How Sylvera rates carbon projects: Refining and improving our technology and techniques
With the emergence of carbon credit ratings companies in the voluntary carbon market (VCM), buyers and other market participants want to understand how we compare with one another. Transparency is at the core of what Sylvera does. We aim to be open and straightforward about our methodologies and processes and expect this level of disclosure from everyone in the market. We believe this is the foundation of a high-functioning, high-integrity market.
Since we launched in 2020, we’ve refined some of our technologies and methodologies for producing carbon credit ratings and assessments. Here we dive into major learnings since we began, why and how we design our ratings system, and the advantages of our science- and market-led approach.
Project-type-specific frameworks offer superior insights
The real strength of our carbon credit ratings lies in our bottom-up, project-type-specific frameworks. We develop specific frameworks for each project category because it is the only way to accurately assess quality across fundamentally different categories of activities. Our 30-person strong team of in-house experts spends anywhere from 3-6 months producing project-type-specific frameworks, which are then peer-reviewed to ensure they reflect the latest science and technology consensus.
We take the same approach with individual projects: rather than rating the methodology and using methodology quality as a proxy for project quality, Sylvera assesses a project using up-to-date data from the project itself in addition to independent, third-party data. We measure real-world data and acknowledge limitations when this data is missing. Conversely, others in the market take a top-down approach, releasing a framework first and then working to research and refine it.
Methodology quality ≠ project quality
Methodology assessments can be helpful, but we’d categorize these as separate from project assessments and ratings. To assume that a project rating is more accurate when based on an assessment of methodology is, in our opinion, flawed. There are a number of examples where a methodology might seem adequate, but the way the project has applied or interpreted the methodology creates cause for concern. After all, even the best-laid plans can go a variety of ways when put into practice.
Rather than assessing projects on their own methodology benchmark (as the verifying bodies already do), we compare them to an independent, science-driven quality benchmark.
- For example, a methodology-led approach would assess permanence by evaluating the size of the buffer pool contribution. Sylvera takes a different approach: we analyze the reversal risk of the project itself. With our in-house climate modelling, we provide a picture of the likelihood and severity of natural risks that could impact the project, including fire, drought, pest, storm and flood risk, to give buyers a deeper understanding of what the real risks are in their investments.
Individual project assessments = more certainty
Assessing individual project outcomes rather than methodologies and rigorous framework development enables us to be as accurate as possible from the outset. Sylvera monitors projects on an ongoing basis and will update our ratings if there's new data released or an event that would have a material impact.
Sylvera accesses superior insights through developer engagement and multiscale LiDAR
We engage actively with project developers. In our experience, developers understand the importance of ratings firms and the market oversight we provide, and are keen to see us help drive the relationship between rating, quality, and price. Not all, but many developers we’ve worked with have been willing to provide more information, which often includes data around on-the-ground conditions that improve the accuracy of our assessments even further.
We’re heavily invested in R&D and in developing innovative ways to measure forest carbon and assess the quality of carbon projects. Our Field Data Science team regularly collect data on the ground in project areas and carbon sinks, discovering insights, and enabling a level of accuracy that no purely methodology-based framework could. Sylvera were the first to do this for the VCM; we began three years ago and have amassed the largest above-ground biomass dataset to date.
Vintage-specific ratings don’t uncover additional information
The Sylvera platform does not yet rate carbon credits per vintage, meaning the year they are issued. That’s largely because we don’t yet see data accurate enough for the ratings to be meaningful. We provide honest information about the limitations inherent in carbon rating technologies, and we believe many per-vintage frameworks offer misleading levels of precision.
Evaluating quality indicators like permanence and additionality is complex enough, but to definitively conclude that, for example, deforestation did or did not occur in a particular year — that’s surprisingly difficult. As such, it is unlikely any product or company knows exactly how many credits should have been issued in a single vintage — particularly if that vintage is less than a year long.
In addition, most indicators of carbon credit quality occur at the project level, rather than at the vintage level. As a result, concerns around additionality and permanence are best considered at the project level and are unlikely to change based on baseline year.
With all that said, we are developing our time series analysis in order to unlock accurate vintage-level credit ratings, but for the time being, we see little advantage in offering per-vintage ratings as they currently stand.
Utility and buyer demand drive Sylvera project coverage
We’re focused on first rating those projects and project types that will truly serve the market — and we have several criteria we use to decide on these. Typically, we prioritize coverage based on:
- Customer and market demand
- Volume of available (non-retired) credits
- Recent trading activity
- Data availability
Quality, breadth, and utility help our customers make confident investment decisions. If continuing to rate projects isn’t in the best interest of our customers, we won’t pursue it.
Superior education and risk mitigation for buyers
Ratings and carbon data fill a critical educational gap in this emerging market. Without a partner to provide project-level due diligence, buyers may not understand the true quality concerns, risks (notably around environmental integrity and corporate reputation), and the potential for risk mitigation in the voluntary carbon market.
Headlines aren’t the full story
Relying simply on headlines can be misleading; many news stories about carbon credits tend to catastrophize about elements of quality that buyers can quite easily manage from a risk perspective. Most of these headlines are not based on the same level of per-project due diligence that ratings agencies can offer; the analysis we perform is far more accurate and precise.
- For example, a popular headline theme at the moment is that all REDD+ projects are low quality. But only a ratings agency can provide component scoring for individual REDD+ projects to help buyers navigate individual purchase decisions and manage the unique risks associated with REDD+ project quality.
Market guidance is not yet clear enough
New guidance from a number of bodies in the VCMs, though well-meaning, has been slow to produce true clarity in the market. Many buyers who aren’t as well-versed in the industry are finding the guidance too vague, which has exacerbated confusion in the market. The educational content produced by ratings firms like Sylvera offers unparalleled depth and insight, which is something our clients appreciate.
The VCMs need carbon data and ratings more than ever
Ultimately, we believe that ratings and carbon data play a crucial role in the VCM, particularly at this stage of market maturity. The unique approaches taken among ratings agencies, and the differences between our approaches and those of the verifying bodies are not necessarily flaws but may in fact be strengths. Together, we can work to improve the integrity and impact of the market as a whole. And from Sylvera’s perspective, we believe in our science-led, bottom-up approach to carbon project ratings — and so do our buyers.
To learn more about our ratings frameworks, download our white paper.
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