Building an evidence-led view of a multinational mining group's carbon portfolio

The company had deployed and committed capital into a nature-based project portfolio spanning 14 assets across four countries, but it had no independent, third-party view of what that portfolio was actually worth, how the underlying projects would perform against leading carbon market integrity frameworks, or where risk was concentrated.

Nature-based carbon credits face close scrutiny over additionality and quality, and the company's financial commitment to the portfolio was substantial. It needed a defensible, evidence-based view to inform decisions on retention, commercialisation or further investment, one robust enough to satisfy internal governance and external scrutiny.

The client was hands-on in the market, originating and developing projects in-house and sitting across the roles of corporate, developer, and investor. That made an independent, outside-in valuation critical to the business.

The review needed to answer two strategic questions: 

1. Was it more economically rational to continue to invest in projects for offtake, or move to purchasing carbon credits annually on the spot market.
2. How to weigh the economic return of both their regional investment strategies and the subsequent community benefits from those investments.

To assess the portfolio, Abatable ran technical due diligence on each of the 14 projects individually, rather than applying a single portfolio-wide assumption, before rolling the findings into one consolidated view. Economic assessments were conducted by evaluating each project’s current design and using detailed economic models to investigate how return-on-investment could be enhanced.

The work drew on Abatable's proprietary forward price curves and a pricing database of more than 100,000 price points, giving every project a market-referenced view of its future value.

This saw Abatable:

• Assess each project against additionality, permanence, measurability and safeguards criteria, and screen for delivery, country and proponent risk. We quantified the potential shortfall in credit delivery from these risks and rated each project low, medium or high.
• Benchmark methodology risk against the Integrity Council for the Voluntary Carbon Market’s (ICVCM's) Core Carbon Principles (CCPs), checking CCP status and approved methodology versions project by project, and test every project for CORSIA eligibility, and Article 6 and voluntary routes to market. Where a project could qualify for a compliance market, we quantified the price premium available and the level of effort needed to reach eligibility.
• Model pricing and return scenarios for each project, combining our due diligence outputs, market indicators, expected demand and supply, and pricing from comparable peer projects across the lower, median and upper market quartiles. We modelled different investment structures, including pre-pay offtake, right of first refusal, and CSR funding, and reflected each project's development stage from feasibility through to issuance, classifying each project as in- or out-of-the-money relative to the client's target return.
• Consolidate findings into a bottom-up and top-down portfolio financial valuation model, combining benchmarking, discounted cash flow and real options valuation. This included developing sophisticated financial models for all 14 invested assets, assessing the carbon credit stream and creating detailed benchmarks using proprietary Abatable forward price curves, segmented by project type, region, and specific project-level integrity and premium characteristics.
• Score each project on social and biodiversity impact through a dedicated co-benefits assessment, reflecting the client's focus on high co-benefit projects and putting a value on those co-benefits. This framework allowed us to measure intangible metrics and allocate a suitable premium on the value of the portfolio based on the local ecosystem and social impacts delivered in the company's areas of operations. Claims were tested against a framework derived from the UN Sustainable Development Goals and the Kunming-Montreal Global Biodiversity Framework, then converted into a premium or discount on each project's forward price.
• Recommend a clear course of action for each project – divest, retain and review, retain and bring in a co-investor, or commercialise – scoring against the client's hurdle rate and an economic feasibility test.

Results

• A defensible portfolio view – An independent, evidence-led assessment, identifying where the value and the risk sit across all 14 projects in the portfolio, spanning four countries.
• Comparable co-benefits – A consistent basis for evaluating developer claims on biodiversity and community impact across the portfolio, and assessing the associated financial upside.
• Standards alignment – A view of which projects meet CORSIA and ICVCM CCP criteria, and where methodology or delivery risk could affect future issuance.
• Clarity to move forward – Decision-making confidence underpinned by rigorous financial analysis using proprietary data and modelling under different carbon market scenarios.