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DCS #08 Maria Eugenia Filmanovic of Abatable

Published: 01 Jun 2023

Last Updated: 19 May 2024

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In this episode of Developing Carbon Stories, we speak with Maria Eugenia Filmanovic, our Co-Founder about our annual Carbon Project Developer Ecosystem Report, what the growing ecosystem of projects means for our efforts to tackle climate change, and how carbon developers are adapting to the evolving ecosystem.

Download the Developer Ecosystem Report.

Read more about the Carbon Project Developer Curve mentioned in the episode.

More about Maria.


Pauline Blanc: Hello, my name is Pauline Blanc and this is developing carbon stories, a podcast about product developers developing the most innovative and impactful carbon projects around the world.

Developing Carbon Stories is a project by Abatable, a carbon procurement and intelligence platform that enables companies to purchase high-quality carbon offsets.

During each episode, we speak with an entrepreneur from a different part of the carbon ecosystem and talk about their journey so far and how they are acting on climate change.

On this episode, we are speaking with our very own Maria Eugenia Filmanovic, co-founder of Abatable. We discussed our annual current product developer ecosystem report and what the growing ecosystem of projects means for efforts to tackle climate change.

DR: Maria, thanks so much for joining me on today’s bonus episode of Developing Carbon Stories. Thanks for joining.

Maria Eugenia Filmanovic: Thank you, David, for having me. And today we’re going to talk about Abatable’s recent report called the State of the Carbon Developer Ecosystem 2023 Edition.

DR: Why don’t you talk us through why Abatable decided to publish this report in the voluntary carbon market space and why it’s important?

MEF: Fantastic. Well, thanks so much again, David. Yeah, as you said, we’ve published a recent report. This is the second edition of the state of the carbon developer ecosystem talking about key themes and trends we’ve observed in the voluntary carbon markets in 2022. This is coming after our successful release of the previous report, Integrational One that we published last year with over 1000 downloads from the entire community, primarily developers, and investors that are really interested in this theme in particular.

And like other research reports, we’ve looked at the voluntary carbon market through the lens of the developer themselves. So, putting aside any sort of project or registry-specific profiling, which we’ve seen from reports and we’ve leveraged data from main registries: ACR, car, gold standard, Vera, and used most importantly, some of our proprietary data as we engage constantly with developers on the market.

DR: Yeah. Wow, okay, that seems really interesting. What were the key themes that the report touched on?

MEF: Yes, some of the key observations as we saw that this market really evolved over the last two years or so. Firstly, and foremost, we’ve started to see the first signs of developer ecosystem consolidation. And what we mean by that is the observation that despite the fact that the developer ecosystem is highly fragmented, there are very few large players and a long list of very small regional players.

For the first time, we started to see the signs of consolidation. How we’ve measured that is by looking at the percentage of historical issuances in the top 15 developers across all project types, and what we see is that there’s been an increase in the percentage point of historical issuance in the first few names.

Why has that happened? Well, predominantly because of the merger and acquisition activities that were started to be announced in 2022.

MEF: And certainly, the percentage of historical issuances are likely to grow in the top 15 names in the space. Some of the notable transactions that have happened and mergers that have happened include self-polls, which is per our ranking of top 15 developers, top three in our list.

They’ve increased substantially both their number of issued credits, but also a number of projects, and that came from the back of an acquisition they’ve done of, in particular an Italian-based developer called Carbon Sync. The other one we saw was the acquisition of Mitsui Global forestry developer and Investor New Forest, which is a US-based investment platform, and then also a lot of activity coming from a new environment which has merged with, you know, came on the back of a merger that TPG, which is a private equity firm, arranged between Blue Source and element markets, which are very major US developers. So, this is the first theme.

DR: Is that, is that trend of consolidation, is that something we’re expecting to see continue this year and next in the future?

