Download as pdf

Contact us

Executive summary

This report is based on survey responses from 74 nature-based carbon project developers around the globe, collected between May and September, 2025. Survey respondents shared how they’re currently funding their projects, structuring offtake agreements with buyers, and where they’re running into the biggest hurdles accessing project finance. 

The data indicate four core dynamics in today’s funding landscape for nature-based carbon projects; each of these carries an opportunity for investors who can address it.

1. The majority of projects rely on organization-level funds or project-level equity

The majority of projects relied on either their organization’s balance sheet, including a founder loan and company-level equity, or project-level equity for their primary source of funding. Early-stage projects (pre-PDD) were particularly dependent on organization balance sheets, leaving many in a race to achieve milestones necessary to unlock larger pools of capital before their runways end. Almost all projects utilizing project-level equity were managed by developers who had previously sold carbon credits. 

2. The cost of capital alongside getting ‘investment-ready’ were top obstacles to finance

Respondents cited the cost of getting a project past milestones most financiers and funders require, coupled with lengthy investor and offtaker due diligence timelines, as their top obstacle to accessing funding. The high cost of capital was the top source of overall project cost uncertainty as well as another major bottleneck to accessing finance. 

3. Projects with an offtake were 6.7x more likely to utilize project-level debt

Project-level debt was rare—just 13 percent of projects utilized this as their primary funding source. Of these, 85 percent had a signed offtake or were in late-stage negotiations for one.  

Offtakes are long-term contracts in which a buyer commits to purchase a producer’s future product. They’re commonly used in capital-intensive sectors like energy, mining, and agriculture. By guaranteeing a buyer, they give investors confidence to finance a project. Offtakes appear to play a catalytic role in unlocking lower-cost capital for nature-based carbon projects. 

4. Philanthropic capital was scarce, and primarily for new developers with early-stage projects

Just 9 percent of projects utilized grants or philanthropic capital as their primary funding source. This funding was almost entirely used by projects that were very early-stage (pre-PDD) and developers who had never previously sold credits. 

As has been the case with many major infrastructure sectors in the past, concessional capital may be a necessary early catalyst to deploy nature-based climate solutions at scale.

Current underinvestment in NBS is an opportunity

A wave of policy and market developments is priming demand for nature-based carbon credits—particularly removals—to surge in the coming decade. But even without demand growth, current investment in nature-based carbon removal is only sufficient to supply about half of anticipated demand in 2030. 

The high cost of capital for nature-based carbon projects makes the economics challenging, or even out of reach, for many projects. Concessional capital is scarce, and what little low-cost finance exists tends to flow only after a project secures an offtake agreement—a milestone that itself requires substantial upfront investment to reach. This leaves many promising projects stalled or abandoned long before they reach the market.

Investors and funders who step into this funding gap and find innovative ways to deploy flexible, low-cost capital to early-stage projects will unlock a pipeline of high-quality carbon credits and shape the sector.

Introduction

Many promising, early-stage nature-based carbon projects starting out today will never make it to market. It won’t be because they are of poor quality or there’s no market for the credits they could produce. It’s because they’ll run out of money before they achieve the milestones necessary to unlock project finance, scale operations, and produce verified carbon credits. 

This is not a surprising story in a nascent market like the verified carbon market. Demand has been unreliable and the investment case—that is, the potential returns relative to the risk—has not been strong enough to turn many investors’ heads. Investor due diligence timelines are lengthy and buyer offtake agreements, often a necessary precursor to accessing finance, remain complex, bespoke, and take months to negotiate. 

The problem is acute for capital-intensive nature-based carbon removal projects, such as ecosystem restoration. These incur the majority of lifetime costs in initial development years, long before they’ll produce and sell credits that can pay back early investment. Most funding available for early development is expensive (equity) or dependent on a founder’s pocketbook. The lack of funding is throttling the pipeline of high-quality nature-based carbon credits. 

But there’s good cause to believe demand for high-quality, nature-based carbon credits is on the rise. And that means the current underinvestment in the sector is an opportunity for investors with the appetite and interest. 

A few recent developments that foreshadow a demand uptick this decade include:

Article 6 is ramping up: Many countries are showing signs that they’ll incorporate Article 6 carbon credits into their NDC¹ plans under the Paris Agreement, which may well include a variety of nature-based credits. Singapore’s recent nature-based carbon credit purchases are an early indicator of this future national demand.

