Is there a novel approach to help fund carbon project developers based on structured carbon credit offtake contracts?

That was the central question a group of developers, insurers, buyers and financiers came together to discuss on a sweltering day during London Climate Action Week 2026.

The conversation sought ways to assess a proposed collaborative structure between finance providers and insurers which could see finance providers offer lower cost capital to founders against the delivery of carbon offtake credits. By lending the bulk of the funds needed to scale FOAK projects, with the risk of failed delivery covered by an insurance policy, the idea could offer corporate offtake buyers a “safety net” of sorts.

The solution aims to help buyers meet their commitments while empowering project developers with the capital they need to scale and deliver meaningful carbon projects in a more affordable way than securing capital through dilutive venture capital investment.

The idea aims to reduce the likelihood of failed delivery by providing meaningful capital upfront while limiting buyer risk from the outset, this model could help businesses that are too small to secure project finance, to unlock lower cost capital and build their projects without relying on institutional or philanthropic capital.

Of course, the true test for any innovation is introducing it to market. So how did founders and specialist investors in the room react to the idea?

Before understanding the potential of this solution it’s crucial to understand the overarching climate tech funding landscape and the underlying need.

Unlike software-focused ventures, building climate tech is comparatively capital intensive². Innovation requires significant funding at the research phase, to pilot, and to build – largely because many of the solutions are the first of a kind (FOAK).

The need for vast upfront capital with little historical performance data means that traditional investors have chosen to focus their investment on established, NOAK (Nth-of-a-Kind) technologies rather than unproven solutions.

The numbers speak for themselves. According to new research from Currence (previously Sightline Climate), overall investment was up 8% YoY in 2025, but deal count was down 18%³. That suggests investors are deploying larger tickets into proven, quality businesses, which amplifies competition.

Assessing investment flows by stage confirms this perspective.

Investment into Seed and Series A startups fell 20% and 7% respectively with Series A deals down 22%. While Series B investment was up slightly (7%), the situation is more challenging at Series C where investment fell 32%⁴.

That means many crucial innovations are falling at the final hurdle because they can’t attract capital to turn promise into real-world application.

It’s a familiar problem. Many innovative climate solutions stall in the “missing middle” between technical proof and commercial competitiveness. Making the leap from proof of concept to pilot calls for significant capital, but the traditional institutional capital and private investment needed to lower costs is structured to arrive when solutions are close to being cost-competitive. And with a typical threshold of $100M, project finance is not a practical option either⁵.

As one attendee acutely summarised, “the bottleneck is bankability”.

So how might collaboration find a way to bridge the gap?

As corporations and countries strive to reach their own decarbonisation goals, many have taken to purchasing carbon credits through offtake contracts⁶.

Each credit represents a removal of 1 metric ton in greenhouse gas emissions to compensate for a metric ton of emissions made elsewhere. A credit can be bought, sold or traded before it is “retired,” meaning it cannot be traded again, assuring that only the buyer can claim emissions cuts associated with that credit⁷.

Agreements between carbon project developers and buyers – often large corporates, who are becoming more active investors in the climate space – are a formal transaction that should help both sides achieve their goals.

For the project developers the contract ensures there’s funding for them to scale their innovation, while buyers have the security of knowing they will meet their emission targets.

• Buyers can secure a consistent supply of high-quality credits from projects through choice, managing price risk, and possibly influencing project development
• Project developers can secure revenue early, which helps in financing and scaling projects

However, founders building emerging technologies often find it difficult to commit to a long-term contract. There’s an inherent risk that they may not be able to deliver specific volumes within a set time and strict terms put the whole venture at risk. It’s the nature of new innovation: what works in the lab may not operate as effectively in the real world.

The result is that the carbon offtake contracts themselves are often structured in a way that leaves either the project developer or the buyer at risk. Fail to deliver and the contract can be terminated.

That means developers are out of pocket while buyers miss their decarbonisation milestones.

One way that could unlock the kind of “catalytic climate investment”⁸ needed is to create a structure that seeks to insure against risk and spread financial pressure between the buyer, and a finance provider.

For example, a bank may lend the majority of the value of carbon offtake agreement to the project developer at the outset so that they can access the capital they need to move to pilot. If failure to meet agreed targets is insured for a significant proportion of the contract value, then buyers may gain confidence that their investment into the project is covered - whether the technology delivers the yield promised or not.

Like any lending solution, the project developer would have to repay the bank within an agreed timeframe and terms, but by spreading risk, this kind of collaborative approach may well help carbon projects to land and pave the way for future solutions.

The challenge holding back many climate tech scale-ups isn’t ambition or science. It’s bankability. Carbon offtake contracts already align buyers and developers around real-world decarbonisation outcomes, but for FOAK projects the delivery risk can make those agreements brittle. If projects under-deliver, developers lose funding and buyers lose certainty.

A collaborative structure that combines lower-cost capital with specialist insurance could change that equation. By lending against contracted offtake value and insuring a portion of non-delivery risk, the model aims to give corporate buyers a credible “safety net” while giving founders the runway to build and prove pilots at scale.

If market appetite follows, this could become a practical way to help the right innovations survive the missing middle, and set a repeatable path for the next wave of climate solutions.

*Note, carbon offtake contracts are long-term agreements where a buyer commits to purchase a set amount of future carbon credits from a project developer over multiple years.