MEF: Yeah, I think we’re going to see some consolidation for sure. The market is highly fragmented, as we saw. And so, there’s an opportunity to build market share as developers think about, you know, establishing presence in key markets, whether it’s US or emerging markets. And certainly, we’ve also observed drive to try to build regional or global portfolio. So, a lot of developers historically tended to be country specific, and now there’s an opportunity to build scale at a regional level and diversify portfolios.

DR: But of course, there’s also been a bit of a trend in expanding the developer portfolio as well. Can you talk a little bit about that?

MEF: Yeah, exactly. So that’s the second theme that we picked up as we looked at the data. So certainly, we’ve looked at the expansion of portfolios, the trends that we’ve observed is migration from country-specific to global players.

So, from, you know, an expansion of the set of portfolios that matter. And also, the other thing that we’ve observed is the fact that new players coming onto market and we’ve assessed roughly 180 new developers were added on registries in 2022, they themselves have been coming to market with an average portfolio size already of 2.8 projects. So that means that whoever is coming and new entrant is already thinking about the portfolio approach and not a single individual project.

DR: And so, is that an increase in the average number of projects that we saw in the last developer ecosystem report?

MEF: Yeah, of new players for sure. What we’ve noticed is also the fact that a lot of these new players, they are getting more financing.

And so, I think they’ve been re-upping their ambition from the start, which means that, you know, the portfolio purchase, something that they start with and it hasn’t historically been the case.

Historically, a lot of people were focused on building pilot projects focused on proving the concepts and then raising after that.

DR: And so, as they’re developing these larger portfolios, moving into multiple regions at once, are they also diversifying the project types that they have in their portfolio?

MEF: To a certain extent, yes, that’s something that we see and still connected to perhaps the key theme i.e. nature base, perhaps think about nature-based developers, they might be thinking about sole carbon projects as well as deforestation, reforestation, some in some ways also projects that were historically looking at renewable energy and are moving into nature base given the buyers preferences that are driving future demand expectations.

The other things that we’ve noticed, one of the third theme that I wanted to touch on as well as part of this report, is the fact that we’ve seen a huge amount of new projects coming on, specifically in the sustainable agriculture theme, that came on the back of potentially a lot of conversion of CDM project, or Clean Development Mechanism, that are now transitioned temporarily into the voluntary carbon registries.

And you know the key thing that we noticed was a list of Chinese developers that had portfolios of Rice Mission Management project that got converted and so certainly that bumped a lot of these new entrants data that we’ve looked at and a lot of financing activity went into cocktails developers substantial amount, some of the largest funding transactions that we’ve noticed went into expanding portfolios of project developers like Seaquest, Up Energy, Burn Manufacturing, which secured extensive amount of funding in 2022 to accelerate growth.

DR: Yeah. And that’s really interesting you touch on that. I mean, another thing I noticed in the report, it touches on the total amount of investment or estimated investment within the voluntary carbon market last year and it was something around $10 billion or so, is that right?

MEF: Yeah, exactly. We tracked number of funding transactions specifically into project developers, whether it’s equity project financing, carbon purchase agreements, and in total, we estimate that it’s the announced transaction are 10 billion and potentially of course way more as a number of these transactions don’t have announced amounts and so potentially anywhere between 10to even up to 26 billion is our estimate of the total funding that went into the space, which is a record year relative to our 2021 data came up on.

DR: Hmm. And where are these investments going? I mean, who are the players that are putting for these investments and what are they investing into?

MEF: Yeah, a lot of them still the, the, the majority of the funding goes into nature-based project as we touched on, there’s a lot of buyers preferences moving to that direction, whether it’s corporate publishing, nature positive commitments or re-appreciating the importance of forced protection conservation efforts as well a drive towards removal, something that we’ve seen also and nature-based projects offer a more cost-effective solution relative to carbon dioxide removal technologies.

