Forest Carbon Removal Gets a $160 Million Vote of Confidence

The embattled nature-based carbon removal market got a significant show of support today as Chestnut Carbon announced a whopping $160 million Series B funding round, led by the Canada Pension Plan Investment Board. The startup focuses on planting trees and vegetation as well as on improving forest management practices to better remove carbon from the atmosphere.

This announcement comes on the heels of the company’s recent deal with Microsoft to remove over 7 million tons of carbon dioxide from the atmosphere over a 25-year period. That involves planting about 35 million native trees over about 60,000 acres. It’s Microsoft’s largest carbon removal contract in the U.S., and one of the largest domestic carbon removal projects period — including those that rely on engineered solutions such as direct air capture.

Chestnut aims to fill a void in the forest carbon removal space by employing a rigorous measurement, reporting, and verification framework that it claims leaves little room for accounting errors and greenwashing, offering a solution that, hopefully, the market can finally trust. So far it seems, investors are buying it.

Chestnut will use this latest funding to build out afforestation projects — that is, planting trees in areas where, at least in modern times, forests have not existed. “We’re buying this farmland — this is marginal pasture land — and we are turning that back into a native forest,” Chestnut’s chief financial officer, Greg Adams, told me. The company buys land that is ill-suited for farming due to factors such as acidic, alkaline, or nutrient-poor soil or a climate that’s hostile to food crops but works for certain tree species.

The startup began planting native tree species in Arkansas and Alabama in 2022, and has since expanded into Mississippi, Louisiana, Texas, and Oklahoma. There are a number of benefits to planting in the Southeast, Adams told me. For one, the region’s climate allows trees to grow particularly fast, leading to more immediate carbon benefits. Also, the area isn’t very wildfire-prone, but is extremely biodiverse — so if one species of tree falls victim to disease or blight, much of the forest is likely to remain unscathed. “We look to build a forest that, if you had a time machine and you went back 100 years, would look very similar to what was there 100 years ago,” Adams told me.

While planting trees isn’t particularly expensive, land acquisition is, and that’s what the majority of Chestnut’s Series B funding will go towards. Adams told me that owning the land also helps to “reinforce the permanent nature” of Chestnut’s carbon removals, since the company has 100% control over land management decisions.

Forest-based carbon offsets are famously prone to fraud and other accounting improprieties. A 2023 investigation showed that many rainforest carbon credits approved by Verra, a leading credit certifier, for instance, were essentially bogus.

Chestnut is well aware that past scandals have eroded trust in nature-based removal efforts and aims to counteract the industry’s dubious reputation. While Verra does certify Chestnut Carbon’s “improved forest management” credits, another entity called Gold Standard certifies the company’s afforestation credits.

In addition to aligning with Gold Standard’s methodology, Adams told me the team uses a number of tools to verify the amount of carbon that its trees remove, including one that the company invented itself, which has plotted every parcel of land in the lower 48 states. This tool uses public and private data to inform Chestnut whether a plot of land is suitable for afforestation. Then, given a hypothetical mix of trees and their space relative to each other, an algorithm determines how much CO2 they would capture and sequester over a 50-year period. After the digital work is done, foresters visit the proposed site and develop a more nuanced analysis that takes into account factors such as expected yield over a given period of time and various mortality risks.

“We sell carbon credits, but we ultimately sell reputational risk insurance, because these are voluntary,” Adams told me, saying he recognizes the fragile nature of the market at this stage. “I want to make sure that what we do is seen differently, in a positive way, and ultimately it’s not going to blow back in our customers’ faces.”