The most recent information on Climate Trust Capital's investment fund—straight from the Conservation Finance Practitioner Roundtable, May 2016.

1. Spotlight: Launching Climate Trust Capital
Patrick Maloney, Sean Penrith, and Peter Weisberg
Conservation Finance Practitioner Roundtable
Portland, OR
May 18th, 2016

2. Building a “Market”, Phases, Deliverables & Roles
Development Emerging Market
Early Market
(scaling)
• Defining the market opportunity
• Developing the cash flows & benefits
flows.
• Defining returns opportunities
• Developing protocols & regulations
• Defining & negotiating the unit of
measure
• Building data and processes to support
the “unit of measure”
• Often involving regulatory
agencies
• Innovation often in an NGO
• First pilots transactions, often one-off
deals
• Modifying & testing the regulations
• Testing the “unit of measure”
• Validating the cash flows, benefits flows
and returns model
• Build market rules - TLC
• Risk assessment
• Returns models and
sources
• Pricing & valuation
• Underwriting standards
• Structures
• Stabilized regulations
• Scalable & repeatable transactions
(market size)
• Defining risk & returns expectations
• Decreased deal friction & transaction
costs
• Multiple entrants along the full value
chain
• Investor becoming educated on the
asset & strategy
• First intermediaries that monitor and
validate the strategy
• NO RETURNS • Return of capital • “Market rate” based on risk & asset
class
• Grants • Grants
• PRI’s
• Impact/mission driven investors
• Credit enhancements & guarantees
• Early adopters in mainstream
• Niche investors
Mainstream
Can you apply this
MODEL to other
examples of market
evolution?
• Micro finance
• Carbon cap-trade
• SIBs
Making a Market:
TLC
• Transparency
• Liquidity
• Consistency

3. Objective: Moving from emerging/early market to mainstream
3
• Risk mitigation
• Pilot Auction
Facility
• Buyer of last
resorts/put option
contracts
• Bond
guarantees/credit
enhancements
• Buyer
commitments
• Protocol design
Source: 2016 GIIN Annual
Impact Investor Survey
$15.2 billion in impact investing in 2015

4. 4

5. Trading on our core competency; bullish on carbon
5
Climate Trust model: Late stage projects
Due diligence
Active project management support
Credit generation / commercialization
Special
Purpose
Fund via
CO2
Standard
18 years
Climate Trust Capital: Early stage projects
Due diligence
Active project management support
Credit generation / commercialization
Impact
Capital Fund
2016 >>

6. What other models could The Climate Trust draw from as it launches a for-profit
investment fund? What resources exist to help non-profits create for-profits?
6

7. Domestic Carbon Markets – $2.89 billion total demand through 2025
7
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Voluntary and Compliance Market Demand, 2015-2025
Voluntary Market Value Complaince Market Value
California compliance market key assumptions
• California’s cap-and-trade system is extended beyond 2020. From 2021
through 2025, the California Air Resource Board continues to decline the
cap at 2% per year.
• Compliance entities in California purchase offsets to cover only 5% of their
annual compliance obligation (the maximum available to entities is 8%).
• Offsets are traded at an assumed minimum price, discounted 28% from the
estimated regulated floor price for allowances.
Voluntary market key assumptions:
• Demand for voluntary offsets grows at 5% per year.
• Prices start at $5 per voluntary credit in 2015 and grow
by 2% per year to $6.09 in 2025.

8. California Air Resource
Board Protocols:
1. Livestock digesters
2. Forestry
3. Ozone depleting
substances
4. Coal mine methane
capture
5. Rice cultivation
Climate Action Reserve
Protocols:
1. Grassland conservation
2. Nutrient management
3. Landfill
4. Composting
Verified Carbon Standard
Protocols:
1. Weatherization
2. Campus clean energy
and energy efficiency
3. Wetlands
4. Avoided deforestation
of tropical forests
American Carbon Registry
Protocols:
1. Forestry aggregation
2. Livestock management
3. Compost additions to
grasslands
4. Wetland restoration
5. Carbon capture and
storage
California Compliance Market
$2.18 billion demand through 2025
Voluntary Market
$714 million demand
through 2025
Compliance and Voluntary Carbon Market Supply and Demand
8

9. Problem: Risk causes lenders to significantly or completely
discount future carbon revenues.
Digester Offset Revenue - $2.09 million
$- $-
$156,276 $164,881 $174,041 $185,145
$198,660
$213,162
$228,723
$245,420
$263,336 $263,336
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
0 1 2 3 4 5 6 7 8 9 10 11
CarbonRevenue
Year
Key risks:
• Market risk. When delivered, what will credits be worth?
• Delivery risk. Will the number of credits anticipated at the
time of investment/lender be delivered?
9