So that’s one area, certainly prominent, consisting of 2021 as well. The marginal increase in investments this year came into cookstove projects, which we touched on. We think that that’s on the back of the fact that people realise the fundamental economics of developing cookstoves. Investing in cookstoves are quite attractive relative to where market prices are today, and certainly cookstoves will provide a social impact element as well, which buyers kind of care about and want to support indirectly through the carbon markets.

DR: Yeah, sure. And I mean that increase in attention towards cookstoves, do you think that was partly to do with the erosion of trust in the market towards red plus projects?

There was a fair bit of negative press that came through last year and just recently this year too. Are people moving more towards cookstoves because of that? you know, and also cooks, those being a similar price point, a lot of the time.

Is that a trend or is that something that came a bit later?

MEF: Yeah, definitely came a bit later, I would say. Of course, one of the watershed moments in this market has been the Garden article that a lot of people have seen and you know started to… through that started to question the integrity of some of the Red Plus project.

The funding activity that we commented on is certainly something that was a bit isolated relative to most recent events. And so, it’s just, I think that the key drivers of the cookstove interest came on the back of the realisation that a lot of funding went into nature base already and was going into, and the market of nature-based project developers was getting very competitive.

And so, by virtue of looking into the next attractive investment category, I think people got drawn into the cookstove category as a result.

Going back to your question on who is investing in this market, I think one of the things that we realised is that there is an increasing appetite for investors or commodity traders and intermediaries to back projects earlier into what we call the carbon project development curve.

So, the carbon project development curve is simply, what it stands for, is a reflection of the fact that you know, the earlier you back project into the more risk you’re taking because of the volume risk, market risk, you know, political risk as well, of backing this project. And so, by virtue of that you have a higher investment expectation as well.

So, the funding is moving to an earlier stage, which is a strong sign of interest that there is in this market and certainly I think a symptom of the fact that people are realising that it’s more competitive to get funding secured and volume secured earlier on into this project life. So that’s what’s happening. By virtue of that, I think you know the kind of people that invest in this market are people that want to stomach the higher risk and higher potential and also are comfortable in underwriting potentially with our emerging market risk and political risk.

If you think about all the uncertainty that still exists related to Article 6 regulation, that’s a big bet that a lot of people still take as they invest. And so, the kind of investors we see tend to be more nimble investment firms. We’ve seen the emergence of carbon streaming companies– there’s a big ecosystem in Canada that’s starting to form, and then commodity traders are still quite active in the space and to a certain extent, emergence of impact investment funds that are also interested in allocating into impactful projects as well.

DR: That’s really interesting. I mean, as these investors and buyers are moving further up the development curve, and we’ll probably put a little visual on the video of this as well so that the listener can see the graph that we’re talking about, that it shows it a bit better. As investors are moving further up this development curve and taking on more risk, does this mean that they’re looking to mitigate risk by looking at established developers in the market, developers that have already got a proven track record that develop projects and so inherently we’ll have a little bit less risk in developing a project?

MEF: That’s a really good question. I think the trend is certainly moving to that direction. And as I said, you know, you’re taking a lot of risk early on.

So, you want to be backing a team that have experience in developing these projects, have technical in-house expertise. They’re not quite outsourcing that necessarily through different consultants, and can really manage the process in delivering successful, you know, carbon delivery over time.

So yeah, there’s almost this perception of like land grab somehow, like the very large established players are getting a lot of attention. And there’s this long tail of new entrants or smaller developers, very localised and regional, that don’t quite get the same amount of investment attention somehow.

Of course, I think from an investment community, it probably is an opportunity to look deeper into some of this long tail and perhaps pick one or two that are really building a lot of expertise and you know might just need that capital to be able to get to that next stage. And so, from an investment perspective, it’s a really interesting thesis that I think a lot of investors may want to consider down the line, provided the fundamentals of this market continue to be strong and you know we continue to see a lot of demand and prices to go up.

DR: Yeah. So there have been some sort of landmark deals, I guess you could say, in the last year. Would it be worth pointing out a few of those that are mentioned in the report? Some notable ones?

