ReFi is becoming even more regenerative
Solid World, a digital infrastructure company dedicated to scaling climate finance, today announced the launch of carbon market liquidity pools on the Polygon Proof-of-Stake (PoS) network. Solid World (SW) joins a growing hub of regenerative finance (ReFi) activity across Polygon protocols.
In a market that is currently struggling to scale due to restrictions on market entry and over-the-counter (OTC) trading restrictions, Solid World is democratizing access. Solid World’s Liquidity Providers (LPs) enable liquidity, pricing and risk mitigation to scale financing for nature-based carbon projects globally.
Solid World’s first launch is the CRISP-M pool, a mangrove blue carbon pool with open participation in the restoration of mangrove forests around the world in locations such as Senegal, Myanmar, Sri Lanka and Indonesia, managed by leading project developers such as ALLCOT, MangroveDAO and Vlinder. The Solid World liquidity pools are open to all interested parties.
Mangroves are one of the fastest and most effective ways to remove carbon from the atmosphere because they can store carbon for thousands of years. They provide important habitats for a variety of marine life, protect coasts from erosion and are a livelihood for many coastal communities.
“We are excited to introduce our CRISP-assessed mangrove pool launching on Polygon PoS,” said Stenver Jerkku, Founder of Solid World. “Our mission at Solid World is to create unprecedented transparency and democratize access to carbon markets that are critical to tomorrow’s economy. Mangroves are a good place to start because they are more than just credit; They are the lifeblood of local communities and key to mitigating climate change.”
Stefan Renton, Sustainability Lead at Polygon Labs, said: “The long-awaited launch of Solid World’s first carbon project funding pool is an exciting development in the case of ReFi on Polygon protocols. In a carbon market suffering from a lack of trust leading to funding reluctance and delays, these low-risk and open-access pools will create a new channel for effective funding flows to deliver positive net climate and biodiversity outcomes.”
Futures Contracts: Opening Liquidity
Solid World’s cash pools are operated through “forward contracts” to fund emerging nature-based carbon removal projects. These contracts were developed by SW as agreements for the future delivery of tonnes of CO2 avoided or removed by a project and will be published on SW’s upcoming platform.
Prior to the introduction of Solid World, such contracts were only accessible to large organizations that had the resources to assess a project’s quality and likelihood of lending, which are impacted by a range of activities from overestimates to climate disasters such as wildfires can. Solid World’s liquidity pools will change that.
Solid World combines futures contracts that agree on tons of carbon removed in the future with its Carbon Risk Identification and Scoring Principles (SW-CRISP) framework, an open public good for identifying key potential factors affecting the delivery of promised carbon credits.
These CRISP-assessed liquidity pools reduce the risk associated with early-stage projects and incentivize nature-based finance.
In addition, SW has also developed replacement guarantees for the LPs in the event of non-delivery, guaranteeing “same or better quality” credits. And for the first time, pricing is enabled by project type – for example “mangroves” for the initial blue carbon pool.
Catch-22 of carbon removal funding
On average, less than half of the planned carbon credits are provided based on the equivalent number of tonnes of CO2 removed or avoided after a project’s review.
For the vast majority of the market, a project’s credits must be verified and issued First to mitigate liability from both a financial and reputational perspective. While this reduces risk, it also hampers most people’s ability to participate in the growing carbon market.
All of this creates a quandary: projects cannot get off the ground without seed capital, which they can only access once they have demonstrated that their work can avoid or remove carbon.
Source: UN Environment Programme, State of Finance for Nature 2022
The arcane stagnation in funding for nature projects couldn’t have come at a worse time.
Limiting global warming to the 1.5 degree target set in the Paris Agreement will require at least US$520 billion in additional nature-based funding annually. The world is currently spending $154 billion, less than a quarter of what it would take to reach the goal.
Solid World is developing new infrastructure to find the capital needed to boost conservation and restoration. The capital is provided by groups that were previously barred from entering this market. Mangrove restoration and protection alone is estimated to cost $22 billion by 2050.
Solutions like Solid World are pioneers in achieving this goal.
Learn more about the sustainability efforts at Polygon Labs, tune in to the blog and our social channels to stay up to date with the latest developments in the Polygon ecosystem.
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