LONDON — An insurance start-up founded by three former Allianz executives that aims to guarantee companies buying carbon credits get the permits they’ve paid for has closed the biggest European climate-focused seed funding round in more than a year.

CarbonPool raised 10.5 million Swiss francs ($12.17 million) in the round led by Heartcore Capital and Vorwerk Ventures, two executives told Reuters, alongside HCS Capital, Revent Ventures and former Allianz board members Axel Theis and Christof Masher.

That is the second-biggest climate finance seed funding round globally and the biggest in Europe since the start of 2023, industry tracker PitchBook said.

The company’s approach guarantees companies buying carbon credits will receive the permits they have ordered even if the issuer cannot deliver them – for example, if the forest backing a credit is destroyed by wildfires.

CarbonPool plans to do this by buying high-quality carbon credits that it will keep on its balance sheet and pay out when needed.

Uncertainty on whether permits will be delivered is one issue holding back market growth, co-founder and Chief Operating Officer Nandini Wilcke told Reuters.

“(Buyers) are in the uncomfortable position that right now there’s no guarantee that the offsets they buy in advance are actually going to materialise and… in the number that they’re expecting and reporting on in their financial disclosures.

“Insurance is basically the missing piece.” The approach, currently being assessed by the Swiss regulator, is previously unreported.

Data gathered between 2000 and 2023 and shared with Reuters by industry tracker AlliedOffsets shows the average issuance success rate for carbon permits was just 45%.

Failure to secure the expected credits can leave corporate buyers short of those needed to meet their climate goals.

While companies issuing carbon permits can already insure the assets that back them, no provider currently pays for the value of the carbon credit itself.

“If you have a fire, what they pay you back is the amount of money you spent to put those trees in the ground,” said Peter Fernandez, CEO of Brazilian carbon removal start-up Mombak, which is backed by investors including AXA Investment Managers and Bain Capital.

“They don’t pay you back the carbon credits that you lost, which is a much more expensive thing.”

“What we need is ‘you lose carbon credits, you get back carbon credits’.” — Reuters

HONG KONG — China’s Supreme Court and Hong Kong’s Department of Justice said on Monday that they signed an arrangement on the reciprocal recognition and enforcement of judgements in civil and commercial cases effective immediately in both places.

The arrangement reduces the need for parties to re-litigate the same dispute in the mainland and Hong Kong courts, reducing the risks, legal costs and time usually associated with the cross boundary enforcement of such judgements, Hong Kong’s Department of Justice said in a statement.

It is unclear how the reciprocal recognition and enforcement arrangement would work in practice as there has been no previous precedent with the mainland.

Hong Kong is the only jurisdiction to have an arrangement with the mainland on reciprocal recognition and enforcement of judgements with such a wide coverage, it said.

The move comes as Hong Kong prepares to enact a new round of national security laws this year known as Article 23 that is expected to further tighten China’s grip, and include counter-espionage legislation that could strengthen official control over foreign institutions.

When Hong Kong reverted from British to Chinese rule in 1997, Beijing promised the city a high degree of autonomy including the right to free speech and protest.

Western critics say Beijing has reneged on those promises amid the current national security law crackdown that has been used to arrest over 280 pro-democracy activists and politicians including leading China critic Jimmy Lai.

Lai’s trial has become a diplomatic focal point and a key test for the financial hub’s judicial independence and freedoms, with diplomats including those from the US, Britain, the European Union, Canada, and Australia in attendance.

Justice Secretary Paul Lam said that the new civil and commercial arrangement showcased the unique advantages enjoyed by Hong Kong under the “one country, two systems” formula that the city is governed under.

It will make the option of choosing Hong Kong with its common law system which the “international business community is familiar with and have confidence in, as the jurisdiction to resolve any contractual dispute more attractive,” knowing that a Hong Kong judgement may be recognised and enforced all over the mainland, Mr. Lam said.

“This will be conducive to enhancing Hong Kong’s status as an international legal and dispute resolution services centre. It may also make investors and business people from other countries more ready to explore investment and business opportunities on the mainland.” — Reuters