Opna

Shilps, your background is a mix of frontline climate activism and fintech financial services, including six years at the forefront of original carbon markets—from procurement and funding to allocation of resources. How did this inform the launch of Opna?

I have spent the best part of two years understanding the human and lived experience of the climate crisis. That endeavor took me to India for two years, where I spent time stand-up paddling the River Ganges from source to sea, meeting a lot of incredible people along the way, and learning how climate change affects people across gender, caste, class, faith, and political alignment. I wanted to figure out how to sensitize people to this challenge and decided this is how I wanted to spend my time for the rest of my living and working life. 

I understand how we can use capital to solve climate change’s gnarly problems—how we can take the best of fintech to finance the hell out of climate projects that will decarbonize the planet. We need about $100 trillion. The crazy thing is, that money is sloshing around—someone just needed to figure out how to get that money from where it’s sitting today to actual climate projects, which is where Opna comes in. I’m going to build a massive business—that’s really important to me—and the outcome is going to be the life improvement of hundreds of millions of people around the world. 

For the uninitiated, those unfamiliar with climate projects, what is the problem you’re trying to solve? 

In solving climate change today, we have the technology to do so. But in order to use the technology we have, we need to build climate-positive projects: this could be anything from renewable energy, like solar, to carbon removal, which means sucking carbon dioxide out of the air that we humans have been putting into the air since the industrial revolution. Think of a farm of mangroves, a regenerative farm, or a project where cooling towers are sucking carbon dioxide out of the air. In order for us to bring these climate projects to life, the people building these projects need financing. Often, it is real people, just like us, who want to build these projects as a business, but they face one big problem: they can’t get the required financing to get the project off the ground. These are people who know what they’re doing, oftentimes they already have proven carbon projects up and running, but every time they want to build a new project, they run into the same problem. Financing. 

In the world we live in today, there is very little incentive for a financial institution, like a bank, to take on the so-called perceived risk of funding these folks. However, there is a way to fund them that aligns the incentives we have in today’s world with the financing these folks need: voluntary carbon markets. On one side you’ve got corporations and financial institutions that have committed up to $150 trillion to reduce, mitigate, or remove their carbon footprint. On the other side, you’ve got these projects that can actually provide these carbon benefits and help these corporations meet their goals. Voluntary carbon markets allow us to take the money from one side—the climate commitments of corporates and financial institutions—and transform that money via the mechanism of carbon credits into very lucrative and actually useful investments for the people who want to build climate projects. The carbon credit model is a smart way to route money from these net-zero commitments to the projects that need the money. 

For these carbon credits to be real—to be “not bullshit”, as we call them—they need to be high quality; they need to provide the promised benefits to the local communities in which these projects are situated. Today, we have no way of verifying what these credits are doing what they say they’re doing. Ultimately, this lack of carbon credit transparency combined with the lack of financing has resulted in a huge lack of supply of credible carbon offsets. This is the problem we’re solving. We’re helping to bring a high-quality, non-bullshit supply of carbon credits to the market. 

What is the perceived risk in funding these climate projects for traditional banks?

Unlike corporate or residential real estate, which are developed markets for lending and equity with a way to collateralize the risk, the challenge with climate financing is that it’s very early. The players (the people or organizations developing the climate projects) are unknown to the banks, so no one can assess the rate of default or the credibility of the people doing the projects because they only have a two to five-year history, max. Then sometimes, the technology itself is high-risk because it hasn’t been fully fleshed out and proven. It might have been proven on a small scale, but it doesn’t yet have a track record. 

For the most part, solar and wind technology has been relatively de-risked. However, even for those climate projects, they might need to buy forward contracts, where an organization or a corporation buys the contract to purchase the power for the next 20 years, to de-risk that transaction for the bank. Alternatively, in countries where you have a government committed to doing green infrastructure, the money a bank puts up in the beginning might be guaranteed by that government, but the challenge with that is that governments have not gotten to the point where they’re able to underwrite these infrastructure projects. So then it starts to fall under the providence of private enterprise, and in the private enterprise world, it’s all about credit rating and risk. One of the problems we’re trying to solve is to build that missing data that allows us to risk analyze every single project based on the geography, based on the people involved, based on the various financiers who are in the stack. 

