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Canada Pension Joins Startup at $100 Million Reforestation Fund

(Bloomberg) —

Canada’s largest pension fund has joined a project to produce carbon credits by planting more than 100 native tree species on degraded land in Brazil’s Amazon region. 

Canada Pension Plan Investment Board will invest as much as $30 million in a reforestation fund managed by Sao Paulo-based Mombak Gestora de Recursos Ltda., said Peter Fernandez, chief executive officer of the carbon-removal startup. 

The investment from the Canadian pension fund, and a smaller outlay from the Rockefeller Foundation, brings Mombak’s first reforestation fund to its $100 million target, Fernandez said. The Canadian fund will also invest $500,000 in Mombak. 

The startup is tapping a shift in voluntary carbon markets where buyers pay more for projects that actually remove carbon, rather than so-called avoidance offsets that, for example, generate credits by keeping existing trees standing. 

“The price of carbon credits went high enough to scale a business,” Fernandez said in an interview, adding that Mombak is focused on selling credits to high-end buyers who want “no question whatsoever” that carbon removal occurred.  

Read More: Carbon Markets Puzzled by How to Integrate Removal Offsets

It is already pre-selling carbon credits at more than $50 each, a premium in voluntary markets. Carbon credits represent a ton of removed carbon or avoided emissions. Mombak will continue raising money for Amazon reforestation projects and expects to deploy $1 billion in the next three to five years.

The Amazon Reforestation Fund also includes AXA IM Alts and Bain Capital Partnership Strategies. The end buyers of the credits, not the investors, use them to offset their emissions.

“We expect that the value of high-quality, verifiable, nature-based carbon removal credits such as the ones produced through The Amazon Reforestation Fund will continue to rise,” said Bill Rogers, the global head of sustainable energies at CPP Investments, as the Canadian pension fund is known.

–With assistance from Paula Sambo.

© 2023 Bloomberg L.P.


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