10. Digester Offset Revenue (CTC Financing) - $1.43 million
Digester Offset Revenue (No CTC Financing) - $2.09 million
$- $-
$156,276 $164,881 $174,041 $185,145 $198,660 $213,162
$228,723
$245,420
$263,336 $263,336
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
0 1 2 3 4 5 6 7 8 9 10 11
CarbonRevenue
Year
$771,050
$- $- $- $- $-
$53,977
$106,581 $114,362 $122,710 $131,668 $131,668
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
0 1 2 3 4 5 6 7 8 9 10 11
CarbonRevenue
Year 10
10

11. “The data is consistent
with the plucking of
low-hanging fruit, and
also suggests starting
surpluses will drop – if
less dramatically – over
time.”
California Carbon’s “California 2030
Offset Supply Forecast – Forest
Carbon Projects.” December 2015.
Forestry: Focus on bump/flush/surplus projects due to low risk
11

12. Financial innovation particularly powerful with high-capital cost,
long-term savings projects.
Source: Climate Bonds. Pooling EE/RE Projects. DG Clima. March 2013.
12

13. Market risk mitigation: Put option or buyer of last resort
13
Climate Trust Capital
(fund)
The
Climate
Trust
(NGO)
Packard
Foundation CTC receives a put-option to sell
credits at a minimum over the ten year
life of the fund.
Commitment to Purchase
AgreementLoan Agreement
Project
1
Project
2
Project
4
Project
3
Project
5
Carbon Investment Agreements

14. Market risk mitigation: Put option gives Climate Trust Capital
the right, but not the obligation, to sell verified credits to The
Climate Trust at $6/credit.
14

15. Fund Concept: Finance projects that will rely upon revenues
from carbon markets.
Problem: Lenders are unwilling to value revenues from carbon markets (and require projects to
be profitable in their absence). Forestry, biogas, and agricultural projects therefore struggle to
raise the necessary capital to build and develop new projects.
Solution: Climate Trust Capital will finance projects that will depend upon revenues from
carbon markets, through an upfront investment.
15

16. Financing Tool: Upfront investment based on anticipated carbon
credit generation.
• Guarantee minimum carbon value.
• Revenue share rewards project developers as carbon prices increase.
Investment
• Climate Trust Capital “pre-purchases” ten years of the carbon offsets a
project is anticipated to generate.
• Capital is made available upfront for the construction of new projects.
Active
management
• Climate Trust Capital will work with a project to
develop a carbon monitoring plan and
commercialize credits.
Revenue
share
• After carbon sales have repaid the pre-purchase,
50% of future carbon revenues are paid to the
project and 50% are paid to Climate Trust Capital
and its investors.
16

17. Digester Offset Revenue (CTC Financing) - $1.43 million
Digester Offset Revenue (No CTC Financing) - $2.09 million
$- $-
$156,276 $164,881 $174,041 $185,145 $198,660 $213,162
$228,723
$245,420
$263,336 $263,336
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
0 1 2 3 4 5 6 7 8 9 10 11
CarbonRevenue
Year
$771,050
$- $- $- $- $-
$53,977
$106,581 $114,362 $122,710 $131,668 $131,668
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
0 1 2 3 4 5 6 7 8 9 10 11
CarbonRevenue
Year 17
17

18. Value Proposition: Manage the long-term execution and market
risks associated with nascent carbon markets.
Market Risk Mitigation. Investments guarantee a minimum value for carbon credits over the 10
year crediting period of a project.
• Allows projects to leverage The Climate Trust’s existing programs, which have $22 million under
management and must purchase and retire credits regardless of what happens in emerging
markets.
Execution Risk Mitigation. We develop a carbon monitoring plan that sets up the methods for
data collection, data aggregation and verification. We then commercialize credits on behalf of the
project in the compliance and voluntary markets.
• Monitoring plan allows projects to benefit from The Climate Trust’s 18 years of experience
investing in and managing offset projects.
• Commercialization gives project developers access to The Climate Trust’s existing buyer network.
Projects benefit from portfolio approach since this aggregation minimizes risks (execution &
invalidation) that buyers currently face.
18

