Development of Good Practice Note on the Bankability of High-Integrity Carbon Market Projects

Description

The Inter-American Development Bank (IDB) invites specialized consulting firms to submit proposals to prepare a comprehensive Good Practice Note (GPN) providing technical, financial, governance, and credit risk guidance to assess the bankability, creditworthiness, and financing structures of high-integrity carbon market projects across Latin America and the Caribbean (LAC).

The objective is to establish practical risk, revenue, and due diligence frameworks for the Voluntary Carbon Market (VCM) and Compliance Carbon Market (CCM)—including Article 6 and Paris Agreement Crediting Mechanisms (PACM)—with a specialized focus on nature-based solutions in the Amazon and regional forest ecosystems.

1. Scope of Services & Core Objectives
Bankability & Credit Risk Framework: Formulate a risk evaluation framework tailored for private investors, MDBs, and DFIs, covering price volatility, off-taker concentration, counterparty risks, permanence, certification delays, and Article 6 regulatory dependencies.

Carbon Revenue Assessment Model: Define guidelines for integrating carbon revenues into valuation and financial modeling, determining conditions for partial or full recognition based on project additionality, revenue certainty, and off-take contracts.

Sponsor & Developer Due Diligence Standards: Create a standardized due diligence tool to evaluate developer governance, operational capacity, technical expertise, financial strength, and market track record.

Focus on Nature-Based Solutions: Address bankability constraints specific to Amazonian and forest carbon projects, including benefit-sharing arrangements, permanence risks, long timelines, and national authorization protocols.

2. Key Activities & Methodological Tasks
LAC Case Study Evaluation: Analyze factors behind successful credit issuance and commercialization as well as failure patterns (e.g., project cancellations, certification rejections, issuance delays) across regional carbon projects.

Global Demand-Side Mapping: Evaluate purchasing criteria, pricing dynamics, and contractual expectations across corporate actors, aviation (CORSIA), financial institutions, and compliance buyers (e.g., Japan).

Lifecycle Financing & Blended Instruments: Assess financial structures across all development phases (incubation, certification, issuance, scaling), evaluating the role of grants, concessional capital, guarantees, blended finance, and off-take agreements.

Digital Infrastructure & Governance: Evaluate how digital MRV, remote sensing, satellite monitoring, carbon rights clarity, and registry systems mitigate operational risks and increase investor confidence.

3. Deliverables & Implementation Roadmap
Comprehensive Good Practice Note (GPN): Consolidated technical and financial guide containing the three core analytical frameworks, market evaluations, and project lifecycle financing tools.

Stakeholder Insights & Validation: Expert consultations with project developers, investors, carbon rating agencies, DFIs, and regulators to ensure practical market alignment.

Implementation Roadmap: Strategic recommendations for public and private actors to deploy the GPN to strengthen carbon project financing across LAC.

Note: Interested companies must review the requirements in the BEO Bidders Portal.