March 13, 2023

What Gets Included in TIME CO2 Portfolios

TIME CO2 Portfolios

Here are some highlights of what we will cover:

  • There is no silver bullet for climate change; we need a combination of the highest integrity, scalable solutions.
  • We believe in the power of diversity, and we create diverse portfolios of projects for greater planetary impact and lower risk. We only choose projects that will deliver credible impact within the next five years.
  • In line with the best available science, our portfolios include greenhouse gas removal, reduction, protection, and innovation projects, because all of these are necessary to reach our climate goals by 2030.
  • About 70% of the projects in our portfolios generate carbon credits (both spot and future credits); the remaining 30% of projects focus on critical non-crediting solutions like protecting mangroves, increasing circularity, and adapting to climate change impacts.
  • We include both nature-based and engineered climate solutions, including tried-and-true projects like reforestation and landfill gas capture, as well as emerging but science-backed approaches like direct air capture and storage. Our projects span the globe, from the US to Mauritius.

Globally, we emit over 40 Gigatons (billion tons) of CO2 every year (and this doesn't even include other greenhouse gases like methane). To stay within our warming limits, the world needs to get down to emitting zero Gigatons per year by 2055.

We need an increase of at least 590% in annual climate funding to reach this target, avert catastrophic temperature increases, and meet the 2030 interim goals our countries pledged in the Paris Agreement. In previous years, public climate finance has not kept pace with this global need.

In turn, the private sector has stepped up to help fill this financing gap for climate solutions. Over the past five years, billions of dollars of venture capital and corporate investments have reshaped the ecosystem for climate solutions.

This influx of funding has led to an explosion of new greenhouse gas reduction and removal approaches, projects, and developers–badly needed in the face of inaction by large global emitters.

Poor quality projects are still too common, and hard to discern

Unfortunately, many climate solutions, and particularly carbon credit projects, have been of varying quality, with news articles and even talk show segments bringing attention to the questionable climate benefits of some projects. Climate solutions are complex, and their quality challenges are not always evident to buyers.

This variability in quality has also resulted in climate action being dominated by competition and silos–of individual projects, initiatives, and technologies rather than holistic solutions. Many organizations tend to recommend funding only one type of solution, such as engineered carbon removals or reforestation. 

But this is short-sighted–there is no silver bullet. Making rapid, scalable, and equitable progress on climate change requires an acceleration across all pathways, at levels capable of transforming entire sectors and systems, fast enough to get our planetary warming under control by 2030. As the United Nations International Panel on Climate Change (IPCC) notes in its latest report, it will take combinations of many solutions to reduce emissions enough.

Gas treatment facility for purifying methane captured at the Mare Chicose landfill in Mauritius, where the gas is then used to generate electricity.

Diversity is good for banks, consumers, the climate, and everything in between 

An extreme focus in one area, whether that is a banking institution like Silicon Valley Bank over-concentrating its holdings, or a person investing all of their hard-earned money in a single company’s stock, rarely leads to positive outcomes in the long term. 

Similarly, over-concentration in a single type of climate solution means an over-concentration of risks. For example, engineered solutions like direct air capture (DAC) plants, which suck up CO2 in ambient air and store it underground, often face technological, supply chain, permitting, and regulatory risks. Projects that pay local communities to prevent forest destruction (Reducing Emissions from Deforestation and Degradation or REDD+ projects) may face political, deforestation, and fire risks. No climate project is completely immune from risk, but well-managed projects can foresee and mitigate against them.

By creating portfolios of high-quality projects, we can balance across political, technological, financial, regulatory, and environmental risks. In the unlikely instance that a project under-performs or completely fails, it would constitute a very small proportion of total credits. (TIME CO2 has additional controls, including legal mechanisms and our own pool of set-aside credits, in the extremely unlikely event that this happens.)

Houses near a forest in the Solomon Islands, part of a forest protection project organized by Nia Tero and supported through TIME CO2's Planet portfolio. The Solomon Islands are particularly vulnerable to sea level rise, flooding, more severe storms, saltwater intrusion, and other impacts of climate change.

Beyond risk mitigation, diverse climate solutions are often complementary and can allow for a broad set of community and nature benefits alongside core carbon impacts.

Finally, by creating portfolios, we can also increase inclusivity, both by supporting more partners that develop high-quality projects, and by syndicating across many buyers. In this way, many companies can trace their impact to amazing projects that might have otherwise been attributed to a single company. 

TIME CO2’s portfolios are built to reflect what is most urgently needed to halve emissions by 2030

TIME CO2 believes it will take a combination of the best approaches to tackle climate change. 

The IPCC makes clear that we will need to pursue many different pathways in combination to reach net zero emissions, from switching to renewable energy, to reducing the amount of food we waste, to leveraging the carbon storage of forests and other natural ecosystems. The best combinations of mitigation options will differ by country and by company.

Going one level deeper, the best available climate science from the IPCC and the Oxford Principles for Net Zero Aligned Carbon Offsetting recommends that greenhouse gas emitters both big and small offset difficult-to-abate emissions through both carbon removals and reductions as climate technology advances and matures. This also aligns with the Integrity Council for the Voluntary Carbon Market (ICVCM)'s Core Carbon Principles.

