Clyde & Co supports Terra Natural Capital on insurance aspects of groundbreaking afforestation project

Clyde & Co's Climate Risk Team is proud to have assisted Terra Natural Capital in its collaboration with Climate Impact Partners and Microsoft, to finance the groundbreaking Panna afforestation project in Madhya Pradesh State in India. Panna is projected to remove 3 million tonnes of CO2 from the atmosphere, while significantly benefiting local communities and biodiversity in the region. Clyde & Co’s team advised on the legal aspects of a novel, bespoke, carbon insurance product issued for the project.

The Panna project is Microsoft’s first in India and largest in the APAC region. Brian Marrs, Senior Director Energy Markets at Microsoft said: “The collaboration with Climate Impact Partners helps to ensure that millions more trees are planted, more carbon is removed from the atmosphere, more jobs are created, and more finance flows back to local communities.”

The Panna project showcases how nature-based solutions can be used at scale and on a long-term basis. As Sheri Hickok, CEO of Climate Impact Partners stated, “Panna exemplifies how companies can help scale large-scale carbon removal infrastructure.” While Erica Vertefeuille, Managing Director of Terra Natural Capital, commented: “This transaction reflects the power of collaboration between trusted project developers, corporate demand, and innovative finance to unlock climate impact. We recognize that access to project finance is a critical need for the carbon removal market to scale and are committed to providing long-term capital that will accelerate project development and empower corporates to achieve their climate targets.”

De-risking the project was of utmost importance to make it viable for all parties involved, and resilient on a long-term basis. Hence identifying appropriate insurance solutions was paramount. The use of specialised carbon insurance to help de-risk the Panna project is a great example of how insurance can help scale carbon removal projects, thus enhancing resilience and fostering a low-carbon future.  

Carbon dioxide removals (CDRs) are considered an important tool for mitigating climate change and the risks it poses socially, environmentally and economically. Therefore, many businesses are looking to CDRs to both achieve their own sustainability goals and to comply with wider national and global targets.

For example, Clyde & Co recently advised on a pioneering Investment and Carbon Credit Offtake Funding Arrangement for a carbon capture project aiming to decarbonise the Scotch whisky supply chain.  Such investments are a way for businesses to look to “positively contribute to the achievement of net zero emissions, as well as the provision of financial returns to investors by way of CDR credits”, as stated by Nick Purnell, a Corporate & Commercial Partner at Clyde & Co who led the team on the project.

However, such projects introduce significant risk, requiring long-term investments and commitments alongside an ever-changing economic climate – particularly when CDRs are achieved through nature-based solutions such as afforestation, reforestation and restoration (ARR) projects like the Panna project. 

A key way to mitigate this risk is through insurance. As the Prime Minister of Barbados Mia Amor Mottley deftly put it: "what is not insurable, is not investable."

Insurance provides an avenue for businesses to maintain financial stability and the viability of carbon removal projects, managing any arising operational issues and attracting further investors and partners. As such, the insurance industry can act as a “fundamental enabler” to the future of these projects, as noted by Natalia Dorfman, CEO of Kita, a carbon insurance firm.  

The Clyde & Co team worked to address queries arising from novel carbon insurance products, by leveraging expertise in insurance advisory work, combined with subject-matter knowledge in the fields of climate risk and sustainability.

Learn more about the project here: Press release - March 6 25 - Terra Natural Capital, and about our experience and capabilities here: Climate Change Risk | Clyde & Co : Clyde & Co.  Please do not hesitate to get in touch.