Citi Closes $72 Million Carbon Removal-Linked Note to Support Applied Carbon Biochar Project

LONDON – Citi announced the closing of a $72 million, 3.5-year principal-protected Carbon Removal-Linked Note designed to support Applied Carbon's biochar project in Texas, marking another step forward in mobilizing private capital for carbon removal solutions.

Citi’s note introduces an innovative financing structure where investors in the bond will forego traditional coupon payments, and an upfront amount will be directed toward financing Applied Carbon's biochar project. Investors will then receive payments linked to the issuance and delivery of carbon credits generated by the project.

"The voluntary carbon market requires new financial structures to bridge the gap between investor capital and the long-term funding needs of carbon removal projects," said Sonia Battikh, Global Head of Carbon Offsets Trading at Citi. "This Carbon Removal-Linked Note builds on Citi's pioneering work linking bond performance to environmental outcomes and marks our first outcome bond tied to verified carbon removals. By bringing together investors, project developers and long-term carbon demand, we are continuing to expand the range of opportunities through which capital markets can finance real-world outcomes."

Applied Carbon has developed a mobile pyrolysis platform that converts agricultural crop residue into biochar, which is a stable, carbon-rich product that both sequesters carbon and delivers proven soil health benefits. The company's mobile system enables crop residue to be processed directly in the field, combining pyrolysis and biochar application in a single pass. The technology can operate in both in-field and edge-of-field configurations, providing additional feedstock flexibility throughout the agricultural cycle.

“This financing shows that biochar and engineered carbon removal projects can be structured and financed like any other asset,” said Jason Aramburu, Founder & CEO at Applied Carbon. “We're proud to work with Citi and Nuveen to scale our deployments and deliver real impact for the climate and for farmers across Texas. This is the kind of structure that will unlock capital for carbon removal at scale”.

In 2022, Microsoft executed an offtake agreement with Applied Carbon for a portion of the carbon credits generated by the project, providing long-term demand support for the underlying carbon removal activity.

“We are excited to have participated in Citigroup’s inaugural outcome bond given its attractive relative valuation, unique underlying project and commitment to robust impact reporting,” said Stephen M. Liberatore, CFA, Head of ESG/Impact for  Global Fixed Income at Nuveen. “The funding of equipment to produce biochar from agricultural waste through in-field processing is an excellent fit for our portfolios. These are the types of investments that we expect will produce not only direct and measurable impact through high-permanence carbon sequestration but also improve sustainable free cash flow generation through the creation of carbon credits that are being off-taken by a well-known hyperscaler.”