We know there is high demand for climate projects, but a lack of supply. Yet the cost of carbon credits is still so low. Why is this a problem and how does Opna solve this? 

First, we need to make the distinction between the carbon markets we’re talking about. There is the compliance carbon market, wherein a polluter like a fossil fuel company is mandated by certain governments, most prominently in the European Union, to only emit a certain amount of emissions every year. If they go over that limit, they are mandated to buy carbon credits; if they’re under that limit, they can sell those carbon credits. Then there is the voluntary carbon market, which is mostly created out of consumer pressure and the upcoming regulatory rules on private institutions such as big corporates, tech companies, and consumer companies of all sizes around the planet. These companies need to find ways to reduce their own carbon emissions. That’s where voluntary carbon credits come into play. 

The voluntary carbon market is kind of stuck in 1955. You have a buyer (a corporate,  a financial institution, or a tech company), you have a seller (the developer of a climate project), and in between, you’ve got retailers, brokers, validation companies, and auditing companies. There is lot of opacity that obscures the flow of carbon credits; how money moves from the buyer to the seller. Currently, there is no look-through for a buyer to see what they’re actually financing on the ground, which has resulted in up to 95% of these carbon credits not doing the thing they promise. 

Imagine this: if I buy something from Zara, I can maybe tell where it was made but I’m not sure who made it or what the harmful effects of making that garment were. It’s even less clear in the voluntary carbon credit market because carbon credits are intangible—they are simply a number on a registry. There’s no ability for corporations to compare what their offset actually did after they bought it. It’s a structural problem in the market that creates opacity, with the very important job of validation and ongoing verification monitoring of carbon offsets being done by analog folks, where data is not centralized. 

Today, more companies want to buy credits that are certified as high-quality. These high-quality carbon credits are in short supply because we don’t have enough high-quality carbon removal projects being financed. The voluntary carbon market has grown from a $200 million a year market to a $1 billion a year market because there is roughly $150 trillion worth of climate commitments that need to chase the supply. There’s a huge imbalance in increasing demand with no financial infrastructure to finance the supply. 

So how does Opna fix all of this?

Our fundamental point of view is that the current system of finance and banking is not suited to the needs of the climate age. That means that all of those little climate projects we’re talking about are happening on a local level, they’re widely distributed, and there is no centralized force controlling them. Opna’s ability to collect data around all the players in the field (from the project developers to the technology itself) allows us to be the owners of this kind of risk rating that will be necessary in order to underwrite these projects—because we cannot solely underwrite all of these projects. We will contribute one piece to the finance stack and that piece will derisk it for the next and the next and the next to complete the chain that needs to happen for that project to get off the ground. 

Opna is starting with decentralized solar projects. Why?

Decentralized solar could mean off-grid, mini-grid, or microgrid (meaning it’s not connected to a utility). We’re looking at urban mini and micro grids as our go-to-market, and we’re starting with solar because unlike other technologies, it has been proven and we know all the components that go into standing up a solar project. It is already relatively de-risked. Second, when you use technology versus nature-based solutions as a project that is eligible for credits, you are able to monitor it technologically. At all times, we can know the status of the project, we can ensure it is still generating electricity. Unfortunately, nature-based projects make up the majority of the “sketchier” credits on the market. The nature of nature, as it is, is that it is difficult and expensive to monitor, even with geospatial technology, which we will be using as well. You can’t attach some sort of device to every tree in a forest and then be like, “Is that tree still there?” which is the challenge of the nature-based projects. Eventually, we will wade into those waters, but for now, we are starting with solar. 

Once Opna is launched, what are some other climate projects you will tackle on the financing side?