The IPCC also strongly recommends that irrecoverable carbon sources be protected to prevent further emissions. All of these levers need to be pulled to make sure we avert catastrophic warming (Sun et al. 2021, Goldstein et al. 2020).

Adapted from The Oxford Principles for Net Zero Aligned Carbon Offsetting (2020), one of the trusted resources we align our portfolio design with today and into the future.

TIME CO2 was built to look at the system

TIME CO2 takes the latest science, finds specific projects with high potential for climate impact, thoroughly vets them, and then builds integrated portfolios of diverse, high-quality climate solutions. With access to a wide range of project types and developers – and therefore impact – TIME CO2 supports projects that deliver benefits for nature and communities alongside climate mitigation.

In line with the IPCC's recommendations, our portfolios include four types of climate solutions that vary in their global climate mitigation potential, support for climate adaptation and resilience, investment readiness, and opportunities for additional benefits. Many of these projects support indigenous peoples and local communities, critical ecosystems storing irrecoverable carbon reserves, and eco-entrepreneurs in need of commercialization support. All of our projects deliver measurable, credible climate impact within the next five years. 

All of our portfolios include these four types of climate solutions:

Four types of climate projects are included in TIME CO2 portfolios, with many approaches included in each of these
  1. Carbon dioxide removal represents the long-term removal of CO2 from the atmosphere, with a durability (permanence) typically of 100 years or greater. These projects generate verified carbon credits, and also include carbon credits that will be delivered within the next five years to lock in prices, stimulate project development, and ensure sustained impact.

  2. Emissions reduction represents the reduction or avoidance of greenhouse gas emissions, including reduction of carbon dioxide, methane, nitrous oxide, and other gases. These projects typically issue verified carbon credits after the projects are completed, and use an existing voluntary carbon market standard to quantify the impact (i.e. emissions reductions have already occurred, been verified by a third party, and can be retired immediately with an associated certificate).

  3. Protection of natural carbon sinks represents projects that reward landowners for maintaining natural land and ocean carbon sinks. These projects pursue protection and sustainable management of healthy, carbon-rich terrestrial, coastal, or marine ecosystems like rainforests and peatlands, and are meant to incentivize good stewardship–especially for Indigenous Peoples. These projects do not currently generate carbon credits, but do measure stored carbon alongside other critical co-benefits.

  4. Innovation and Acceleration represents catalytic financing that can help "shovel-ready" new technologies with measurable climate benefits to commercialize and scale; or support an enabling activity essential for a type of solution to scale.

For more detailed descriptions of the types of projects that are included in these categories, scroll to the end of this article.

Diversity is built into our portfolio DNA

All of our portfolios include at least ten projects across many different project types, and all projects are constrained to comprise no more than 10% of a portfolio, to avoid over-concentration.

We include both nature-based and engineered solutions, including tried-and-true projects like reforestation and landfill gas capture, as well as emerging approaches like direct air capture and storage.

Our projects are also geographically diverse, from the United States to Mauritius to Brazil to Ireland.

Douglas fir seedlings growing at the SilvaSeed nursery in Roy, WA, to be replanted by Mast Reforestation (formerly DroneSeed) in severely burned areas.

Balancing short- and long-term solutions

TIME CO2’s portfolios include a rich diversity of projects, including technical innovations that need to be advanced and scaled to yield results in the coming decades. As an example, DAC aims to capture and lock carbon away from the atmosphere, but has removed less than 50,000 tons of CO2 in total globally (or 0.0001% of the emissions we create globally every year). DAC also has a current price of $600-$2000 per ton of CO2 removed.

Funding DAC and other similarly expensive, bleeding-edge technologies at large scales is out of reach for all but the most deep-pocketed businesses. Nevertheless, investment in new technologies must be scaled up now if we are to achieve a just, climate resilient future. Therefore, our portfolio model includes these technologies, albeit in smaller proportions, to help stimulate the permanent removals market alongside the more abundant and cost-effective solutions available today.

Packaged together, the projects of a portfolio comprise a contribution to diversified, holistic climate, planetary, and community benefits that complement a company’s own emissions reduction efforts.

Testing bio-oil created by Charm Industrial from heating corn stover (harvest waste) before it is injected underground into deep wells in Kansas.

Why we include nature protection across our portfolios

At the same time that promising engineered removal technologies are being developed, we need to invest in existing, large-scale solutions before 2030. Massive quantities of CO2 are entering the atmosphere today, and we are already facing wildfires, floods, ice storms, droughts, and other serious climate damage.

Nature-based solutions can provide at least 25% of the critical carbon mitigation needed by 2030 before more aspirational technological innovations become feasible (Goldstein et al. 2020). According to the World Economic Forum’s 2021 report on Nature & Net Zero, 65% of the net emissions reduction needed by 2030 can come from natural climate solutions. Importantly, alongside this shorter-term impact, these solutions can also carry many important co-benefits, such as increased quality of life, increased support for Indigenous Peoples, and the protection of at-risk species.

