Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Solid World Unveils CRISP: Risk Assessment Framework and Tool For Carbon Forwards
Solid World | Steve Stenver | May 4, 2023
Image: Solid World
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).
What is CRISP?
CRISP is an innovative carbon risk assessment tool, licensed under Creative Commons. It provides a comprehensive framework for understanding and quantifying the major factors contributing to the non-delivery of carbon credit units. By examining these crucial risk factors, CRISP empowers all stakeholders to make informed decisions and more effectively support global climate action initiatives.
See: A conversation with Catherine McKenna former Minister of the Environment and Climate Change: Fighting greenwashing
Solid World’s protocol delivers advanced payments to climate projects and provides a detailed risk rating framework associated with forward financing. Recognizing the imperative of transparency and collaboration in combating climate change, Solid World is releasing this framework as a public good. As a result, carbon projects, financiers, and sustainability teams everywhere can assess their risks with greater confidence.
Understanding the Risk Factors
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.
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Paul Young of Kita, a renowned carbon insurance company:
As the sector continues to address the urgent need for carbon removal, new risk frameworks are essential in providing the necessary transparency and consistency in reporting on delivery risk. This will help ensure that we are making informed decisions and financing the projects that have the greatest potential for success
More information about CRISP --> here
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