ClimateSeed's rigorous project selection process: ensuring quality and mitigating risks

ClimateSeed focuses on selling carbon credits from high-quality projects generating significant social and biodiversity co-benefits after conducting strict and comprehensive due diligence on the project and the project carrier. 

ClimateSeed follows a strict three-level project selection process that is unique in the market. Every project is sourced and qualified by our team of carbon project specialists and goes through a rigorous process, based on their climate impact as well as potential social and environmental benefits. 

1. How ClimateSeed select its carbon sequestration and avoidance projects? 

All the projects in the ClimateSeed portfolio have successfully passed the following three-level selection process:

Initial Quality Screening of Projects Certified

Carbon projects are identified by assessing multiple factors, including project typologies, methodologies and geographies. ClimateSeed only selects projects that are certified by the highest national and international standards. 

Most projects selected by ClimateSeed have been certified by one of the following international standards: Gold Standard, Verified Carbon Standard (VCS), Climate, Community and Biodiversity Standard (CCB), Plan Vivo, American Carbon Registry (ACR), Climate Action Reserve (CAR), and the French Label Bas Carbone.

Banking Due Diligence for all Project Carriers

ClimateSeed offers a digital platform that connects contributors and project carriers and through which ClimateSeed manages the operational process of the carbon credits transactions, which involves processing two types of flows:

• The transfer of cash (the price paid by the contributor), and
• The transfer of carbon credits (transferred by the seller)

All project carriers must undergo strict banking due diligence to be able to collaborate with ClimateSeed.

Know-your-customer to combat money laundering and terrorism financing

All project carriers are subject to strict know-your-customer due diligence to combat money laundering and terrorism financing.

They are required to provide documents, such as their articles of incorporation, their shareholding structures, and their financial statements.

In particular, these elements enable ClimateSeed to identify the final beneficiaries, i.e., the natural persons who ultimately hold the legal entities admitted to our platform (or, in the case of an association or foundation, the persons who effectively manage it). 

Financial legitimacy and project carrier’s structure 

In addition, we check that participants are not on the international financial sanctions lists and surveillance.

Lastly, besides verifying the ultimate beneficial owners, ClimateSeed also considers the complexity of the shareholder chain, the type of structures, and the jurisdictions concerned (particularly the list of non-cooperative countries and territories for tax purposes of the European Union).

Allowing us, for example, to refuse project carriers where the different structures involved and the beneficial owner were not on any sanctions list but where it was registered in multiple tax havens - deeming the project carrier unacceptable under ClimateSeed’s requirements.

When the banking-due-diligence stage is finalized, we carry out a complementary reputational analysis of the project and the different project proponents on the Internet and social networks.

ClimateSeed’s Project Evaluation Process and Framework

The ClimateSeed Project team developed an internal Project Evaluation Framework to assess and validate all projects that are added to ClimateSeed’s project portfolio. ClimateSeed scrutinized the methodologies of the various carbon credit rating agencies to incorporate their best practices into its own framework.

The goal of the Project Evaluation Framework is not to score and compare projects based on a final score, which can be too simplistic and does not reflect their inherent complexities, but rather to carry out a robust assessment that highlights the benefits and drawbacks of each project. 

Looking individually at each component and its different attributes and variables and ensuring a standardized assessment is carried out for all projects.

Only the projects deemed of high-quality will be added to ClimateSeed’s portfolio. 

The final element of our evaluation framework is to conduct a due diligence and screening for adverse news of the project and its different project proponents. As part of this evaluation, we:

• Screen the project and all its proponents to check for adverse news (Internet and Social Networks)

• Use Refinitiv World-Check One software screenings, which includes international financial sanctions lists and surveillance.

2. ClimateSeed’s goal is to limit any potential reputational risks from carbon credits’ purchase. 

Methodology

The Evaluation Framework is divided into 3 main components.

Each component is composed of different attributes and is evaluated using multiple variables.

The framework comprehensively includes all key aspects to assess the various dimensions of a project, including things like additionality, permanence, leakage, social safeguards and rights, benefit-sharing structures, biodiversity impacts, and co-benefits related to Sustainable Development Goals.

Even more, a reputational risk dimension as part of the due diligence ensures the mitigation of any potential risk (reputational and financial) associated with the project or its proponents). When evaluating each project, the documents reviewed include:

1. The Project Description Document (PDD)
2. The last Monitoring Report (MR)
3. The latest Verification Report

Scoring

We rank each variable from 1 to 5, where 5 is considered the best score. The score for the attribute is the average of the score of each variable (table below).

All the variables and attributes are given the same weight, to avoid any biases in scoring due to subjective evaluations of the importance of each variable.

Project Review with Calyx Global: Enhanced Transparency though Additional Carbon Credit checks

In addition to ClimateSeed’s internal framework, our team checks if the projects have been assessed by a 3rd party, such as Calyx Global, to remove any bias and to see how the two evaluations line up. ClimateSeed also uses the Calyx Global Platform to narrow down quality projects when sourcing new credits. 

Calyx Global is a carbon credit ratings platform that uses peer-reviewed frameworks to assess the GHG integrity, SDG contributions and environmental and social risks of carbon projects. In a comparison of rating agencies performed by Carbon Market Watch, Calyx Global came out on top for its rigor. To date, they’ve rated over 550 projects from nature-based solutions to emerging technologies. Carbon credit ratings for over 550 projects, along with in-depth analyst notes we use in our assessment, are available on the platform.

In order to avoid any kind of speculation on carbon credits, ClimateSeed does not allow their resale and therefore only allows end-customers with a clear and ambitious emission reduction policy to purchase carbon credits.

From sourcing to commercialisation of the carbon credits, ClimateSeed ensures the highest quality through further checks:

1. Transparent business model: important to purchase the credits from a transparent player as a common practice in the market is to purchase the carbon credits through resellers, which most do not show transparent margins . As a result, contributors do not know how much of their contribution is actually going to the project.
2. No secondary market: the climate contribution to projects is a way to finance much-needed climate mitigation action and support the global transition to a zero-carbon future. Organizations (contributors) must avoid reselling the carbon credits and must retire them from the market to complete the climate contribution action.
3. No double-counting: carbon credits must be retired in the registry to ensure that there is no double-counting of the carbon credits (meaning that a single emission reduction or removal is counted more than once).
4. Co-benefits: most emission reduction projects claim that they contribute to some of the United Nations Sustainable Development Goals; however, an analysis of the project documentation must be carried out to ensure that the claims beyond carbon of the project are accurate.
5. Financial legitimacy: crucial to understand who the ultimate beneficial owners behind each vendor are to prevent money laundering and terrorism financing.