Nature-based carbon removing startup Chestnut Carbon has raised $160 million in Sequence B financing, the corporate informed TechCrunch. The startup buys marginal and degraded farmland, crops them with native timber, and harvests the ensuing carbon credit.
Carbon credit have develop into a scorching commodity, particularly amongst tech corporations trying to offset skyrocketing emissions brought about partially by the breakneck growth of knowledge facilities serving cloud and AI prospects.
The brand new spherical included funding from Canada Pension Plan Funding Board, Cloverlay, and DBL Companions together with unnamed college endowments, household workplaces, funds of funds, and different institutional traders.
For Chestnut Carbon, the $160 million is definitely a considerably modest sum. When the corporate was based, personal fairness agency Kimmeridge capitalized it by pledging as much as $200 million. The agency usually invests in oil and gasoline corporations, however managing accomplice Ben Dell noticed a possibility to stake a declare within the rising carbon credit score market.
To make it occur, he acquired Forest Carbon Works, a startup based by Kyle Holland that helped households handle their forests to promote carbon credit. Holland continued with Chestnut, the place he’s at the moment chief product officer.
With Chestnut, the group expanded their focus to incorporate tasks developed by the corporate, not simply managing present forests.
Chestnut at the moment owns greater than 35,000 acres of marginal and degraded farmland and pasture within the southeastern United States. A part of the objective of the fundraise is to develop Chestnut’s holdings considerably. The startup is hoping to broaden its carbon credit score capability to 100 million metric tons by 2030, which would require tons of of 1000’s of acres to be remodeled again into forests.
Final month, Chestnut made a down fee on that focus on with the sale of seven million carbon credit to Microsoft. (One carbon credit score is price one metric ton of carbon.) The 25-year deal will assist Chestnut rehabilitate 60,000 acres in Arkansas, Louisiana and Texas. Chestnut makes use of Gold Commonplace to certify its carbon credit for 100 years.
The brand new funding spherical ought to assist the startup dramatically broaden its operations. Whereas there’s loads of demand for high-quality carbon credit immediately, Chestnut’s objective of 100 million metric tons represents a fraction of a p.c of annual carbon emissions, which hit 37.4 billion metric tons in 2023, according to the IEA.
Nonetheless, if Chestnut can safe its foothold within the carbon credit score market, afforestation and reforestation maintain nice potential to rein within the results of local weather warming air pollution.
A study in 2019 discovered that the world can assist 2.2 billion acres extra forest than it has immediately. As soon as these forests matured, they might maintain 205 billion metric tons of carbon, or a few quarter of the carbon at the moment within the environment.