There are lots of innovators in blue carbon and in the carbon sequestration space experimenting and building. They will all hit a wall at some point when they’re past the innovation phase that has been financed by VCs or super high-risk funders. As they’re trying to scale, they will need individuals in different markets to use their methodology, such as farmers, but those farmers will face the problem of funding. We are priming ourselves to be on the ground and ready for this moment, to say, “Yes, you have the methodology, we have the risk framework for how we’re going to do this.” Iit will differ from how we risk rate solar, but ideally, we’re talking about geographies that are similar, enabling us to have the macroeconomic and local economic data. We will have information about the banks and other folks who might become funders of these projects, and we’ll be able to use all of that to help stand up another stack that works for source sequestration.

Let’s talk about the platform itself. How will projects be funded through Opna?

The big opportunity in the market is to use carbon credits as a transactional tool to supply funding to these various projects. On the funding side, we have these corporates who put money on the table and say, “We want to buy credits to offset our emissions.” Currently, that money goes through several different places, like middlemen or brokers, until it ends up on the supplier side. We are focused on where the market is in most need, which is on the ground with the developers who are building these projects. Our platform, in the first iteration, is focused on the ease of use from the supplier side: if you’re a project developer, it should be just as easy as going on a bank website and saying, “I would like to apply for funding or a loan.” The project developers will supply their data, we evaluate it, and determine whether they qualify—sometimes, we will need to do a site visit first. Opna essentially becomes that front end for the supplier to come in and apply for funding. 

Today, we’re not planning to hold cash on the balance sheet; Opna acts as a pass-through. If a buyer wants X amount of credits, we match it to what we have on the supply side. In the future, the vision is a little bit more full-stack. For example, we might also have equity backers or be in the business of debt financing. Think of it as a layer cake: today we have the credits layer, which is something we have relatively easy access to in terms of building the stack; tomorrow we have debt financing that we offer on top of that, for which it will be a slightly different qualification process. We might have equity funding on top of that if a large corporation decides they want to buy an entire farm because it’s really valuable to them in some way. Our goal is not necessarily to fully displace banks, but to play where banks are not playing today, and to partner with them on those larger projects where they can supply a level of financing that we may not initially be able to. 

How do project developers currently apply for financing?

This is where Opna is pretty revolutionary. Take a situation where, for example, you lose power all the time. This happens in Accra, Ghana, where the grid is constantly failing, so what do people do? They buy diesel generators. Diesel, as you know, is one of the most expensive and most polluting fuels you can use. If you replace those diesel generators with renewable energy from a decentralized solar project, that allows that developer to qualify for carbon credits. But the person who wants to start that solar project doesn’t realize they can get funding through credits—mostly because those seeking to verify credits are putting project developers through a long two-year process to qualify for the credit, by which point the project is dead or they’ve moved on to something else. Opna can shorten this gap with our data to be able to say yes, you qualify and the money’s coming in three months’ time. That radically shifts the speed and scale at which we can get these climate projects up and running to displace that dirty energy. 

How will Opna add transparency to the voluntary carbon market, to ensure these project developers are building what they say they want to build?

One of the things we’re aiming for, which almost no one can offer today, is exclusivity. When we contract with a climate project developer, they’re exclusively contracted with Opna, which means they’re not selling or reselling those credits to anybody else, which guarantees the credits are authentic. Today, carbons credits have all been sloshing around for a while on a marketplace being sold and resold. 

Our mantra around transparency is that, as a buyer, you should have a look-through of the entire project. At any given moment you should be able to see what’s happening with that project. Today, if I buy a carbon credit, the best I can get is a report from the person or marketplace I bought it from. And the best those people have is a report from Verra that it qualified. So in terms of chains of verification—”is this thing real?”—that is pretty weak today. Even last week there was a big battle raging on Twitter with Mark Cuban talking about using the blockchain to verify credits. It turns out that one of the big blockchain suppliers of carbon credits simply bought the entire stock of credits from one particular verifier or one particular seller and put it on the blockchain, which basically means that nobody knows what happened to that credit before it got on the blockchain. With Opna, carbon credit buyers can see everything that has happened with a project from the moment it was funded by us and built, to the moment that a carbon credit sold, and then they can continue to track that project. There will never be any question as to where the credit originated.