How Insurance Is Unlocking Climate Finance in the VCM

As the voluntary carbon
market
works to recover from a crisis of
credibility,
one rising player is stepping in to offer something the sector has long lacked:
financial protection from the very beginning.

London-based startup Artio is the first
insurer designed specifically to cover carbon-credit projects from the concept
phase, before a single tree is planted or a ton of carbon is removed.

Artio’s model is bold in its simplicity: Offer insurance to cover delivery
shortfalls on carbon credits, giving both developers and investors the
confidence to move forward early. It’s a solution to one of the most persistent
problems in the sector — a lack of upfront
financing for
nature-based
and engineered
carbon-reduction projects. As regulatory pressure increases and buyers demand
more assurance, Artio is providing a mechanism to rebuild trust and unlock
capital.

“If you want credits in four or five years, the projects have to start today.
We’re making that more feasible,” Artio co-founder and CEO Bilal
Hussain told
Sustainable Brands® (SB). “We want to be there as early as possible – to
support projects coming to market and help investors worry less about the risks.
That’s why we chose insurance: we saw it as a stabilizing force with real power
to unlock scale. And we focused on the early stage because if you want a
high-quality market, you have to get involved from day one.”

Carbon-credit projects, especially land-based ones such as afforestation or
soil
restoration,
often require significant upfront investment and years of patient capital; yet
funding remains elusive. Projects may not deliver their first credit, and
therefore any revenue, for three to five years, sometimes longer.

“Carbon projects require capital, but financing can be tough to secure –
especially in the early stages,” explained Thomas
Herry,
Head of Pre-Issuance at carbon credit rating agency
Sylvera.
“Most projects need funding years before they generate their first credit, and
therefore their first revenue. But banks hesitate because there are no tangible
assets, investors want clear cash flow visibility, and corporates worry about
delivery risk – they’re afraid of not receiving the credits they’ve paid for.

“On top of that, there’s a real information gap. Developers know their projects
inside out, but investors don’t – so they need to run extensive due diligence
just to feel comfortable,” he added. “That’s time-consuming; and for an
early-stage project juggling multiple investor requests, it can be a major
distraction from actually building the project.”

The result is a bottleneck. Developers struggle to scale, and investors are left
circling the same pool of mature projects. Even as corporate demand for
high-quality carbon
credits
grows, the market can’t meet it; the mismatch between ambition and
infrastructure has stalled progress.

Furthermore, those who do manage to raise capital are often forced to frontload
risk – either by accepting unfavorable terms or making unrealistic promises.

“Some projects have inflated their carbon-sequestration forecasts to make
themselves look more attractive to investors. That’s what we call over-crediting
risk,” Herry told SB. “It’s led to a number of greenwashing
scandals,
as you’ve probably seen. That said, we also see projects that underestimate
their potential and others that get it just about right. The challenge is being
able to tell the difference.”

Artio steps into this gap with a deceptively simple offer: insurance for
carbon-credit delivery, available from the idea stage. The firm covers the risk
that a project underperforms – due to fire, drought, methodology changes or
other complications – ensuring that buyers receive the volume of credits they
paid for.

“If a corporate pre-purchases 1,000 credits and only receives 900, we’ll make up
the shortfall – either with matching credits from our supplier pool or a cash
payout,” Hussain said. “That way, they can still meet their climate targets and
stay ambitious. Anything can happen over the life of a project; but with
insurance in place, buyers can invest with confidence – knowing they’ll either
receive the credits they were promised or have the funds to replace them
elsewhere.”

Artio’s model is not just a safety net; it’s a catalyst. By reducing perceived
risk, it enables project developers to secure debt financing and buyer
agreements far earlier. In some cases, timelines shrink from years to months.

“Once a corporate has done its due diligence and chosen a project, the next step
is getting approval from the CFO – and that’s where insurance makes a big
difference,” Hussain said. “The CFO is often less focused on sustainability and
more concerned about
liability.
Insurance solves that. If there’s under-delivery, they know the credits are
guaranteed. Their job is essentially done.”

In the long run, Hussain believes insurance could make carbon-credit
transactions as routine and dependable as any other commodity trade. He wants to
make insurance so boring it becomes automatic: Find a project. It’s insurable.
Done.

Artio’s process begins with a free insurability assessment, offered even before
a developer has a complete project plan. Developers share basic details such as
location, proposed species and project goals. Artio then models everything from
carbon yields to fire and drought exposure.

