Terraformation Workshop at NOAH 2023.pptx
Terraformation Workshop at NOAH 2023.pptx
Explore the potential of carbon forestry as a securitizable asset class. Learn how native forest restoration projects can generate significant carbon credits and revenue streams. With innovative funding strategies and portfolio management, this presentation outlines a sustainable model for impactful investments in biodiversity and climate change mitigation.
Terraformation Workshop at NOAH 2023.pptx
@yeeguy2 months ago
- ~$15M-20M all-in development cost
- ~$110M-120M carbon revenue
- â Over 25,000 banks in the world
- â The 100th largest bank >$300B balance sheet
- â Median US credit union has $1.5B in loans AUM
- â Start 500 to 600 small banking institutions (or a handful of large ones!)
- â Focus on building balance sheets through regeneration of natural assets
- â Early failure indicates return of some unutilized loan principal.
- â Late failure indicates possibility of some carbon revenues.
THIS IS NOT AN INVESTMENT SOLICITATION
Hi, my name is
25 years working on fintech and ecommerce
one jackson
Vouch
(kyp
TaskRabbit
Last 4 years working on global carbon forestry
We launched 29 native, biodiverse restoration projects across 14 countries, with potential to 20x our impact
Forest Restoration Econ 101
Carbon Sequestration
Depends on plant species. Refer to latest botanical and carbon science papers.
Carbon Credits Issuance
~80% Monetizable Carbon Sequestration
Project Development Costs
Wide range
$1000/ha - ' just plant ' (e.g., mangrove)
$4000/ha -fully loaded land prep, soil enhancement, removing invasive species, seed collection & banking, nursery infra setup, outplanting, community benefits, alternative livelihoods
Carbon Market
Conservative 6% CAGR â $86/ton in 2050 ⦠but won ' t be a smooth curve!
Source: Monte carlo simulation of 100K+ global forestry projects
Monetizable Carbon Credits Issuance
Carbon Price
Forest Creator Revenue
Monetizable Sequestration x Carbon Price = Annual Revenue
Operating Margin
5000 hectare project
$3000-$4000 dev cost per ha (conservative)
40 years
Forestry Investments Require Creativity
Forest Creator Revenue
Monetizable Sequestration x Carbon Price = Annual Revenue
Early-stage funding gap prevents many forest restoration projects from getting started
vs. Equity Investor Desired Return
3x - 5x return in 10 years
Early-stage funding gap prevents many forest restoration projects from getting started
Source: Monte carlo simulation of 100K+ global forestry projects
Year
Early-stage funding gap prevents many forest restoration projects from getting started
Theoretically: Forest Creators could handle debt financing -IF they had some catalytic features
Theoretically: Forest Creators could handle debt financing -IF they had some catalytic features
Sufficient area-under-curve to do some creative financing
Portfolio Economics
We know that portfolios will be essential for scale and diversification
Portfolio of 25 forest restoration projects Mean success rate: 60%
(e.g., 15 projects out of 25 survive to complete a 40 year carbon project)
15 completed projects
Portfolio Originator ' s Revenue
Year
Example: Unlevered Portfolio J-Curve
Perpetual Forestry Machine!
Key Result #1
~$500M starts a perpetual forestry machine, running one (1) portfolio at a time
Observation: Portfolio produces steady cashflows after Year 5 or 6 â¦
Securitization
Securitization: structure annuity cashflows into a sellable security, sell 80% stake to Senior buyer
Now let ' s run that playbook, but starting with $750M initial capitalization â¦
Running two (2) portfoliosâ¦
Perpetual Forestry Machine II
Layered portfolios produce larger and larger net cash. Can keep re-investing profits or harvest at any time.
With slight tweaks to portfolio efficiency and incremental revenue from higher carbon pricesâ¦
Portfolio originations go exponential
Could grow even faster with evolution of soil carbon standards, biodiversity credits, Article 6.4 trade, inclusion of other forest revenue streams, etc.
38
Portfolios started
This entity would (by far) be the largest forest restoration driver in the world
950
Forest restoration projects
4.8M
Hectares restored to native biodiversity
2.9B
Tons of CO2 sequestered out of the atmosphere
2.3B
Monetizable tons of carbon credits issued
Key Result #2 ~$750M starts a perpetual forestry machine, running an exponentially increasing number of portfolios
Discussion
Securitization Risks
Question:
What would you call a financial entity that raises a large initial capitalization, makes money from loans, sells securities, and perpetually grows its balance sheet?
Observations on Banks
To completely solve the natural carbon sequestration challenge:
Bonus Question:
If even a handful of these new forestry-banks get started, they will deploy $billions to communities.
Local/indigenous people & businesses will receive those funds as payroll or commercial contracts.
Where will they deposit those income receipts?
Sensitivity &
Risks
Risk assessment through Monte Carlo simulation
100,000+ simulated portfolios
Project Success and Failure Simulation Method
Project success rate modeled as beta distribution, peaking at 60%.
E.g., 15 forestry teams out of 25 portfolio successfully complete a
project.
For projects that fail, year of failure is a critical factor.
Fail-year modeled as beta distribution, with mean of 4.1 and failures in some simulated portfolios out to Year 18.
Carbon Market Simulation
Each portfolio of simulated projects had an independent carbon market simulation with carbon prices that grow at an average CAGR of 6.0% with +/-8% jitter (i.e., prices allowed to fall year-over-year).
Simulated prices ended in a wide range between $43.75 and $173.28 per ton with a mean ending price of $86.28 in 2053
Forestry Project Simulation
Forest Creators net profit is determined by carbon credits issuance (tons) â carbon credits prices ($/ton). Forest Creators can earn net profit, even in a -2.5 s.d. down carbon market, as long as their project issuance are within 2.5 s.d. of plan. All other (more positive) cases are significantly profitable.
Credits issuance model results align with latest published and peer-reviewed botanical and carbon science research. Carbon sequestration by forests increases as new forests grow and then peaks as forests reach maturity. Carbon credits issuance modeled as 80% of carbon sequestration (ex-20% buffer per credits verification standards) with +/- 5% jitter per project per year.
