JPMorgan Chase & Co. has helped structure a first-of-its-kind lending facility for a developer of carbon credits that it hopes will lower the cost of capital and attract institutional investors to a market that’s struggled to grow amid a series of missteps and corporate apathy on climate action.
The US bank, together with a syndicate of smaller lenders, closed a $210 million loan deal that will enable carbon developer Chestnut Carbon to meet its obligations under a 25-year agreement to generate credits from forestry projects in Arkansas and Texas, and deliver them to Microsoft Corp. The loan represents the first time traditional project-finance techniques have been applied to a US carbon-credit project and is an important step to help draw investors to the market, Chestnut said in a statement on Tuesday.
The voluntary market for carbon credits, though touted by advocates as an important weapon in the fight against climate change and a critical vehicle for transmitting money from wealthy countries in the northern hemisphere to the global south, remains so small as to be a rounding error in the context of global capital markets. Still, a handful of deep-pocketed corporations are working to help it grow: Microsoft has signed scores of long-term carbon removal contracts, such as the one with Chestnut, while JPMorgan has said it wants to be the “carbon bank of choice.”
