Chestnut Carbon, a startup focused on nature-based carbon removal solutions, has secured $160 million in Series B funding, as reported to TechCrunch. The company acquires underutilized and degraded farmlands, reforesting them with native trees to generate and sell carbon credits.
Carbon credits have gained significant traction, particularly among technology firms aiming to compensate for the soaring emissions linked to the rapid growth of data centers catering to cloud and AI services.
This latest funding round saw participation from the Canada Pension Plan Investment Board, Cloverlay, and DBL Partners, along with contributions from various unnamed university endowments, family offices, funds of funds, and other institutional investors.
For Chestnut Carbon, the $160 million raised is considered relatively modest. Upon its inception, the private equity firm Kimmeridge had already committed to invest up to $200 million. Although Kimmeridge is known for investing in oil and gas, managing partner Ben Dell recognized a lucrative opportunity within the expanding carbon credit market.
To facilitate this vision, he acquired Forest Carbon Works, a startup established by Kyle Holland, which aids families in managing their forests for carbon credit sales. Holland continues his role as chief product officer at Chestnut.
With Chestnut, the focus has broadened to include company-developed projects in addition to overseeing existing forests.
Currently, Chestnut possesses over 35,000 acres of degraded farmland and pastures across the southeastern United States. A primary aim of the new funding is to significantly increase Chestnut’s acreage. The startup aspires to expand its carbon credit capacity to 100 million metric tons by 2030, necessitating the restoration of hundreds of thousands of acres back into forested land.
Recently, Chestnut made progress towards this ambitious target by selling 7 million carbon credits to Microsoft. (Each carbon credit equates to one metric ton of carbon.) This 25-year agreement will assist it in rehabilitating 60,000 acres across Arkansas, Louisiana, and Texas. Chestnut’s carbon credits are certified for a century through the Gold Standard process.
This latest influx of funding is expected to significantly enhance the startup’s operations. While the appetite for high-quality carbon credits is substantial today, Chestnut’s aim of achieving 100 million metric tons is just a sliver of the total annual carbon emissions, which reached 37.4 billion metric tons in 2023, according to IEA reports.
Nevertheless, if Chestnut establishes a solid presence in the carbon credit arena, both afforestation and reforestation hold immense potential for mitigating the impacts of climate change.
A 2019 study indicated that the planet can accommodate an additional 2.2 billion acres of forest beyond the current total. Once fully matured, these forests could sequester 205 billion metric tons of carbon—approximately 25% of the carbon present in the atmosphere today.
Compiled by Techarena.au.
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