19. Grassland conservation: Place prairie under an imminent threat of conversion into
cropland under a conservation easement.
Source: Climate Action Reserve, revised 2015. Evaluation of Avoided Grassland
Conversion and Cropland Conversion to Grassland as Potential Carbon Offset
Project Types.
1Assumes linear growth such that 30% of acres converted every year into cropland are instead conserved by 2025.
Climate benefit Enhanced carbon
sequestration in soils.
Carbon market Voluntary market (does
not yet qualify for
California compliance)
Anticipated greenhouse
gas reduction associated
with new projects1 built
between 2015 and 2025
902,564 mtCO2e
Greenhouse gas
reductions purchased by
The Climate Trust to date
39,384 mt CO2e
What types of forestry projects are likely to find turning long-term carbon revenues
into upfront capital attractive? Should Climate Trust Capital target land acquisition,
avoided conversion projects, projects that are currently at common practice values? 19

20. Target: Scale fund investments to be directed at identified sectors
Goals:
1. Pilot $15 million fund
2. Scale to a $100 million fund
3. Reduce 20 million tons of
greenhouse gas emissions
4. Demonstrate carbon offsets are
an investible and reliable asset
class
Conservation Finance Gap. Credit Suisse estimates the quantity of conservation
finance must multiply by 20 to 30 times to meet global conservation needs.
Source: Credit Suisse, World Wildlife Fund, McKinsey. Conservation Finance.
January 2014.
20

21. Mitigating Delivery Risk: Protocols are public goods, and
therefore require significant investment of public dollars.
21
American Carbon Registry’s “Avoided Conservation of
Grasslands” relies on Denitrificiation-Decomposition
Biogeochemical Process Model
Climate Action Reserve’s “Grasslands Protocol” does
modeling for US, provides lookup table
(Development and implementation of both protocols supported by Conservation Innovation Grants)

22. Future Symbiotic Structure
The Climate Trust
Climate Trust Capital
Investments made in
environmental credits
Fund 1, 2, 3 ….
Technical Assistance
Debt & equity
investors
Foundation,
philanthropic,
grant support
Development
Facility
Project 1
Project 2
Project 3
Project 4LLC
NGO
New sector development
Sector 1
Sector 2
….......

23. What division of roles have worked well/poorly between non-profits and for-profits? What financial
relationships have worked well/poorly?
23

24. Mitigating Market Risk: Replace grant funding with market risk
mitigation like buyers of last resort.
24

25. What opportunities exist to replicate World Bank’s Pilot Auction Facility
for domestic environmental markets in the United States? 25

26. Expanding Voluntary Buyer Commitment: Council on
Environmental Quality
26
Executive Order 13693 (March 2015):
Federal agencies must reduce GHG emissions 40% below 2008 levels by 2025.
CEQ Guidance on Federal GHG Accounting and Reporting (June 2012)
“… carbon offsets are not allowed to be applied as an adjusted against a Federal agency’s
emissions... More time and deliberate focus is necessary to understand how the market
for carbon offsets and use of those offsets could be applied consistently across the
Federal community.”
Allowing agencies to meet 8% of the anticipated reductions using offsets (rather than just
RECs) could grow the voluntary market by 15% (~1.35 million offsets per year).

27. Grassland conservation: Place prairie under an imminent threat of conversion into
cropland under a conservation easement.
Source: Climate Action Reserve, revised 2015. Evaluation of Avoided Grassland
Conversion and Cropland Conversion to Grassland as Potential Carbon Offset
Project Types.
1Assumes linear growth such that 30% of acres converted every year into cropland are instead conserved by 2025.
Climate benefit Enhanced carbon
sequestration in soils.
Carbon market Voluntary market (does
not yet qualify for
California compliance)
Anticipated greenhouse
gas reduction associated
with new projects1 built
between 2015 and 2025
902,564 mtCO2e
Greenhouse gas
reductions purchased by
The Climate Trust to date
39,384 mt CO2e
If federal agencies are enabled to buy offsets to meet reduction
requirements, in what way should they structure their program to
generate the largest impact? 27

28. Creative Instruments/approaches
28
• Green (ASB) bonds
• PRI syndicated put option/bond guarantee
• NGO cooperative bond issuance
• EPA CWA SRF guarantee facility

29. Carbon price is an indication of the ambition of a cap-and-trade
system
29
Source: Jenkins and Karplus. “Carbon pricing
under binding political constraints.” WIDER
Working Paper. April 2016.

30. THANK YOU!
Peter Weisberg
Senior Investment Manager
The Climate Trust
pweisberg@climatetrust.org
(503)238-1915 x207