THE GUIDE TO BUILDING A CARBON CREDIT PORTFOLIO

Not all carbon credits are created equal. To ensure you achieve the greatest impact with your investments, it’s important to understand how quality is assessed in the voluntary carbon offset market.

Who rates carbon credits?

There are a number of private ratings agencies within voluntary carbon markets that provide detailed information on projects to help us identify high-quality projects. These organizations include BeZero Carbon, Sylvera, and Calyx Global.

Additionally, non-profit registries such as the Gold Standard, the Verified Carbon Standard (VCS), the American Carbon Registry (ACR), Puro.earth, and Plan Vivo set standards for carbon projects.

What makes a credit high-quality?

The standard markers for evaluating carbon credit quality are:

• Additionality: would the project have existed anyway, without funding from the sale of carbon credits? 

• Permanence: will the carbon remain out of the atmosphere permanently? 

• Leakage: does the project cause greenhouse gases to be emitted elsewhere?
   

It’s also worth considering a project’s co-benefits. These are additional environmental and social

benefits projects create, which can align with the United Nations Sustainable Development Goals (UN SDGs) and include measures such as biodiversity and public health benefits.

Align with your values and commitments

Carbon credit portfolios can look different for every buyer. The first step to determining your ideal carbon credit portfolio is deciding what matters to your organization and its climate journey.

If possible, interview internal stakeholders (employees, C-suite, department heads) and external

stakeholders (customers, investors, local communities) about the places, project types, and

environmental causes that matter to them. Use the UN SDGs as a starting point for discussions.

Reassess your brand and company values and look for alignment across your stakeholder input and brand values. Also consider your climate goals or net zero commitments. What quantity and type of credits do you need to make these goals a reality, in the short term and the long term? Don’t just think about this year’s commitments — look further into the future to create meaningful impact for years to come. Carbon credits are one critical tool that should be part of a larger, comprehensive sustainability plan — one that also focuses on deep emissions reductions.

Focus on contribution, not compensation

When designing your portfolio, we recommend thinking beyond quantity targets. While adequate

volumes might be required to reach net zero or carbon neutrality goals, it’s also important to think beyond your own company’s environmental impact.

We recommend approaching your carbon credit investment as a contribution to the larger health of the planet, rather than just as a compensation for your emissions to balance the equation. The SBTi urges the importance of beyond value chain mitigation (BVCM), which refers to emissions mitigation efforts that lie outside of a company’s value chain. Simply put, BVCM requires going beyond your company’s own impact and looking for different and deeper ways to contribute to the fight against climate change.

Balance quality with quantity

We recommend balancing quality with quantity. This means optimizing for projects that can be

expected to offer a meaningful environmental impact. Occasionally, this might mean spending more per metric ton of CO2 removed. More expensive credits might have greater co-benefits or durability, for example, making them worth far more in terms of environmental impact. The benefit of building a portfolio is that you can buy credits across a range of price points to balance impact with cost.

Diversify

As with any investment allocation, it’s important that your carbon credit portfolio offers

diversification. “While decarbonization remains the primary goal, a strategic carbon credit portfolio is more than risk mitigation—it's a catalyst for global transformation and building a company's climate legacy. Through transparent reporting and strategic investments, visionary companies can turn their comprehensive climate efforts into a force multiplier.,” says Callum Hunt, Cloverly’s Climate Solutions Lead.

Cloverly regularly creates and educates buyers on building diverse portfolios to suit their objectives, whether geographical, emission-based, or financial. These could include credits from frontier-type projects like direct air capture, biochar, or enhanced weatherization alongside other lower-cost, high-quality avoidance and removal projects.

Focus on long-term commitments

It’s important that the credits you buy are designed to last over the long term. This is referred to as durability or permanence — the degree of confidence that a project will store the carbon it removes, or avoid the release of carbon, over a long period of time. For example, if the removal time period of a carbon credit is only 20 years, those carbon or greenhouse gas emissions aren’t truly avoided, but simply delayed. Cloverly makes evaluating credit quality simple for buyers. We assess for permanence in our quality criteria and making carbon credit durability information available in our marketplace.

Another way to ensure permanence with your carbon credit investments is to stack your credits.

Credit stacking can be done horizontally, by continually purchasing shorter duration credits to

account for a lack of permanence, or vertically, by purchasing several shorter-duration credits to

‘equal’ one longer-term credit. This helps to ensure your carbon emissions remain out of the

atmosphere for the long term.

Monitor and revisit at regular intervals 

Like any market, there is a level of risk when investing in carbon credits. Even after your purchase, it’s important to continually monitor a project’s ability to succeed and deliver impact and value over its lifetime. To help manage ongoing risk and quality of your offsetting projects, Cloverly actively monitors every project in your portfolio. Seeing how projects perform over the long-term can help to form stronger ties between your company, the projects you’re invested in, and the end goal. Cloverly’s active monitoring of the entire voluntary carbon market allows us to quickly and effectively support you in continuing your positive impact.

There’s no universal ideal carbon credit portfolio —this depends on your company and your climate objectives. Here are a few examples of carbon credit portfolios optimized for different factors.

Sample engineered portfolio

If you’re a technology company with a passion for innovation, you might build a portfolio based on engineered removals. This might include projects such as:

CarbonCure Mineralization

This technology takes waste CO2 as feedstock and injects precise doses into concrete during mixing.

Location: Cartersville, United States

Methodology type: Mineralization

Removal time period: 1,000 years or more

Registry: Verra

Premier Forest Biochar

Biochar, produced by pyrolysis of wood waste, is mixed with compost to save wood waste and its associate carbon emissions from landfill.

Location: Newport, Wales

Methodology type: Biochar

Removal time period: 100-999 years

Registry: Puro.earth

CarbonCapture DAC

This project permanently removes CO2 via direct air capture systems.

Location: Sweetwater County, United States

Methodology type: Direct Air Capture

Removal time period: 1,000 years or more

Mechanism: Removal

Sample nature-based portfolio

A primarily nature-based portfolio might resonate strongly with your brand values. This portfolio focuses on high-quality forestry and conservation projects.

Trees for Global Benefits

This project covers 6,000 hectares and promotes community-led activities that reduce the exploitation of forest resources.

Location: Hoima, Uganda

Methodology type: Reforestation or Afforestation

Removal time period: 99 years or less

Registry: Plan Vivo

Ratings: AA BeZero Carbon Rating

Rimba Raya Biodiversity Reserve Project

This REDD+ project preserves nearly 65,000 hectares (160,600 acres) of tropical swamp forest that were originally going to be converted into palm oil plantations. It protects hundreds of at-risk species such as the Bornean orangutan and develops community programs for local villages that address all 17 of the UN SDGs.

Location: Indonesia

Methodology type: Avoided Deforestation

Registry: Verra

Project ID: VCS674

Ratings: AA BeZero Carbon Rating

Prairie Pothole Grasslands

These prairie potholes provide year-round habitat for a rich mix of plants, animals, and insects, and vital breeding grounds for more than half of North America’s migratory waterfowl. In the first five years of this project, an estimated total of 39,384 metric tons (43,413 US tons) of carbon dioxide equivalent emissions have been kept out of the atmosphere.

Location: Missouri Coteau, United States

Methodology type: Avoided Conversion

Registry: American Carbon Registry

Project ID: ACR222

Ratings: AA BeZero Carbon Rating