CarbonPool, a groundbreaking carbon credit insurance firm, has recently concluded a successful $12 million funding round. Co-founded by former Allianz executives, the climate-focused startup has attracted investment from leading venture capital firms such as Heartcore Capital and Vorwerk Ventures, as well as HCS Capital and Revent Ventures. This funding round marks the largest climate-focused seed funding in Europe in over a year and the second-largest globally in climate finance. The significant interest in innovative approaches to carbon credits insurance is evident.
In today’s world, companies heavily rely on carbon credits to achieve their net zero targets. However, the turbulence in carbon credit markets has highlighted the importance of credit integrity, rigorous risk underwriting, and assurance of real environmental gains. CarbonPool addresses these needs by offering in-kind insurance to mitigate risks associated with reaching net zero commitments. The company acquires high-quality carbon credits and keeps them on its balance sheet for future payouts. This coverage extends to shortfalls, reversals, business interruptions, and natural disasters that may impact contracted carbon dioxide removals. It also applies to events that accidentally contribute to increased atmospheric CO2 levels, such as wildfires.
CarbonPool’s interdisciplinary team, consisting of 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 made in-kind, enhancing the credibility and reliability of carbon credit commitments.
A report by AlliedOffsets covering the period from 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. Current insurance offerings cover the assets underpinning carbon credits but do not provide compensation for the credits’ real value. This is where CarbonPool’s in-kind insurance comes in, addressing the uncertainties and risks associated with carbon credit issuance.
Coenraad Vrolijk, former regional CEO of Allianz Africa and Co-founder/CEO of CarbonPool, highlighted their unique approach to insurance, stating, “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 are projected to increase fourfold to $2 trillion by 2050, currently have limited access to these insurances. CarbonPool aims to fill this gap.
The insurer is actively progressing its insurance license application in Switzerland. It is already engaging with clients, including corporations, institutional investors, and carbon removal developers, offering 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.
In a separate branch of the same tree, climate-focused startups are also attracting investors’ attention. According to Crunchbase data, companies focusing on reducing the carbon footprint of ships and watercraft have raised over $1 billion. These startups are using the funds to improve research and commercialization of electric motors, wind-powered ships, and other low-carbon ships. For example, Pure Watercraft, a startup providing battery-electric propulsion systems for boats, raised over $200 million in total equity funding. Ayro, a French Ocean Zero portfolio company focusing on decarbonizing cargo ships through wind propulsion, has closed over $32 million.
Climate tech startups and their backers continue to demonstrate 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 propel 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 showcase the increasing recognition and support for innovative solutions addressing climate challenges.