities tailored to your project’s unique needs.
What is the difference between working capital and project finance?
In the context of carbon projects, working capital and project finance serve different financial needs, each crucial at various stages of your project.
Working Capital refers to short-term funding that covers the day-to-day operational costs of your project, such as feedstock, labor, and other ongoing expenses. This type of financing is essential for keeping your project running smoothly and ensuring that you have the liquidity needed to manage immediate financial obligations. For example, a biochar project might use working capital to manage feedstock costs throughout the year, especially when there’s a gap between carbon credit issuance and off-take transactions. KUMO offers solutions that allow you to borrow against spot carbon credits or future tranches, helping to maintain consistent cash flow and optimize liquidity.
Project Finance, on the other hand, is long-term funding used to support the development and expansion of large-scale carbon projects. This type of financing typically covers upfront capital costs, such as building new facilities or scaling production capacity. For instance, a Direct Air Capture (DAC) project might use project finance to construct additional plants, enabling the project to achieve economies of scale and grow significantly. KUMO’s project finance solutions involve leveraging carbon credits and off-take agreements as collateral to access institutional capital. This approach ensures that your project has the necessary resources to grow while allowing you to retain ownership of your carbon credits.
In summary, working capital is about maintaining daily operations and liquidity, while project finance focuses on securing the long-term funding needed to scale and expand your carbon project. Understanding these distinctions will help you evaluate the most appropriate financing strategy for your specific project needs
What is the difference between working capital and project finance?
In the context of carbon projects, working capital and project finance serve different financial needs, each crucial at various stages of your project.
Working Capital refers to short-term funding that covers the day-to-day operational costs of your project, such as feedstock, labor, and other ongoing expenses. This type of financing is essential for keeping your project running smoothly and ensuring that you have the liquidity needed to manage immediate financial obligations. For example, a biochar project might use working capital to manage feedstock costs throughout the year, especially when there’s a gap between carbon credit issuance and off-take transactions. KUMO offers solutions that allow you to borrow against spot carbon credits or future tranches, helping to maintain consistent cash flow and optimize liquidity.
Project Finance, on the other hand, is long-term funding used to support the development and expansion of large-scale carbon projects. This type of financing typically covers upfront capital costs, such as building new facilities or scaling production capacity. For instance, a Direct Air Capture (DAC) project might use project finance to construct additional plants, enabling the project to achieve economies of scale and grow significantly. KUMO’s project finance solutions involve leveraging carbon credits and off-take agreements as collateral to access institutional capital. This approach ensures that your project has the necessary resources to grow while allowing you to retain ownership of your carbon credits.
In summary, working capital is about maintaining daily operations and liquidity, while project finance focuses on securing the long-term funding needed to scale and expand your carbon project. Understanding these distinctions will help you evaluate the most appropriate financing strategy for your specific project needs
Carbon Backed Lending / Securitisation in the Capital Markets
What would the structure of the bonds be, and who is the issuer?
The issuer will be a bankruptcy remote Special Purpose Vehicle (SPV) managed by KUMO and based in Luxembourg. The structure is highlighted in the diagram here. KUMO can create portfolios of packaged CDR projects or work with bond buyers or lenders to do so. The SPV then will issue bonds which are ultimately backed by cash flows from carbon credit sales, offtake agreements, and additional revenue streams.
The bonds will be issued by a bankruptcy-remote Special Purpose Vehicle (SPV) managed by KUMO, based in Luxembourg. As shown in the diagram, KUMO can create portfolios of packaged Carbon Dioxide Removal (CDR) projects or collaborate with bond buyers or lenders to build these portfolios. The SPV then issues bonds that are backed by the cash flows from carbon credit sales, off-take agreements, and additional revenue streams. This structure ensures that the bonds are secure and tied directly to the financial performance of the underlying carbon projects.
What would the structure of the bonds be, and who is the issuer?
The issuer will be a bankruptcy remote Special Purpose Vehicle (SPV) managed by KUMO and based in Luxembourg. The structure is highlighted in the diagram here. KUMO can create portfolios of packaged CDR projects or work with bond buyers or lenders to do so. The SPV then will issue bonds which are ultimately backed by cash flows from carbon credit sales, offtake agreements, and additional revenue streams.
The bonds will be issued by a bankruptcy-remote Special Purpose Vehicle (SPV) managed by KUMO, based in Luxembourg. As shown in the diagram, KUMO can create portfolios of packaged Carbon Dioxide Removal (CDR) projects or collaborate with bond buyers or lenders to build these portfolios. The SPV then issues bonds that are backed by the cash flows from carbon credit sales, off-take agreements, and additional revenue streams. This structure ensures that the bonds are secure and tied directly to the financial performance of the underlying carbon projects.
How does securitization work in the context of carbon-backed lending?
The securitization market continues to expand globally, leveraging innovative structures and diverse assets as collateral. In essence, any assets or entitlements representing predictable future cash flows can be securitized. In the context of carbon-backed lending, this means that cash flow streams such as off-take agreements, carbon credits, and energy sales are used as collateral.
KUMO pools assets from multiple Carbon Dioxide Removal (CDR) projects—predominantly those generating cash flows from carbon credit sales. These assets are assessed based on their ability to generate reliable cash flows and are then combined to create diversified portfolios. This diversification is further secured through legal opinions provided by top global law firms, such as A&O Shearman.
By introducing this new class of debt instruments, KUMO enables broader market participation, deepening the carbon market and providing access to assets that might otherwise be out of reach. The primary structure we employ is a pay-through debt instrument, ensuring that investors can benefit from the underlying cash flows of high-quality carbon projects.
How does securitization work in the context of carbon-backed lending?
