Deep dive: Chestnut Carbon's $160m Series B

Another interesting deal was Chestnut Carbon, which raised a massive $160m Series B round. Founded in 2022 by PE firm Kimmeridge, the company focuses on purchasing marginal and degraded farmland in the Southeastern US, restoring it with native trees, and generating carbon credits. The round attracted backing from institutional investors like Canada Pension Plan Investment Board, DBL Partners, and Cloverlay, among others.

Still, Chestnut is navigating the challenges of the voluntary carbon market where credibility has been a major concern. To overcome this, the company focuses on owning land in the US, where robust property rights and clear ownership structures help ensure stability and boost credibility for its longer durability claims, under Gold Standard. It also works with third party land-owners to develop high quality removal IFM credits under Verra. Early on, it signed an offtake contract with Microsoft, structured like a Power Purchase Agreement (PPA), a contractual framework used in conventional assets that helps enable the space to mature and attract lower costs of capital. Microsoft also then signed a second, larger offtake contract soon after. The buyer’s creditworthiness signaled trust in Chestnut’s ability to deliver on its commitments, and helped attract investors who saw the potential for scaling the business and meeting demand for verified credits.

Looking ahead, Chestnut’s long-term goal is to lower the cost of capital, with plans to move beyond equity funding and into debt financing. This step will help reduce financing costs and increase the company’s ability to scale, but Chestnut is still focused on keeping the business model simple, a “rinse and repeat” project development approach with a focus on conservation for profit, to deliver risk-adjusted returns to investors and ensure the business itself is sustainable.

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