ClimeFi’s Ratings form the underlying analytical foundation of our Due Diligence: they are the core structure through which durable carbon removal projects are evaluated, compared, selected for Coverage, and continuously monitored over time.
We assess a carbon removal project’s risks and strengths across three key categories: Integrity, including Carbon and Beyond Carbon, Delivery, and Strategic (see Figure 1).
Figure 1: Structural breakdown of ClimeFi’s risk assessment framework
The Beyond Carbon Rating is the second component of our analysis, and is designed to assess the risks stemming from the non-carbon aspects of a project. In this article, we explore why Beyond Carbon risks matter, what Beyond Carbon risks ClimeFi actually assesses, and how we act on it.
Why Beyond Carbon risks matter
Reputational risk is a primary concern for companies building portfolios of climate assets. Yet as carbon standards mature and the market becomes increasingly well-equipped to assess carbon performance, the non-carbon dimensions of a project are emerging as the more novel and consequential reputational hit.
Durable carbon removal projects are increasingly high carbon integrity, prioritising durability and additionality. The market was not designed to audit Beyond Carbon risks in the same way, and most actors currently don’t have the capacity to do so. Assessing these risks is particularly difficult for ex ante projects, where operational track records are limited or non-existent. Therefore, impacts on the environment and people are not yet experienced and must be forecasted.
Beyond Carbon risks fall into three broad categories: risks to nature and the environment; risks to people and society; and governance risks. Based on ClimeFi’s extensive experience in talking to carbon removal buyers, we often find that these risks are some of the most sensitive, and some of the most difficult to recover from publicly.
At ClimeFi, we look to provide that additional lens, holding the durable carbon removal market to a higher standard than the current market when it comes to non-carbon risks.
What ClimeFi assesses
Beyond Carbon risks are inherently complex, and can not be accurately assessed under a quantitative approach. ClimeFi’s assessment therefore covers risks within three categories, and highlights where mitigatory safeguards are in place:
- Governance and Ownership: The integrity of a project’s corporate governance, carbon and corporate ownership, and impact from public governance risks.
- Nature: The project’s non-carbon impacts on its natural environment and resources.
- People: The project’s non-carbon impacts on all stakeholders affected by a project, including local communities, indigenous groups, or employees.
Figure 2: ClimeFi Beyond Carbon risk assessment categories
To see what this looks like in practice, three common examples of how ClimeFi assesses various types of Beyond Carbon risks are explained in further detail below:
- Free Prior and Informed Consent (FPIC). FPIC is increasingly standard practice for nature-based projects, requiring consent from all communities in the vicinity of a project before activity begins. It is not currently required for durable carbon removal projects, despite being relevant in particular with hybrid approaches, such as enhanced rock weathering and biochar projects. ClimeFi enforces a review of FPIC as a requirement, and negatively scores projects where it is absent. Understanding that this is not common practice in this sector, we also play an educational role, explaining consent best practice to suppliers before procurement decisions are made.
- Grievance mechanisms. Any individual should be able to lodge a formal grievance against a carbon removal supplier. To meet the standard ClimeFi assesses against, informed by UN Environment Programme guidelines, a mechanism should be publicly transparent; multilingual, accessible beyond a written submission; and resolved with a participatory framework. While ClimeFi assesses it on every project, this is not currently required in the sector.
- Associated Industries. Financial or operational ties to high-emission activities can pose reputational and ethical concerns. As part of our due diligence, ClimeFi evaluates whether a supplier or its project partners are linked to climate-negative industries. ClimeFi’s proprietary framework examines a carbon removal project’s connection to industries such as oil and gas, hazardous materials, mining, and large scale forestry, which may present structural climate-alignment risks, ethical concerns, or environmental externalities. Where a traditionally negative industry connection serves a remediation purpose, such as a carbon removal project that captures or neutralises hazardous or polluting materials, this can be positively taken into account.
How we act on it
In the case that Beyond Carbon risk escalates, ClimeFi leverages contractual terms to ensure that suppliers are held to fixed Beyond Carbon standards from the outset. From there, ClimeFi monitors the projects on a quarterly basis to track whether risks compound over time.
Beyond Carbon risk is a priority of our due diligence from the outset. Through our supplier relationships and ongoing monitoring, we have the ability to maintain high-integrity standards on behalf of our buyers, limiting future reputational risks.