Marginal Abatement Cost for natural climate solutions globally (a) and in the US (b) for solutions below $100 per ton of CO2, adapted from Cook-Patton et al. 2021.

Some ecosystems, like peat bogs, mangrove forests, and tropical forests, are particularly rich stores of carbon. If these ecosystems are degraded or destroyed, that carbon can take decades to centuries to be recovered, and is considered “irrecoverable.” In line with the best available science, we include the protection of intact, carbon-rich ecosystems as part of all our portfolios.

Although carbon crediting mechanisms are being developed for protecting ecosystems, these credits are not yet commonly used or accepted. Nonetheless, we believe carbon-rich ecosystems are critical to fund even without carbon credits, and are one of the most efficient methods to prevent further emissions: it's far cheaper to protect existing, "locked-up" carbon than to try to remove diffuse CO2 once it's in the atmosphere (Cook-Patton et al. 2021).

Estimated annual carbon loss and fraction that is irrecoverable carbon for major ecosystem types, adapted from Goldstein et al. 2020.

Our portfolios will evolve alongside science

Our current portfolio approach reflects a focus on nature-based solutions and the stewardship of natural ecosystems. We expect that our investment theses will evolve along with the shifting climate finance landscape, new scientific discoveries and measurement tools, and assessment of where the collective investment potential of businesses can add the most value.

Over time, as high-quality carbon credit supply catches up with demand, and emissions reductions commitments are realized, we expect to shift more resources into durable carbon removals. 

By design, our portfolio approach will continue to evolve with science to reflect what the planet needs. 

What do all these project type names actually mean?

Removals project types:

  • Afforestation, reforestation, and revegetation (ARR) - planting trees and other plants in areas that have become degraded and no longer have healthy ecosystems

  • Biochar - agricultural and forestry waste byproducts that are burned at very high temperatures in an oxygen-limited environment to turn forestry and agricultural residues like pistachio shells into a stable, carbon-rich product resembling charcoal  

  • Bio-oil sequestration - oils created from the high-temperature burning (pyrolysis) of agricultural residues and pumped back underground in deep wells

  • Blue carbon - restoration of mangroves, seagrass meadows, and other high-carbon coastal or marine ecosystems

  • Direct air carbon capture (DAC) and mineralization - capture of CO2 in ambient air using binding materials, with subsequent injection of the concentrated CO2 underground in deep wells in magnesium-rich volcanic rocks like basalt, where the CO2 chemically reacts to form new minerals and stay permanently underground

  • Direct air carbon capture (DAC) and storage - capture of CO2 in ambient air using binding materials, with subsequent injection of the CO2 underground in deep wells in sedimentary rock, or bound in concrete

  • Enhanced rock weathering (EMW) - a chemical reaction between concentrated CO2 and calcium- or magnesium-rich rocks that results in CO2 permanently binding to these minerals, either deep underground or when rocks are spread as crop dust

  • Soil carbon additions/amendments - adding fungal and other species to the soil to increase its ability to hold carbon long-term

Reductions project types:

  • Clean cookstoves - improved stoves that are engineered to use less wood or to use better fuels as inputs (such as propane or ethanol rather than wood), and therefore result in less deforestation; these also improve the health of women and children because of less smoke inhalation than using firewood

  • Destruction of hydrofluorocarbons (HFCs) and other high global warming potential gases - these are gases that are often used as refrigerants, and replaced harmful older, refrigerants that destroy the ozone layer. However, they are still much more potent than CO2, and they can leak into the atmosphere if not destroyed and replaced with lower-potency chemicals

  • Improved forest management (IFM) - projects that channel payments to landowners in exchange for longer timber harvest cycles, or for improved practices that result in more carbon storage in trees (such as inoculating tree roots with beneficial fungi or bacteria); this differs from reforestation because the trees or crops are still expected to be harvested

  • Methane capture and destruction - methane is much more potent than CO2 and is important to remove from the atmosphere; projects include methane capture from landfills, wastewater treatment plants, manure lagoons, and bio-digesters

  • Ozone-depleting substances (ODS) destruction - chemical transformation or destruction of chemicals that destroy the ozone layer (typically from old air conditioners) so they do not leak into the atmosphere;  ODSs are also very potent greenhouse gases

  • Reducing Emissions from Deforestation and Degradation (REDD+) - payment to local communities for protection of tropical forests at high risk of degradation or deforestation; these projects must show that the forests being protected likely would have been degraded or cut down without the carbon payments

  • Renewable energy - solar, wind, and other clean energy projects. These are one of the most common carbon credit project types. While renewable energy is critical for decarbonization, we do not include carbon credits from renewable energy projects in our portfolios due to concerns with additionality (meaning that these projects likely would have happened regardless of the carbon credits because they are already funded through paying electricity customers, and typically do not need carbon credits to be economic).

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Isabella Akker

Portfolio manager at TIME CO2. Stanford grad. Hiker-dancer-painter. Formerly at Dalberg Advisors, Smart Wires, Yale Carbon Containment Lab.