Finance & Investment

How Insurance Is Unlocking Climate Finance in the VCM

Artio de-risks early-stage carbon-credit projects to restore trust, speed up investment and scale the next wave of climate solutions.

By Scarlett Buckley | Published 3 months ago | About a 9 minute read

Image: Freepik

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.”

The problem: Risk without revenue

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.”

The solution: Early-stage insurance

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.

How Artio assesses risk

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.

Backing the risk: Who funds the insurance?

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.

The importance of ratings and market reliability

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.

Why it matters

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.”