Solid World’s CRISP-Scored Pools — Explained
Solid World’s Origins
Solid World founders Stenver Jerkku and Al William “Rez” Tammsaar have spent years helping farmers improve their soil, so they can earn carbon credits as compensation. Along the way, they have personally witnessed some of the roadblocks that these projects face throughout the process. They met projects who had a very hard time getting a fair deal, because there was no transparency into what a “fair price” was. In most cases, though, the projects couldn’t afford to get started.
They realized that solving these issues would open the floodgates for new, highly additional projects to get to work. They set out to work on solutions and eventually developed the idea for Solid World.
Stenver Jerkku, Solid World CEO, reflected on how he and Rez sought out solutions for these problems.
“At Solid World, our mission goes beyond the surface. We’re tearing down the medieval walls of the carbon market’s bartering economy, turning a currently opaque black box into a radically transparent platform. We’re bringing unparalleled transparency to this crucial sector of our world’s future.”
The Funding Problem
The Voluntary Carbon Markets have the potential to help us harness the effort and resources that are required to fight climate change — while also providing major benefits to the communities that are most affected by the consequences. This market is still in its early stages, though, and some major challenges have to be overcome before it can have a massive, transformational impact on the fight against climate change.
One of the biggest obstacles is the funding process. High-quality projects generally have high up-front expenses. Finance for these projects is challenging and inaccessible even to some of the most interested organizations. Under these conditions, only a small portion of motivated stakeholders are mobilized. This means the quality credits that high-integrity sustainability teams are looking for are few and far between.
For carbon project developers, accessing the funding needed to make their invaluable work a reality has often been a complex and convoluted process. They’ve had to navigate a labyrinth of opaque, Over-The-Counter (OTC) deals, where market prices remain elusive and the certainty of a fair deal is a distant dream. These systems often lack standardization, and are fraught with uncertainty and risk.
It’s not just carbon project developers that lose out in the current OTC model. Distributors such as brokers, traders, and carbon marketplaces have long grappled with the complexities and inefficiencies of OTC forward inventory, which leave them stuck in trades that they are unable to exit for years.
CRISP Risk Rating Framework
This is a complex problem because it’s not as easy as just handing money over to ambitious climate projects. Data shows that even successful carbon projects face challenges in delivering climate outcomes that meet their estimates. It is important to deeply analyze the projects, map out the risks and understand the markets in which they operate.
For over a year, Solid World’s team of climate scientists and technology experts have been developing a groundbreaking framework that is set to revolutionize the way forward carbon credit deals are evaluated within the rapidly growing Voluntary Carbon Market (VCM).
This framework is called CRISP (Carbon Risk Identification and Scoring Principles).
Solid World’s CRISP (Carbon Risk Identification and Scoring Principles) framework was released as a public good. This means that organizations will have a reference point for analyzing risks, even if it’s independent of Solid World. If projects want to participate in these liquidity pools, Solid World will provide these assessments for free, as a part of its vetting procedure.
CRISP’s approach to risk assessment is comprehensive and multifaceted. It encompasses:
- Carbon Yield Risk: Estimates the likelihood of credit yield based on scenario modeling (realistic and optimistic predictions). Improved accuracy through remote sensing, up-to-date data, and in-depth research.
- Climate Catastrophe Risk: Utilizes proprietary climate models to estimate the probability of climate-related events affecting project outcomes.
- Policy and Legal Risk: Assesses risks at the national/jurisdiction and project levels using pre-set indicators to gauge the strength of legal and policy environments.
- Financial Risk: Estimates vintage-specific financial risk using complete data (holistic financial models) or limited data (break-even year and yield models) methods, depending on data availability.
- Project Developer Risk: Analyzes the strength of project developers using standard indicators, such as developer experience, project team strength, and project network strength.
The framework then calculates net forward risk scores based on the weighted sum of these factors. These scores are categorized into ratings ranging from AAA (prime) to D (junk), to help Solid World make informed decisions.
This is where Solid World’s transformative liquidity pools come into play. Any project that aligns with Solid World’s stringent standards and values can tap into liquid funds by selling their future supply into Solid World liquidity pools at transparent prices.
As Solid World grows, it will offer a network of liquidity pools that each contain forward carbon credits for specific types of environmental projects, such as blue carbon, cookstoves or community reforestation. All of the projects that bring forwards into these pools will need to pass through the CRISP framework to ensure that the integrity and quality of the pool will not be compromised. These pools will all have different prices since the underlying assets are different values, which is one of the key factors that will allow these assets to have a public market price for the first time ever.
Project developers gain the financial momentum they need to bring their carbon removal efforts to life, and to contribute significantly to the global climate solution. By offering structured, high-quality supply at transparent prices and terms, Solid World has created a solution that also allows distributors to efficiently manage their inventory, navigate market volatility, and reduce risk. Moreover, this solution brings a revolutionary level of liquidity to the carbon markets, enabling trades to take place round-the-clock, and providing the flexibility to exit at any moment. With Solid World, distributors gain an unprecedented level of control and visibility, empowering them to better serve their clients and capture new opportunities in the evolving carbon markets.
Alexis L. Leroy, CEO & Founder of ALLCOT, also voiced his support for Solid World’s CRISP-Scored pools, saying that, “This pool aims to set a high standard of integrity with significant, traceable, and transparent impacts from both environmental and social point of views. With the aim to close the gap between price and value, ALLCOT is proud to be part of this disruptive initiative from Solid World.”
By introducing this innovative protocol, Solid World creates a new class of “liquidity providers’’ who act as a crowdsourced counterparty for the market, incentivized to connect buyers and sellers across time. The result is a win-win solution for carbon projects and distributors, ensuring better access to capital, attractive prices, real-time liquidity, and deep documentation. It opens up trading and hedging strategies that are possible in the traditional stock market, but that have been so far unreachable in the carbon markets.
Real World Assets — Real World Impact
Solid World’s forward carbon protocol design gets resources directly into the hands of those repairing ecological habitat supporting local economies and accelerating regeneration.
The launch of Solid World’s CRISP-scored Mangrove Restoration pool (CRISP-M), marks a significant step forward for climate finance and our planet as a whole. Mangroves are globally recognized for their immense carbon sequestration capacity and offer substantial community benefits, making them an ideal focus for this innovative solution.
The CRISP-M pool specifically addresses major challenges faced by Mangrove restoration carbon project developers. It provides them with the necessary funding while also offering structured inventory to distributors seeking to sell high-quality carbon credits.
Sergey Ivliev, Founder & CEO of Vlinder, stressed the importance of Mangroves in a statement about Solid World’s launch, “…Blue Carbon liquidity pool will stream trading fees and protocol rewards directly into tree planting to benefit local village communities in Kenya, Senegal, Indonesia and Myanmar. Solid World’s innovative approach to climate finance and non-delivery risk management, truly makes them a thought leader in the digital carbon market space.”
This new forward carbon protocol is a watershed event within the Voluntary Carbon Market industry, bringing unprecedented transparency, accessibility, and capital. It is poised to make a significant impact in addressing the climate crisis.
Solid World’s partners, including Vlinder, Allcot, and MangroveDAO, have been instrumental in organizing the carbon projects on-site, helping to make this ambitious effort a reality.
This is only the beginning. The CRISP-M pool is just the first step in Solid World’s mission to bring transparency and liquidity to carbon markets. Soon, there will be a CRISP-C pool for cookstoves, CRISP-R for reforestation, and many more as the protocol grows to meet the increasing demand for climate finance.