By Thomas Fugelsang, Managing Director, Entoro Capital, LLC
A good carbon project can still be a bad financing proposition. The developer spends first, verifies later and often discovers the price only after the outcome already exists. That sequence puts years of development cost, delivery risk and market risk on one balance sheet, then asks a spot buyer to decide what all of it was worth after the capital has already been spent.
The market increasingly shows that quality has value, but quality alone does not determine who captures it. Sylvera reported high-quality afforestation, reforestation and revegetation credits averaging about $26 per tonne in December 2025, while technology-based carbon removals can command prices well above $100 per tonne and, in some categories, several hundred dollars. Those are different products with different durability, cost and delivery profiles. The point is not that one should price like the other. It is that buyers already distinguish sharply between forms of environmental performance. Financing structure determines how much of that value reaches the project, how early it arrives, and how much risk the developer must carry to earn it.
Finance the outcome, not the certificate
The central shift is simple. Instead of treating the registry credit as the financing instrument, the project finances contractual rights tied to verified delivery. An issuer or special-purpose vehicle can define who provides capital, what the project must deliver, when verification occurs, how cash is released, and what happens if performance falls short. Verification stops being the moment a developer begins looking for revenue. It becomes a contractual payment trigger.
That distinction matters even more when the mitigation outcome carries sovereign authorization. Under Article 6, host-country authorization and corresponding adjustment can address a problem private registries cannot solve on their own: whether the same mitigation outcome is being counted toward more than one national claim. Authorization does not guarantee project performance or create private-law title by itself, but it can strengthen the claim that sits underneath the financing. The contract then supplies the delivery rights, payment obligations, remedies, and transfer mechanics investors actually need.
Prepayment released against verified delivery
The most direct structure is a prepayment facility with capital held in escrow. The project can be set up with a small initial disbursement or with all funds held in escrow. An investor commits capital before the environmental outcome is delivered and funds are released to the developer in agreed tranches as independent verification confirms performance. Additionally, a small coupon can be passed back to the investor from the funds in escrow being held in treasuries. If a project delivers 80 percent of a scheduled milestone, the documents can provide for a corresponding release, subject to the actual terms of the transaction. Undisbursed capital remains protected rather than becoming an immediate loss.
For the developer, the value is timing. Capital arrives before the majority of costs occur rather than years after them. For the investor, the value is control. Cash release is tied to evidence, shortfalls can be governed by cure periods, and unused funds can remain outside the operating company. The structure does not eliminate delivery risk. It changes who funds that risk, when money moves and what happens when delivery is late.
Splitting debt from outcome performance
A second approach separates conventional credit exposure from environmental-performance exposure. One instrument can carry fixed debt terms, while a separate instrument carries payments linked to verified outcomes. The two claims can have different buyers, different risk tolerances and, where appropriate, separate identifiers and transfer mechanics.
The reason for the split is practical. Many fixed-income investors are built to evaluate principal, interest, credit quality and maturity, not debt whose return moves directly with tonnes delivered or another non-credit variable. Under IFRS 9, for example, amortized-cost treatment depends in part on contractual cash flows being solely payments of principal and interest. IFRS 9 therefore illustrates why keeping a basic lending instrument separate from a variable outcome-linked claim can matter for some holders. The exact accounting treatment depends on the instrument and investor, but the financing logic is broader: do not force every risk into one security if different buyers are equipped to hold different risks.
What the structure actually recovers
This is the center of the economics. Better financing does not make a tonne of carbon more valuable, and it cannot rescue a project that fails to deliver. It can, however, increase the price an investor is willing to pay for a claim on that outcome by reducing uncertainty around delivery, payment and enforceability. More importantly, it can recover value that the current spot model gives away before the credit is ever sold.
First is the time value of money. A developer that spends several years before receiving revenue must finance that gap with equity, expensive project debt or retained cash. Bringing committed capital forward reduces the amount of capital sitting unreimbursed while the project matures.
Second is the forward discount. A buyer asked to fund an uncertain future delivery will demand compensation for project, timing and non-delivery risk. Escrow, staged releases, reserves, insurance where available, covenants, coupon payments, and defined remedies can move some of those risks out of the price and into the structure. The environmental outcome has not changed, but the claim the buyer receives is better defined.
Third is the financing spread. When project risk, carbon-price risk, delivery risk and liquidity risk all sit in one unsupported exposure, the required return has to absorb all of them. Separating those risks can reduce the premium demanded by capital providers. The arithmetic becomes meaningful quickly. On $50 million of five-year debt, a three-percentage-point reduction in financing cost, from 12 percent to 9 percent, would reduce annual interest from $6 million to $4.5 million, or $7.5 million over five years before amortization. Those rates are an illustrative sensitivity, not a market benchmark, but they show why even a partial reduction in the risk premium can materially change project economics.
Fourth is buyer access. A bespoke registry unit has a narrow natural holder base. A properly structured financial instrument can be designed around the custody, disclosure, transfer, valuation and risk-management systems institutional investors already use. That does not guarantee liquidity or eligibility for any particular mandate. It creates more of the conditions under which a broader buyer base, repeat transactions and better price discovery can develop.
Taken together, those effects explain why structure can change developer economics without pretending that finance has changed the underlying environmental result. The project is still responsible for producing the tonne. What changes is how much capital it must carry before delivery, how much risk is embedded in the buyer discount, how expensive the financing is and how many potential holders can evaluate the resulting claim.
The Bottom Line
The objective is not to make a carbon credit look more sophisticated. It is to stop making the credit carry the entire financing burden. The value is in getting capital to a good project earlier, at a cost the project can support, under terms both sides can enforce. That is how a verified environmental outcome becomes financeable before the buyer shows up.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Entoro, LLC, or any of their respective affiliates. This article is provided for general informational and educational purposes only and does not constitute investment advice, a recommendation, an offer to sell, or a solicitation of an offer to buy any security, financial product, or investment strategy. The information presented is believed to be reliable but is not guaranteed as to its accuracy, completeness, or timeliness. Any forward-looking statements or opinions are subject to change without notice.
Author Bio: Thomas P. Fuglesang is a Managing Director at Entoro Capital, LLC and Capturiant, LLC, with over 25 years of experience in energy, shipping, commodities, and real estate. He specializes in corporate finance, investment banking, private wealth management, and equity sales, with deep expertise in structuring transactions and developing international capital market solutions. At Entoro and Capturiant, he leads structuring, capital markets advisory, and business development for environmental and alternative investment products.
Previously, Thomas spent over 17 years as Managing Director at Absalon Capital Ltd, overseeing projects in oil services, shipping, and commodities, while holding multiple senior roles including Board Director and CFO. Earlier in his career, he held roles at Morgan Stanley (Private Wealth Management and Associate in Luxembourg), Credit Suisse (Investment Banking, Transportation/Shipping), and Pareto Securities (Equity Sales).
Thomas has extensive capital markets experience in capital raising, M&A, governance, advisory, and execution of large-scale international transactions. His leadership roles have included Board Director at CAPOL and Ascot Energy Services, CFO of Newport Shipping LLP, and Director at Ohlsson International Ltd and SeaHold Group.
He holds CFA Level I, the Investment Administration Qualification, and Capital Markets & Securities Analyst certification. His academic background includes an MSc in Shipping, Trade & Finance from Bayes Business School (London), and a BA in Business Economics from Vrije Universiteit Brussel (Belgium) and Augsburg University (Minneapolis).
Thomas is recognized for bridging traditional and emerging sectors and structuring innovative solutions for corporate and institutional clients globally.