MEF: Yeah, yeah. Different types. As I said, there’s been some mergers and acquisitions. Certainly, the carbon sink acquisition. But South Pole was a notable one.

There’s been quite a few also in the US. For example, Chestnut Carbon, Force, Carbonworks, which are US developers, have received large investments from Kimmeridge as well. In terms of the other acquisitions we’ve mentioned, New Forests, which is the forestry asset management firm, has been acquired by Mitsui and Nomura.

And then in terms of the other one in Canada was Radical, which was a Canadian Developer, which had been acquired by BMO, which is the large institutional player in Canada as well. So that’s on the acquisition side. In terms of investment, I’d say the largest one we saw, certainly you know something atypical, that we don’t see, it’s been an over a billion-dollar asset acquisition by Anew, a portfolio from the Forest Land Group, it’s 1.8 billion actually. There was a timberland portfolio which you know if you’ve been tracking timberland transactions in the US, they tend to be quite large.

But I think what was interesting with this one is that they’re explicitly mentioned carbon as a key driver of that interest into that.

And then we continue to see quite a few equity investments into developers as they’re trying to professionalise, build new teams, expand reach, and I think that will translate eventually into more project financing on the back of those equity investments.

DR: And so, these trends that we’re seeing in the last year or last two years, are we expecting to see these continue into 2023? Namely things like market consolidation, the expansion of developer portfolios, is that something we’re expecting in the next 12 to 24 months?

MEF: In terms of financing, certainly we would probably expect a level of consolidation as we talked about, there’s probably going to be a slowdown in financing activity, we think on the back of the fact that the prices of carbon credits this year have been slightly more compressed relative to the beginning of last year certainly. So, investors probably will need to restore a little bit more confidence in the fact that these projects may be able to deliver the revenues in the future as prices are expected to potentially go up.

We still probably still will see some interesting nature-based projects just given where bias preferences are– they actually are expected to go directionally given the guidance on a focus on removals certainly, but also this nature-positive commitment and biodiversity as a result, we saw the strong interest there and certainly you know translate into the carbon carbon force protection work as well. So yeah, in terms of financing, certainly in terms of you know other things that we are expecting in 2023, probably a continued amount of new entrants. This market is still a hot thing on people’s agenda. We see, even an Abatable, it’s incredible the amount of new players that we come across that reach out to us every week.

On average, we meet, you know, 15 developers. Most of them are quite early into their journey and are getting sophisticated by the day. So hopefully they will come to market and attract more financing down the line. In terms of new players, certainly more CDR technologies like the ecosystem forming within certain new emerging technologies in the removal space, but also in more developed economies. So, Europe is certainly something that we will see more of as there’s a direct framework that’s going to be published.

And also, we saw some new interesting activity in Mexico with new players and within the Climate Action Reserve ecosystem– so CAR.

And then aggregators, is what I call aggregators, it’s– think of like a tech company that has been developing an MRV solution. They’re now coming to market and saying we can be the project developer and work with different project implementations that are using our MRV solutions.

And so, they’re coming with this portfolio approach– it’s quite interesting. You know some of the things we saw was Pachama, launching the original programme, Boomitra, which is an ag-tech company, is also coming with a portfolio to market, so that’s certainly a trend to monitor closely.

DR: And all this as well, I mean it’s hard to ignore how this will play into Article 6 movements in the next couple of years. Do you have any insights into that and how developers will be participating within those emerging frameworks?

MEF: Yeah, really great question. Article 6 is a big unknown still today. A lot of this regulation is yet to be formed and certainly will be more clarity will be announced on the implementation of registration of Article 6 frameworks probably around the next COP and subsequent COPs. If you think about it from the perspective of developers themselves, I think a lot of them see the Article 6, you know, convergence from the voluntary into the compliance is quite attractive because historically compliance markets have commanded a higher price for tonnes, and especially if you can nest project and sell voluntary into compliance frameworks, you can benefit from that uplift. So, I think a lot of developers are trying to prepare for Article 6 and are trying to engage governments somehow to get a level of corresponding adjustments that would allow them potentially in the future to be eligible under these training frameworks.

