It is clear that the Voluntary Carbon Market (VCM) will play a significant role in our transition to a low-carbon economy. By 2030, the market for carbon credits could be worth $20 billion to $50 billion, according to various experts.
The Intergovernmental Panel on Climate Change (IPCC) states that billion-tonne scale carbon dioxide removal (CDR) is now “unavoidable” if we are to hit climate targets.
As a result, trillions of pounds in investment are required to scale CDR solutions at speed, spanning both nature-based solutions like afforestation and engineered solutions like direct air capture.
These investments are largely transacted via the VCM. However, the lack of transparency and quality metrics within the VCM creates a high-risk environment for CDR investments, which is a deterrent to financing at scale. In this case, insurance is a solution – by reducing risk and increasing transparency, insurance can act as an essential enabler. And here’s where UK’s carbon insurance startup Kita addresses the problem.
Kita’s vision is to “build a comprehensive portfolio of insurance products to protect against risks for all parties in the carbon markets ecosystem.”
Secured £4 million
Based out of London, the carbon insurance specialist has now secured £4 million in an over-subscribed Seed funding round led by Octopus Ventures, alongside existing investors Insurtech Gateway, Carbon13, and Climate VC, and new investors Chaucer Group and Hartree Partners.
The UK company will use the funds to build its team, scale its underlying technology-based risk modelling, and launch its first insurance product, Carbon Purchase Protection Cover.
The proceeds will also enable Kita to build a portfolio of carbon insurance products to cover the full spectrum of risks in the carbon markets.
Carbon insurance specialist
Kita was founded in December 2021 by Dr. Paul Young, Thomas Merriman, and Natalia Dorfman, as part of the Carbon13 climate tech venture builder in Cambridge.
The company’s first product — Carbon Purchase Protection Cover, insures the buyer of forward-purchased carbon removal credits against carbon delivery risk, removing a significant protection gap.
The goal is to enable more upfront financing so carbon removal solutions can access greater flows of consistent capital and scale their impact faster.
Natalia Dorfman, CEO, and Co-Founder, Kita says, “To prevent the worst impacts of climate change, we must remove gigatons of CO2 from the atmosphere annually for the remainder of the 21st century. This is a mammoth task, and it requires de-risking and access to capital for carbon removal solutions. Insurance can act as a fundamental enabler – by removing risk and increasing trust in the market, insurance will help drive capital to help quality carbon removal projects scale. Kita’s passion is developing these insurance products and we are delighted to be bringing our first product, Carbon Purchase Protection Cover, to market.”
With support from Insurtech Gateway, Kita secured regulatory approval from the FCA, was approved as a Lloyd’s of London coverholder, and onboarded insurance partners, including Chaucer Group.
Natasha Jones, Octopus says, “Carbon removal plays a critical role in the fight against climate change and there is a pressing need to scale these technologies at an unprecedented size and pace. Insurance is essential to enable this rate of growth by de-risking investments into carbon removal solutions and building in incentives that increase the supply of high-quality carbon credits in the market. We are thrilled to have the opportunity to work with Kita in bringing ‘first of its kind’ carbon insurance solutions to market to help unlock billions of dollars of investment into the space, increase transparency in the Voluntary Carbon Market, and fight the climate crisis.”