Investing in a Cleaner Environment

As climate change and other environmental issues increasingly make their way onto corporate board priority lists, Ballard Spahr is helping environmental commodities firm ClimeCo with its work at the leading edge of a transformation: Businesses, governments, and ecology advocates are adopting environmental markets as the most efficient way to address these challenges.

ClimeCo views the transition to a climate-friendly, green economy as a historic opportunity to align commercial and ecological interests, putting capital to work to solve worldwide environmental problems—as consumers and investors alike increasingly demand an end to business as usual. With businesses focused more and more on environmental, social, and governance (ESG) issues, ClimeCo develops projects that yield environmental offsets—primarily carbon offsets—for the voluntary compliance market. Using protocols developed by Verra, Climate Action Reserve, and others, ClimeCo designs and implements programs that reduce emissions. Those reductions are represented by certificates purchased by manufacturers and other companies to offset their greenhouse gas (GHG) emissions.

Ballard Spahr attorneys worked with ClimeCo to structure and close an important reforestation transaction in Q2 2021. We advised ClimeCo in forming an alliance with the Heritage Group and Heritage Environmental Services, LLC (collectively, Heritage), and nonprofit Restore the Earth Foundation, Inc. (REF), to finance the reforestation of an environmentally challenged bayou area of southern Louisiana.

ClimeCo and Heritage are providing capital for REF’s campaign to plant half a million bald cypress trees on 4,000 acres at the Pointe-aux-Chenes Wildlife Management Area, run by the Louisiana Department of Wildlife and Fisheries. The project marks the largest step so far toward REF’s ultimate goal of reversing deforestation in the Mississippi River Basin—known as North America’s Amazon—by restoring a million acres of deforested land. The economic and social value of this irreplaceable resource is practically incalculable, not to mention its ecological importance to our nation and, in fact, the world.

By replanting trees and restoring freshwater-forested wetlands at Pointe-aux-Chenes, REF is working to repair some of the harm caused by hurricanes and human activities, including land clearing, dredging, and anthropomorphic climate change.

Here’s how the Pointe-aux-Chenes project works:

It starts with the planting of bald cypress seeds in pots at a commercial nursery. They will grow to saplings—500,000 of them—through the summer of 2021 and be planted through the fall when hurricane season abates. One year later, the progress of the sapling forest will be inspected and a third party will assess the survival rate and the projected capacity of the new forest to store carbon dioxide over the next century. Based on this assessment, carbon offset credits will be issued to the project sponsors in accordance with the Climate Action Reserve’s Climate Forward program. The credits, known as forecasted mitigation units (FMUs), will be marketed to voluntary corporate and other buyers. FMUs represent the current value of the carbon sequestration that will take place over the next 100 years as the forest turns carbon dioxide into wood.

The Ballard Spahr legal team was led by Brendan Collins, a partner in the firm’s Environmental and Natural Resources Group and leader of the firm’s Manufacturing industry practice, who hosted a 2021 podcast on environmental commodities with ClimeCo President and CEO William Flederbach. The legal team included Richard Hudock of Ballard Spahr’s Business and Transactions Department and Erin Carter of the environmental practice. These lawyers advised ClimeCo in forming a special purpose LLC for Heritage and ClimeCo, documenting the agreement with REF, and advising on the carbon offset protocols and requirements for generating the FMUs. They helped close the deal on a fast track so the seedlings could be bought in time for the project timetable.

Companies and organizations ClimeCo has worked with include major names from the entertainment world, such as rock bands Pearl Jam and Third Eye Blind, who collaborated with ClimeCo to mitigate the carbon footprint of recent live tours.