The securitization market continues to expand globally, leveraging innovative structures and diverse assets as collateral. In essence, any assets or entitlements representing predictable future cash flows can be securitized. In the context of carbon-backed lending, this means that cash flow streams such as off-take agreements, carbon credits, and energy sales are used as collateral.
KUMO pools assets from multiple Carbon Dioxide Removal (CDR) projects—predominantly those generating cash flows from carbon credit sales. These assets are assessed based on their ability to generate reliable cash flows and are then combined to create diversified portfolios. This diversification is further secured through legal opinions provided by top global law firms, such as A&O Shearman.
By introducing this new class of debt instruments, KUMO enables broader market participation, deepening the carbon market and providing access to assets that might otherwise be out of reach. The primary structure we employ is a pay-through debt instrument, ensuring that investors can benefit from the underlying cash flows of high-quality carbon projects.
Is the set-up bankruptcy remote?
In short, yes, the SPV used in our bond issuance is a bankruptcy-remote vehicle, ensuring that the assets are protected in the event of a bankruptcy. However, for direct lending, a private placement structure can be used, which may not be bankruptcy remote. In this case, the borrower or issuer would be the project developer, not KUMO.
Is the set-up bankruptcy remote?
In short, yes, the SPV used in our bond issuance is a bankruptcy-remote vehicle, ensuring that the assets are protected in the event of a bankruptcy. However, for direct lending, a private placement structure can be used, which may not be bankruptcy remote. In this case, the borrower or issuer would be the project developer, not KUMO.
Are the bonds rated?
Currently, the bonds are not rated. However, we are in discussions with leading rating agencies about the possibility of issuing rated instruments in the future. This would help open up the asset class to a broader investor base.
Are the bonds rated?
Currently, the bonds are not rated. However, we are in discussions with leading rating agencies about the possibility of issuing rated instruments in the future. This would help open up the asset class to a broader investor base.
What quantum and tenor would the bonds be?
The initial private placement issuance will be executed under the 4(a)(2) regulation, with a target size of approximately $15-30 million, offered to a select group of investors. As the market matures, we anticipate that CDR-backed bonds will increase in size, with future issuances expected to be $100 million or more. We are aiming to issue the first $100 million+ bond by Q1 2025.
The tenor of these bonds is flexible and will depend on the underlying projects contributing to the issuing SPV. Generally, maturities will range between 3 to 30 years, allowing for tailored financing solutions that align with the specific needs of each project.
What quantum and tenor would the bonds be?
The initial private placement issuance will be executed under the 4(a)(2) regulation, with a target size of approximately $15-30 million, offered to a select group of investors. As the market matures, we anticipate that CDR-backed bonds will increase in size, with future issuances expected to be $100 million or more. We are aiming to issue the first $100 million+ bond by Q1 2025.
The tenor of these bonds is flexible and will depend on the underlying projects contributing to the issuing SPV. Generally, maturities will range between 3 to 30 years, allowing for tailored financing solutions that align with the specific needs of each project.
How many projects/ facilities would contribute assets to access the capital generated from the bond issuance?
For the $15-30 million private placement, approximately 5-7 projects will post collateral and access debt capital. These projects will all operate under the same or similar methodological labeling and will be focused on tech-based CDR. The exact number of projects will depend on the total borrowing required, with no more than 25% of the collateral in the SPV being provided by any single project.
How many projects/ facilities would contribute assets to access the capital generated from the bond issuance?
For the $15-30 million private placement, approximately 5-7 projects will post collateral and access debt capital. These projects will all operate under the same or similar methodological labeling and will be focused on tech-based CDR. The exact number of projects will depend on the total borrowing required, with no more than 25% of the collateral in the SPV being provided by any single project.
Who is responsible for the repayment of the debt capital/ bonds?
The repayment of the debt capital or bonds is managed by a Special Purpose Vehicle (SPV) that holds the collateralized assets. The debt service is met through a pass-through structure, where cash flows generated by the pledged collateral are "paid through" to investors. These cash flows ultimately come from project developers as they sell carbon credits (or other assets) either into the open market or to off-takers under the terms of the pledged off-take agreements.
Who is responsible for the repayment of the debt capital/ bonds?
The repayment of the debt capital or bonds is managed by a Special Purpose Vehicle (SPV) that holds the collateralized assets. The debt service is met through a pass-through structure, where cash flows generated by the pledged collateral are "paid through" to investors. These cash flows ultimately come from project developers as they sell carbon credits (or other assets) either into the open market or to off-takers under the terms of the pledged off-take agreements.
Who is able to buy the bonds?
The private placement issuances will not be regulated or listed securities, and they will be available to a select group of accredited investors. As the market grows and larger-scale bonds are issued, these bonds will be listed on the Luxembourg Stock Exchange (LuxSE) but will remain restricted to non-retail buyers, ensuring they are accessible only to qualified institutional investors and other eligible entities.
Who is able to buy the bonds?
The private placement issuances will not be regulated or listed securities, and they will be available to a select group of accredited investors. As the market grows and larger-scale bonds are issued, these bonds will be listed on the Luxembourg Stock Exchange (LuxSE) but will remain restricted to non-retail buyers, ensuring they are accessible only to qualified institutional investors and other eligible entities.
Does the issuance come with any guarantees or insurance?
Yes, the bonds will be issued in tranches, with certain tranches benefiting from guarantees provided by Development Financial Institutions or insurance coverage. These guarantees and insurance enhance risk mitigation, offering additional security beyond the collateralization of the assets.
Does the issuance come with any guarantees or insurance?
Yes, the bonds will be issued in tranches, with certain tranches benefiting from guarantees provided by Development Financial Institutions or insurance coverage. These guarantees and insurance enhance risk mitigation, offering additional security beyond the collateralization of the assets.