Compliance carbon pricing is on the rise: In 2024, nearly one-in-four retired carbon credits was used to meet a compliance carbon pricing scheme. As more countries turn toward carbon pricing as an efficient climate policy tool, and increasingly give carbon credits a role in their pricing schemes, this source of demand is likely to increase. 

Deadlines are looming for public corporate climate commitments: Demand from voluntary carbon credit buyers is also poised to increase. Corporate demand for nature-based carbon removal, via projects like afforestation and reforestation (ARR), is growing rapidly and may outstrip supply as soon as 2030. Projects that can survive the development pipeline today will command premium prices in a supply-constrained market in the coming decade. 

Corporate net zero rules are changing: SBTi’s latest corporate net zero standard 2.0 draft proposed requiring mitigation of ongoing emissions. Carbon credits are the most established tool for mitigating current emissions. If put into effect, this policy could drive new demand for nature-based carbon credits in the coming years.

Nature-based climate solutions (NBS) have the potential to deliver one-third of the cost-effective climate mitigation needed to keep the Paris climate targets within reach. Demand for carbon credits from these projects is likely to grow in the coming decade, creating a unique opportunity for investors looking to be early movers into an emerging asset class. Shifting NBS project finance from bespoke transactions to standardized structures will be pivotal to unlocking supply and scaling these solutions for meaningful climate impact.

The survey findings

This report is based on survey responses from 74 nature-based carbon project developers around the globe, collected between May and September, 2025. Survey respondents shared how they’re currently funding their projects, structuring offtake agreements with buyers, and where they’re running into the biggest hurdles accessing project finance.²

Nature-based climate solutions include a variety of land management practices that protect and restore nature, and in so doing maintain existing terrestrial carbon stores and remove additional carbon from the atmosphere. They include reforesting degraded land, protecting existing forests, improving the management of working forests, regenerative agriculture to boost soil carbon, and more. Together, NBS could deliver over one-third of the cost-effective climate mitigation needed to keep the Paris-aligned climate targets within reach. 

Carbon projects based on NBS provide a way to document and track the impact of these interventions utilizing third-party verified methodologies. These projects issue credits, each representing one ton of CO2 emissions avoided or removed from the atmosphere. 

Who responded to the survey

Survey responses came from seven types of nature-based carbon projects. The vast majority were from projects that remove carbon from the atmosphere, including nearly 50 percent from ARR and agroforestry projects. Only eight percent were from REDD+ projects, which avoid emissions.

Responses came in from projects on six continents, with the greatest concentration in Latin America and the Caribbean.

Primary funding sources

Respondents shared how they are funding their projects today, and had the option to select one of seven choices (see list in chart below). While many carbon project developers blend a variety of capital sources together, the survey only asked about a project’s primary funding source.

Nearly one-in-three projects used its organization’s balance sheet as its primary source of funding. This category includes company-level equity, founder funding, and, in some cases, revenue from other products or carbon credit sales.  

Project-level equity was the next most common funding source, at 26 percent of projects. Equity investors typically have higher return expectations than debt, making this an ‘expensive’ form of capital. Many respondents commented that the high cost of capital was a major obstacle to project development, reducing returns to local communities and making some projects financially infeasible. The survey didn’t provide quantitative insight into the impact of project-level equity on project cost. 

Much less common funding sources were pre-purchase agreements³ and project-level debt—each provided 13 percent of projects’ primary funding. Only a handful of projects relied on carbon streaming agreements or philanthropic capital, highlighting the limited supply of these for carbon projects.

Funding sources varied by project stage, developer age and experience, as well as presence of an offtake (see page 11). The data does not indicate which of these factors, if any, were responsible for the shifts in funding sources over time, and which were simply correlated. For the purposes of this report, the data have been analyzed by each factor. 

Funding by project stage 

Early-stage projects (those without a validated PDD) were most likely to use organization-level funds to cover project costs.

Project-level equity and debt were more common for more mature projects, though nearly one-quarter of respondents continued to use their organizations’ balance sheets as their primary funding source even in late development stages. 

Philanthropic capital funded 17 percent of projects pre-PDD but was rarely used as a primary project funding source for projects in later development stages, or for developers who had previously sold carbon credits. 

Funding by company age and experience

The longer a project developer had existed, the less likely its project was to rely on the organization-level balance sheet for funding. Nearly 40 percent of developers 2 years old or less were funding their projects via company balance sheets. But as developers crossed the three-year mark since founding, project-level equity and debt became more common than organization-level funds.

