BetaCarbon-backed Clima to launch insurance-backed carbon credits in Australia

Australian trading house BetaCarbon is set to bring to market credits with insurance backing, as major corporates look to secure emissions offsets ahead of new climate disclosure rules.

BetaCarbon founder and chief executive Guy Dickinson says insurers will only underwrite credits from reputable projects. Picture: Britta Campion

Insurance-backed carbon credits are set to open the door to more institutional buyers after Sydney-based trading house BetaCarbon secured backing to underwrite credits and mitigate risk from potential failures.

The insurance-backed credits are set to hit the market on March 1 after BetaCarbon-owned carbon solutions business Clima secured backing from insurer Oka, with the deal marking its expansion into Australia.

BetaCarbon founder and chief executive Guy Dickinson said several high-profile Australian companies had already expressed interest in buying the insurance-backed credits, which provided a safer alternative for the long-term emissions abatement and offset credits.

Mr Dickinson, who also runs Clima, said a broad range of customers in the agriculture and consulting sectors were keen on the credits, along with several other businesses that had “already stepped into the Climate Active space, who see this as a great way to mitigate this risk going ­forward”.

The deal sees the BetaCarbon subsidiary Clima offer carbon credits, with insurance brokered through PSC Paragon Australia.

Lloyds syndicate member Oka will underwrite the credits. The insurance of the Clima carbon assets is its first foray into Australia.

The three-year policies would pay out a dollar value of the credit in the event the underlying project that supplied the carbon offset fails or is destroyed, allowing insured companies to repurpose the funds to purchase other ­credits.

Holders of credits can renew policies when they conclude.

Mr Dickinson, a former banker at HSBC, said the launch came at a time when the clamour for credits was only set to grow.

Some of Australia’s largest companies will be required to report their carbon emissions profile under proposed laws from the federal government.

Under the laws, large companies and asset managers would have to reveal climate-related risks, risk-management strategies and emissions targets to investors.

Companies with $500m in revenues would be required to report from July 1, 2024, while companies with $50m in revenue must report from 2027.

However, assurance of their claims won’t be required under the proposed scheme until 2030.

Mr Dickinson said insurance of carbon credits allowed companies and their boards to offset the risk of purchasing emissions offsets.

“There’s a natural market here for the directors who will take an increasing interest about what liabilities are held to their climate disclosures,” he said.

“They can make sure with ­clarity that the credits they’ve bought will offset their carbon emissions.”

Mr Dickinson said insurance was key to the process, as insurers would seek to only underwrite credits from reputable projects.

“They will do their due diligence around it, but it also comes down to who is the project developer who has managed this project,” he said.

Oka founder and chief executive Chris Slater said Australia was an ideal market to offer carbon asset insurance, “given the rapidly accelerating pace of ­carbon and climate action in ­Australia”.

“We couldn’t be more fired up to bring our first-of-its-kind insurance solution to international markets,” he said.

The deal comes as market watchers predict an explosion in the demand for the credits, with existing government schemes set to reduce the number of carbon offsets in the market over the coming years.

Sydney trading exchange FEX has started offering futures contracts in Large Generation Certificates, a form of carbon offsets.

The Australian Securities Exchange has also signalled plans to launch trading in carbon futures products in 2024.

The Clean Energy Regulator has contracted Trovio Group to develop a new register for carbon market assets, as the agency moves to consolidate existing records of offsets and credits.

Originally published as BetaCarbon-backed Clima to launch insurance-backed carbon credits in Australia