Citi has announced the first outcome bond for engineered carbon removal, and the first issued by a commercial bank: a US$72 million, 3.5-year, principal-protected Carbon Removal-Linked Note that mobilises private capital to provide non-dilutive funding for Applied Carbon, working alongside Kumo, as it scales its biochar deployments in Texas.
Nuveen participated as an investor, and Microsoft holds an offtake agreement with Applied Carbon, signed in 2022, for a portion of the project's carbon credits. Investors give up a traditional coupon in exchange for a return linked to the carbon credits the project issues and delivers, with their principal protected.
Pioneered by the World Bank, the outcome bond is now a replicable, commercial instrument, with the potential to drive private capital into the expansion of carbon removal projects globally: non-dilutive funding for developers, and a principal-protected route into CDR for banks and institutional investors.
What is new
The Kumo League Tables record five carbon outcome bonds before this one, and every one of them was a World Bank bond, arranged by a commercial bank.
| Year | Project | Issuer | Arranger |
|---|---|---|---|
| 2023 | SIPCO, water purifiers, Vietnam | World Bank | Citi |
| 2024 | Plastic Collective, plastic and carbon credits | World Bank | Citi |
| 2024 | Mombak, Amazon reforestation | World Bank | HSBC |
| 2025 | UpEnergy, clean cooking, Ghana | World Bank | Standard Chartered |
| 2026 | Imperative, spekboom restoration, South Africa | World Bank | BNP Paribas |
| 2026 | Applied Carbon, biochar, Texas | Citi | Citi |
The innovation here is that a commercial bank and a private investor have replicated the structure. This one was issued by Citi, with Nuveen investing, and it is tied to engineered carbon removal (biochar) rather than to avoidance, nature restoration or waste. In effect, an instrument pioneered in development finance has become one a commercial bank can bring to market.
What it enables
Whilst this is a milestone in itself, it matters far beyond a single transaction. Durable carbon removal has to scale by orders of magnitude to meet the world's climate targets, and McKinsey estimates the gap between the investment expected and the investment needed this decade at $400 billion to $1.6 trillion. Structures like this open up routes to that capital (and to different pockets of it):
- A replicable instrument. Building on the structure the World Bank pioneered, commercial banks can now bring it to market for removal projects with a contracted offtake. In time, the same logic could extend to sovereigns, or to corporates with an outcome tied to their own supply chain.
- Institutional capital for CDR. Because the investor's principal is protected and only the return depends on delivery, the structure has the potential to bring in more institutional investors, pension and insurance funds among them, who have largely been out of reach.
- Non-dilutive funding for developers. A project with an offtake agreement on carbon credits can raise capital up front without giving up equity, as Applied Carbon has.
This does not work for everyone. The structure still has requirements, and demand in the form of a contracted offtake remains a key unlock. But the routes to capital for removal projects are widening, and this is one of them.
The voluntary carbon market requires new financial structures to bridge the gap between investor capital and the long-term funding needs of carbon removal projects. This Carbon Removal-Linked Note builds on Citi’s pioneering work linking bond performance to environmental outcomes and marks our first outcome bond tied to verified carbon removals.”
Sonia Battikh, Global Head of Carbon Offsets Trading, Citi
From Citi’s announcement
This financing shows that biochar and engineered carbon removal projects can be structured and financed like any other asset. We’re proud to work with Citi and Nuveen to scale our deployments and deliver real impact for the climate and for farmers across Texas. This is the kind of structure that will unlock capital for carbon removal at scale.”
Jason Aramburu, Founder and CEO, Applied Carbon
Building the infrastructure for carbon finance is key to mobilise private capital and make carbon a bankable asset class. At Kumo, we provide the data, diligence, and execution expertise that enable carbon deals to close, and are proud to work alongside Applied Carbon, whose project is funded through this inaugural outcome bond. We hope this landmark transaction can serve as a blueprint to drive institutional funding to carbon removal projects like Applied Carbon.”
Henry Waite, COO and co-founder, Kumo
How an outcome bond works
The idea of outcome bonds is not new (though to date it has solely been the preserve of the World Bank): investors provide capital in the form of a bond. A reputable offtaker contracts to buy the removals the developer delivers, and the investor's return is linked to that delivery.
- Investors buy a principal-protected note. Their capital comes back at maturity, so their principal does not depend on the project.
- They give up the ordinary coupon. The value of that foregone coupon funds the project up front.
- The project receives non-dilutive funding. The developer gets capital up front without giving up equity.
- Investors' return follows delivery. Payments to investors are linked to the credits the project issues and delivers.
- A buyer anchors the credits. A contracted offtake from a creditworthy buyer (Microsoft, here) gives investors confidence that delivered credits have somewhere to go.
What makes it work for investors is how the risk is arranged. In many financing structures a single party is left carrying all-or-nothing risk on delivery, and that binary exposure is one of the reasons durable removal has been so hard to finance. Here the investor's principal is not exposed to delivery risk; only the return is.
What this means for you
If you are a capital provider. Please do reach out to discuss your approach to carbon financing. Carbon removal projects can now be assessed on a comparable basis with robust financial metrics and benchmarks. Kumo can provide you with the standardised data, diligence and execution expertise to transact at scale with confidence.
If you are a project developer looking for financing. Get started on our platform to access funding via Kumo, and talk to us about the support to prepare you and connect you with the right capital providers.
About Kumo. Kumo is capital markets infrastructure for carbon: the data, diligence and execution that get carbon transactions to close. Kumo works with project developers including Applied Carbon.
- Data. The Kumo Terminal tracks 300+ carbon removal projects (financials, performance, delivery and cost benchmarks), so any project can be benchmarked against the market, whether it is raising capital or deploying it.
- Diligence. A structured assessment scored across 7 dimensions, focused on financeability and calibrated against the market, giving a consistent, comparable read on key metrics.
- Capital connections. Kumo has onboarded 300+ projects and 100+ capital providers, and generated over US$200m of term sheets. Capital Connections matches the right capital to the right project.
Source: Citi press release, 20 October 2026, including the quotes from Citi and Applied Carbon. Outcome bond history from the Kumo League Tables. Investment gap: McKinsey.