“A developer might say, ‘We’ll generate 1,000 credits,’ but our models might
estimate 700,” Hussain explained. “That early intervention helps projects avoid
overpromising and gives investors more confidence in what they’re buying into.”

Artio has built a proprietary database of over 8,000 species and designed
modelling systems that simulate various climate and performance risks. Based on
this, a project is either given a stamp of insurability or a detailed feedback
report.

Artio’s policies are underwritten by major players: Tokio Marine
HCC,
Markel
and
Apollo.
The startup also received one of the fastest-ever approvals from Lloyd’s of
London – a testament to the rigor of its systems.

“We spent months presenting our data to underwriters, running deep-dive
workshops to earn their trust,” Hussain said. “We’re not here to write dozens of
policies a day. We’re building a portfolio for the long haul.”

Once insured, projects are continuously monitored. If early signs of
underperformance emerge, Artio can source credits from elsewhere in its
pre-approved pool or prepare a cash settlement: “It’s about getting ahead of the
problem. We don’t want to wait until it’s too late.”

Crucially, Artio does not hold carbon credits on its own balance sheet –
avoiding the systemic risk that might come from overexposure to a failing credit
type.

Trust
is the foundation of a healthy carbon market. For Herry, independent ratings are
a crucial tool to help rebuild it.

“You can have a project developer say ten times that their project is great or a
corporation include it in their annual report – but ultimately, that’s the
project they’re backing,” he said. “Having an independent, third-party
assessment is critical for trust and integrity in this market. Our standardized
frameworks allow for like-for-like comparison, so projects are always assessed
the same way. That consistency is something the market really needs.”

Sylvera has assessed over 2,500 carbon projects, building one of the largest
databases in the space. That scale enables it to benchmark new projects against
a wide dataset, flag risks early, and help both developers and investors
course-correct before major problems emerge.

For early-stage projects especially, where visibility is limited and delivery
may be years away, these kinds of ratings offer much-needed transparency.

“We talk weekly to a large number of bankers and investors who want to invest in
carbon projects,” Herry added. “They’re ready to take risks, but the returns
need to match that risk. What they really want is visibility on cash flows and a
clear understanding of how to mitigate
risk if something
doesn’t go according to plan.”

The integrity of the carbon market depends on this consistency. Without
credible, comparable data, the risk of over-crediting, underperformance or
greenwashing grows – and with it, public skepticism. Ratings, verification and
insurance form the infrastructure that can make climate finance truly scalable.

Artio’s rapid rise reflects just how hungry the market was for such a solution.
Since officially launching in mid-2024, the company has already assessed
hundreds of millions of dollars’ worth of carbon-credit projects and secured
backing from top-tier underwriters.

An early turning point came when reinsurance broker Gallagher
Re backed the company, before it had even
raised funding.

“They carry a lot of weight in the market, but they signed on when our bank
balance was basically zero,” Hussain recalled. “That was a big deal and really
helped us navigate the insurance world. You have to learn how the system works
and how to challenge it. That’s how we ended up with one of the fastest-ever
approvals at Lloyd’s. As a startup, you move fast – you need your partners to
move fast, too.”

Artio completed its Lloyd’s of London coverholder application in record time and
hosted multi-hour deep-dive workshops with underwriters to build confidence in
their model. Still, many in the sector were watching from the sidelines.

“Even insurers we weren’t actively pitching to were watching to see if we could
actually launch,” Hussain said. “Everyone knew early-stage risk was a missing
piece, but no one had figured out how to fix it. So, we just focused on building
a product that worked and showing we could move fast without compromising on
rigor.

“Now we’ve got a process in place. When we launch a product, we know how to get
it done – and that’s what gives people confidence.”

This kind of innovation couldn’t be timelier. The climate crisis demands
scalable solutions, and carbon markets are expected to play a critical role. But
to meet that potential, the market needs infrastructure that guarantees
reliability, transparency and speed.

Early-stage insurance is quickly becoming that infrastructure. Artio’s model
doesn’t just fill a gap; it builds a bridge between bold ideas and bankable
investments – and makes carbon credits accessible to organizations of all sizes.

“Right now, it feels like only
Microsoft
can participate,” Hussain said. “But the future of climate finance has to be
inclusive. We want the one-hectare farmer and the local shop owner to be part of
this. If we can make carbon markets accessible to everyone, that’s how we truly
scale.”