ClimeFi Analyst Rating: the next evolution of the CDR market

ClimeFi has launched its Analyst Rating – a first-of-its-kind product that offers a unique perspective on CDR projects, designed to inform portfolio management decisions. In our latest blog, we explain how the new product works, what sets it apart from conventional carbon ratings, and where it sits in an increasingly fragmented market

In recent years, the carbon dioxide removal (CDR) market has evolved from a niche concept into a critical tool in the fight against climate change. However, as the market continues to mature, the need for sophisticated mechanisms to help guide participants is becoming increasingly clear.

Addressing this need directly, ClimeFi is pleased to introduce the Analyst Rating – a forward-looking innovation inspired by the financial sector’s equity and credit analysis. The new product – introduced in ClimeFi's recently published Rating Methodology– provides dynamic insights that go beyond the static evaluations of traditional ratings, representing a significant step forward for the CDR market.

What is an Analyst Rating?

An Analyst Rating is a forward-looking evaluation on CDR projects designed to inform portfolio management decisions. To provide a comprehensive overview of the risks and opportunities for each project, the Analyst Rating leverages expert analysis, strategic supplier engagement, and deep sectoral knowledge.

Crucially, the Analyst Rating is dynamic: assessments evolve with the rapidly changing landscape of scientific, regulatory, and market trends. Our versatile approach both fosters action and empowers stakeholders to navigate the complexities of the CDR market with confidence.

This next generation of ratings offers tangible benefits for buyers. By delivering critical insights into a project’s long-term viability and aligning with their emerging needs, the Analyst Rating provides the complete picture of a project to a buyer: analytical insights on project-specific risks presented alongside key opportunities. With its future-facing lens, the Analyst Rating can help simplify the CDR procurement process and enhance market efficiency.

So, what makes it different from conventional carbon ratings? 

Rating agency ratings and the Analyst Rating serve different purposes and offer distinct perspectives. Generally, conventional rating agencies in the carbon market focus on carbon attributes – such as additionality, permanence, or carbon accounting risks – to deliver mostly static assessments of carbon credit quality. While these evaluations are foundational, they often fall short of capturing the dynamic and evolving nature of carbon projects.

The Analyst Rating looks to bridge this gap by providing a more nuanced and adaptive perspective. Evaluations are based on in-depth analysis of a project’s transactional and performance data, as well as ongoing updates through quarterly supplier engagement. As a result, they are able to provide forward-looking insights into a project's integrity and delivery, and ultimately offer an independent opinion.

Rather than solely classifying the quality of a carbon credit, an Analyst Rating digs deeper into its beyond carbon quality attributes, scalability potential, regulatory evolvement, and alignment with emerging market trends – much like the analyst ratings that guide investment decisions in financial markets.

Aligning with the financial sector

In financial markets, financial institutions have long used analyst ratings to provide actionable insights. Analysts at these firms issue recommendations based on a number of factors. Banks, for example, issue ‘buy’, ‘hold’, or ‘sell’ ratings based on anticipated earnings growth, market dynamics, and trends.

While rating agency ratings provide a standardised assessment of creditworthiness, analyst ratings offer more nuanced, forward-looking insights into a company's financial performance and prospects (see Figure 1).

Taking inspiration from this approach, ClimeFi’s Analyst Ratings assess a CDR project’s performance not only based on project quality, but also in terms of delivery expectations, scalability, resilience, compliance likelihood and other buyer suitability based on strategic opportunities.

One-stop-shop for CDR buyers

From robust due diligence and contracting services to portfolio monitoring and high-quality project sourcing, ClimeFi is able to support buyers on their CDR journeys with an end-to-end service that constantly evolves with the market. And with its all-new Analyst Rating, ClimeFi has further bolstered its arsenal, giving buyers – both first-time and experienced – dynamic and effective insights into carbon removal projects, helping them to both manage risks and seize opportunities in the market. 

To find out more about the Analyst Rating, please download our Rating Methodology – applied in all CDR project analyses, credit transactions, and portfolio construction. Through its publication, we aim to bring greater transparency to the market and as a result, foster increased trust in CDR credit transactions.