A variety of factors could be responsible for the move toward project-level finance over time. For example, project investors may be more willing to finance projects from developers who have a track record of success bringing credits to market. Alternatively, business development teams at more mature companies have had longer to establish relationships with investors and funders.

Offtake agreement structures

Offtake agreements are contracts in which the buyer commits to purchase credits from a specific project or developer in the future. They’re commonly used in capital-intensive sectors like energy, mining, and agriculture. By guaranteeing a buyer, they give investors confidence to finance a project. While offtakes are a standardized financing tool in many industries, they remain bespoke for NBS carbon credits, and differ by pricing structure, timeline, volume criteria, and more. 

Twenty-three survey respondents shared insights into the structure of their signed offtake agreements; another five were in late-stage negotiations. They included every project type in the survey, with just over half from ARR or soil carbon projects.

While most projects with signed offtakes were in later stages of development (issuing verified credits or close), one-fifth did not yet have a validated PDD. All early-stage projects with signed offtakes were removals-based projects, including ARR, agroforestry, soil carbon, and wetland restoration. 

Offtake pricing structures

Two-thirds of the offtake agreements surveyed used a fixed price per ton to set the credit price. This was far more common than tiered pricing structures based on volume, or fixed to a price index (like Xpansive).

Offtake credit delivery timelines

Offtake agreements include a credit delivery window, which is the period of time over which the project developer will deliver credits to the offtaker. Credit delivery timelines ranged from 1 to 50 years, with an average of 10 years. 

Delivery timelines were longest for project types that remove carbon from the atmosphere, including ARR⁴ and IFM. This makes sense, as project types that rely on growing new plants and restoring ecosystems cannot deliver large volumes of credits in early years. 

REDD+ projects, which can deliver credits more quickly, had the shortest delivery windows.

For three popular carbon removal project types—ARR, IFM, and soil carbon—offtake prices were higher than transacted spot prices. This may be due to growing demand for these project types, coupled with limited supply and the perception of higher quality in newer projects. 

Funding sources for projects with offtakes

Presence of an offtake was strongly correlated with use of project-level debt. While project-level debt was rare overall, 85 percent of projects relying on this finance tool had an offtake in place, or were in late-stage negotiations for one.

Projects with an offtake were also slightly less likely to rely on their organization’s balance sheet for primary funding, and much less likely to utilize philanthropic capital.

Obstacles to securing project finance

Fifty-four respondents shared their biggest challenges with securing project finance.⁵ Responses fell into seven categories:

• Early project development costs and due diligence timelines: Including the costs of early project development, meeting due diligence requirements, maintaining operations during lengthy due diligence timelines, and implementing measures to mitigate risk, such as purchasing project insurance. 

• Market uncertainty: Investor and project developer uncertainty about future demand for carbon credits, price volatility, and pending government and NGO policies that could impact project development and carbon credit demand.
  
• Lack of signed offtake: Respondents cited their lack of signed offtake as their top obstacle to accessing project finance.
  
• Cost of capital: The cost of capital, including high investor return expectations, mismatched with project returns. Many developers noted this as a major concern for the viability of their projects.
  
• Investor awareness: Low investor awareness and understanding of carbon markets generally and nature-based carbon projects specifically, including credit delivery timelines, project cashflows, and revenue sources.
  
• Access to funders: Finding, accessing, and building trust with potential investors and donors.
  
• Project uncertainty:  Uncertainty in estimating project costs, future delivery volumes, and timelines. 

Far and away, the high costs of getting a project investment-ready, including lengthy investor due diligence timelines, was the top obstacle respondents cited to securing project finance. This was followed closely by uncertainty about future demand for carbon credits and the cost of capital.

Respondents also commonly cited the lack of signed offtake agreement as a core blocker to securing finance, underscoring the role of offtakes in providing investors with the confidence necessary to deploy capital, knowing the project will generate revenue in the future.

Uncertainty in project costs

Respondents overwhelmingly identified the cost of capital as their greatest source of uncertainty in estimating their overall project costs.⁶ This uncertainty slows project investment, development, and ultimately the entire market.

The cost of project finance can dramatically change overall carbon project costs, and ultimately exert a major influence on carbon credit prices, according to other research on carbon removal. 