We’re starting to see this in the form of potentially diversification of portfolio, back to my earlier point, some developers might be considering, you know, being Article 6 ready with some of the new projects that they’re looking to bring to market to have this optionality to sell into higher prices framework. So that’s something that’s interesting. And you know, hopefully something we’ll see more of in terms of announcements in 2023 and onwards.

DR: Yeah. And in terms of the risk that you know the unknowns around how a country will adopt a new Article 6 framework, the risk that that poses for developers, do you think that’s also potentially behind developers looking to diversify which regions that they’re working in, which countries they’re working in? If you have projects situated in multiple countries, perhaps you’re like mitigating the risk of 1 country completely, you know, absorbing voluntary credits within their article 6 framework? Does that play a factor at all in decision-making for developers?

MEF: Yeah, I think it depends on the developers. Some of them have a regional reach by virtue of how they’re built and you know, organisation is structured. Some of them might be harder because they’ve been focused so much into a region and developing government relationships in one specific region. Of course, it’s nonscalable to do this across multiple regions. You need a lot of resources, so probably the highest resource developer is likely to think about it in the same way you’ve described it. But think about the long tail small developers, not a lot of them, have that resources and capacity. But funding into them could actually facilitate that.

And if the investors communicate it as you know, something that they need to be thinking about practically, perhaps that’s something that they can, you know, include in their ambition.

DR: And so, this is the 2023 edition of the report. When are we expecting the next report of this?

MEF: Yeah. So we’re going to likely publish a second report in the beginning of next year, but instead of waiting for a full year, to see some of our research, we’re likely to do a mid-year check sometime in the summer where we’re going to be leveraging a lot more information that we receive from developers directly, and so just a sneak peek into what the year has been. And that’s likely to come out in July or August.

DR: Yeah, sure. And there’s plenty of content that we’ll be looking to publish in the short term as well before then, you know, including the policy paper, the most recent policy paper, which I suppose by the time this podcast episode is published it probably will be already out and well received by the market. Any other key pieces that we’re looking to publish in the next few months before this update comes out?

MEF: I’ll say definitely check out the Developing Carbon Stories podcast that David has been leading and it’s fantastic. I think I’m very proud of the fact that we provide these opportunities for developers to speak about their stories and impact narratives from the ground to buyers and investors that, you know, might not have the opportunity to have access to them or be able to travel out there. That’s one. And then the other thing that we’re also doing a lot of is advocacy for corporate buyers and trying to educate them as purchasers of carbon credits.

We are going to publish what we call a Net Zero procurement guide, which is essentially a step-by-step guide on how to think about your carbon procurement as a corporate. And we are trying to align a lot of the advocacy work with industry standards that are coming on, potentially with more guidance at the end of this year, whether it’s SPTI or the VCMI initiative. So that’s certainly something that we want to be driving more of. And so, check those out, it’s likely going to come out in the next few weeks.

And we’re going to be organising a lot more content webinars and we’re also thinking of a potential conference in the second half of this year where we’re going to be bringing some developers into a room in front of corporate buyers for them to be having direct exchange and talk about what’s happening in the voluntary carbon market and potentially trying to contrast a bit this erosion of trust narrative that– we don’t think it’s productive for the advancement of this important instrument that is the voluntary carbon market.

DR: Wow. So, lots of content, lots to be excited about. Lots of work for us. But thanks so much for joining on today’s bonus episode of Developing Carbon Stories. It’s a pleasure having you and very interesting to hear these insights.

MEF: Thank you so much, David. Keep up the good work. A lot of hard work, but we’re on to a great mission, which is advancing this market. So, thank you all for listening.

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