Standard Chartered is set to provide the first commercial loan to a carbon removal technology company, following British Airways (BA) commitment to purchasing over 4,000 tonnes of credits from project developer Undo.
Carbon removal technologies are crucial in the global fight against climate change, though many remain in their early stages and have yet to be proven effective on a large scale.
Traditionally, early-stage funding for such projects has come from grants, pre-payments, and venture capital, with banks hesitant to offer corporate loans due to the perceived risk, Standard Chartered said.
By securing an advance purchase agreement with BA and insuring against insufficient carbon credit production to cover the loan, the credit risk for Undo is mitigated, the bank explained.
Undo employs a method called “enhanced rock weathering,” which involves spreading silicate rock dust over farmland. This process captures carbon when it rains, sequestering it for over 100,000 years.
The deal’s partners, which include intermediary CUR8, insurer CFC, and broker WTW, aim to replicate this structure for other developers to scale the market. Financial details of the deal were not disclosed.
“We need a technological solution that can scale, allowing carbon dioxide removals to become affordable across the market and deliver the net in net zero,” said StanChart head of carbon markets development Chris Leeds, adding, “This transaction puts money into a project today in an efficient way, through upfront bank finance.”
Scientists estimate that by mid-century, around 10 billion tonnes of carbon emissions may need to be removed from the atmosphere annually to meet climate targets. However, carbon removal credits currently make up only a small portion of the market.
Carrie Harris, British Airways’ director of sustainability, highlighted the importance of carbon removal in achieving the airline’s climate goals.