Some developers also cited uncertainty around the costs of MRV, particularly as technology and standards are evolving rapidly in this space. The cost of audits and certification as well as costs of community engagement were also areas of uncertainty, but mentions of these appeared far less frequently than those related to the cost of capital.

The nature finance opportunity this decade

Current funding commitments for NBS carbon removal translate to enough credits to meet about half of expected demand in 2030, based on existing publicly announced purchasing commitments. If demand for high-quality NBS carbon credits grows in the coming decade, as many global, national, and corporate policy signals suggest it will, the market will be caught flat footed, without a sufficient pipeline of high-quality projects. 

Closing the finance gaps for nature-based carbon projects will grow the pipeline of projects able to deliver credits in the 2030s and beyond. Some of the most tangible opportunities to do so include increasing low-cost funding available for early-stage projects; streamlining investment due diligence cycles; and systematizing offtake agreements to unlock lower-cost capital. Each would provide greater certainty about the cost of capital, creating more transparency about project costs and ultimately credit prices. 

Addressing the NBS finance gap offers investors a chance to enter an emerging asset class, build the project pipeline needed to meet future market demand, and scale a critical climate solution.

A note of gratitude

If you are one of the carbon project developers who donated their time to this project by responding to the survey, thank you!!! I hope this report is a useful resource for you and the whole nature-based carbon project community as we work to scale this climate solution. Thank you for your work.

Many people helped along the path to bring this report together. My sincere thanks to Edit Kiss, and Shauna Matkovich for advice on survey design; to Jen Stebbing, Leigh Madeira, Utkarsh Akhouri, and the Art of Forests community for helping to spread the word about the survey; to Destin Whitehurst for reviewing an early draft of the report; and to Laura Pau Burgos for giving Carbon Capital Lab a logo! 

All errors in the survey design and data analysis are purely my own. 

(And if you do see an error, reach out and let me know!)

Margaret Morales
Director, Carbon Capital Lab

Carbon Capital Lab equips investors, carbon buyers, and project developers with strategy and research to navigate carbon markets. If you’d like to work with me, please reach out.

Glossary

This report uses a variety of abbreviations and terms to describe carbon project types and finance structures. Here are the most common terms and abbreviations you’ll find in the text:

ARR	Afforestation, Reforestation, and Restoration – a carbon project type that removes carbon from the atmosphere by restoring forests or afforesting degraded land.
IFM	Improved Forest Management – a carbon project type that removes carbon from the atmosphere by increasing carbon in working forests.
MRV	Monitoring, Reporting, and Verification – the data collection carbon projects undertake to track and measure their impact.
NBS	Nature-based Solutions – a variety of land-management practices that protect and restore nature, and in so doing protect existing terrestrial carbon stores and remove additional carbon from the atmosphere. They include all of the carbon project types reviewed in this report, and many other practices not covered here.
NDC	Nationally Determined Contributions – climate action plans produced by individual countries under the Paris Agreement, outlining their plans to reduce greenhouse gas emissions to reach global climate goals.
PDD	Project Design Description – a document detailing a carbon project’s activity. Developers submit this document to a project registry to begin the process of assessing compliance with a project methodology.
REDD+	Reducing Emissions from Deforestation and forest Degradation – a carbon project type that maintains standing forests to protect existing terrestrial carbon stores and implement practices that continue to grow the carbon stocks in these forests.
SBTi	The Science Based Targets initiative – the most recognized standard setter for corporate voluntary climate commitments. It has published both a net zero standard and a near-term emission reduction standard, charting a path for organizations to align decarbonization plans with global climate targets.

1. This report uses a number of industry acronyms and terms. For definitions, see the glossary at the end of this report. ↩︎
2. Survey respondents could skip any question in the survey. As a result, charts have slightly different
   sample sizes throughout this report. ↩︎
3. The survey defined pre-purchase agreements as upfront payment for carbon credits. ↩︎
4. Delivery timelines for ARR offtakes varied widely, from 3 to 50 years. ↩︎
5. Survey question: What’s your biggest challenge with securing project finance?
   This was an open-ended question. Responses were coded into one of seven categories. Some
   responses straddle two primary categories and are counted under both. ↩︎
6. Survey question: Where do you see the most uncertainty in your cost structure?
   Respondents could select one of seven categories, including ‘other,’ with an option to share further detail. Responses from those who selected ‘other’ included project and demand-side uncertainty, which are reflected in the chart, alongside the other original six categories. ↩︎