Chestnut Carbon Raises $160M for Reforestation of Farms

Chestnut Carbon Secures $160 Million in Series B Funding

Chestnut Carbon, a nature-based carbon removal company, has successfully closed a $160 million Series B funding round, as reported to TechCrunch. The company’s core strategy involves acquiring farmland that is either marginal or degraded.

These lands are then replanted with indigenous tree species, and the carbon sequestered through this process is converted into marketable carbon credits.

Growing Demand for Carbon Credits

Carbon credits are experiencing heightened demand, particularly from technology companies. This surge is driven by the need to counterbalance the increasing emissions associated with the rapid growth of data centers.

These data centers are essential for serving the expanding cloud and artificial intelligence sectors.

Investment Details

The latest funding round saw participation from several key investors. These include the Canada Pension Plan Investment Board, Cloverlay, and DBL Partners.

Additional investment came from unnamed university endowments, family offices, funds of funds, and a range of other institutional investors.

Initial Capitalization and Acquisition

The $160 million represents a moderate investment for Chestnut Carbon. Initially, the company was capitalized with a pledge of up to $200 million from private equity firm Kimmeridge.

Ben Dell, managing partner at Kimmeridge, recognized the potential within the burgeoning carbon credit market, despite the firm’s traditional focus on oil and gas investments.

A crucial step in this venture was the acquisition of Forest Carbon Works, a company founded by Kyle Holland. Holland’s startup specialized in assisting families with forest management to facilitate the sale of carbon credits.

Holland now serves as Chestnut’s chief product officer, bringing valuable expertise to the team.

Expanding Operational Scope

Chestnut Carbon has broadened its operational scope beyond simply managing existing forests.

The company now actively develops its own carbon removal projects, increasing its overall impact.

Current Land Holdings and Future Expansion

Currently, Chestnut Carbon owns over 35,000 acres of marginal farmland and pasture located in the southeastern United States.

A primary objective of this funding round is to substantially increase these land holdings.

The company aims to achieve a carbon credit capacity of 100 million metric tons by 2030. This ambitious goal will necessitate the transformation of hundreds of thousands of acres back into forested land.

Recent Carbon Credit Sale to Microsoft

Last month, Chestnut Carbon secured a significant agreement with Microsoft, selling 7 million carbon credits.

This 25-year deal will support the rehabilitation of 60,000 acres across Arkansas, Louisiana, and Texas.

Chestnut utilizes the Gold Standard for certification of its carbon credits, ensuring validity for a period of 100 years.

Impact and Future Outlook

The new funding will enable Chestnut Carbon to significantly scale its operations.

While current demand for high-quality carbon credits is strong, the company’s 100 million metric ton target represents a small fraction of global carbon emissions.

In 2023, the International Energy Agency (IEA) reported annual carbon emissions at 37.4 billion metric tons.

Potential of Afforestation and Reforestation

Despite the scale of the challenge, establishing a strong position in the carbon credit market offers substantial potential for mitigating climate change.

Afforestation and reforestation efforts can play a vital role in reducing the effects of pollution and global warming.

Global Forest Potential

A 2019 study indicated that the world possesses the capacity to support an additional 2.2 billion acres of forest.

Upon maturity, these forests could sequester 205 billion metric tons of carbon, representing approximately a quarter of the carbon currently present in the Earth’s atmosphere.