Developer Meet and Greet learnings

On 5 February 2024, the BeZero Developer Engagement team hosted its first Developer Meet and Greet, designed to showcase our ratings department. The webinar brought together over 80 developers across two sessions and featured a lengthy Q&A where we answered questions from the audience.  

This year we’re striving to create open forums to address pressing questions and hot topics in the market, as well as to provide developers with a solid understanding of our ex post and ex ante ratings. The Developer Engagement team will be running a series of Q&A webinars on topics dictated by developer interests. To help us decide which topics to focus on next we’ve created a form for you to submit suggestions.

Our Ratings team is also hosting another webinar at the end of this month launching our new ARR scorecard, a tool to self-assess ARR projects at any stage of their lifecycle. Find out more and sign up here.

Unpicking our ratings process

The meet and greet gave developers the chance to hear from Teresa Hartmann, our Chief Rating Officer, Dr Spencer Meyer, our Vice President of Ratings, Ronan Carr, our Lead Analytical Officer, as well as Dr Clarissa Fontes and Dr Áine O'Brien, two of our Carbon Ratings Scientists. The first half of the session was dedicated to unpicking our ratings process and how we work with project developers, as well as discussing our in-house expertise and technical capabilities. We mentioned several useful resources during the webinar which you can find here:

• Ex ante rating methodology

• Price-rating correlation

• Sector-specific methodologies

• Data disclosure guidelines

• Developer engagement flow chart

Q&A - answering your questions

We saw excellent engagement during our Q&A session, with lots of participants posting extra questions in the live chat. Many of the questions aimed to dig deeper into our methodology in some aspect and understand how we will continue to apply it in light of market developments (e.g. new REDD+ methodologies, Article 6, etc.) There was also a clear interest in how ratings link to pricing and our approach to safeguards and impartiality. There were too many questions for us to address during the session so we have responded to the remaining questions below.

1. How can a rating agency be better positioned to evaluate a project in comparison with a standard + auditing company (VVB/DOE) specialised in doing that?
   
   We are providing a different function in the market to standards bodies and VVBs. We all have our roles and it's important to keep these separate.
   
   The projects we rate (ex post) have met the requirements of methodologies as decided by VVBs, and that's an important first step. However, accreditation by nature is binary and we view quality and risk to exist on a spectrum. Our role is not to reassess compliance with the methodology, but rather to evaluate the level of carbon efficacy of credits. Our ratings provide our expert opinion on the likelihood that one credit represents 1 tonne of CO₂e avoided or removed.
   
   BeZero Carbon Ratings are a fungible metric to understand and compare carbon efficacy across credits in all sectors, regions, and methodologies. Not all credits are created equal and without our ratings their direct comparison would not be possible.
   

2. Do you see a correlation between ratings and higher credit prices?
   
   Yes. There has been considerable growth in the price premium for higher-rated credits over the last 18 months, indicating the importance of our ratings in driving credit prices. On average, over the period since the launch of BeZero Carbon Ratings in April 2022, we’ve seen a 25% price difference between credits separated by one BeZero rating notch (e.g. ‘C’ and ‘B’ or ‘BBB’ and ‘A’). You can read more in our recent article on the correlation between price and ratings.
   

3. How can BeZero Carbon remain impartial when there are several interests involved? How can conflicts of interest be spotted/highlighted for transparency? 
   
   Independence is core to our success. When rating an ex post project, we will not share the rating or analysis with the developer before publishing the rating; this is to maintain our independence and ensure that no party has privileged access to our rating. We operate on upfront payments and have no other sources of revenue (e.g. we do not buy, sell, or trade credits or consult) so we do not have any incentive to provide a certain rating. There are no results-based payments.
   
   We take conflicts of interest very seriously. As with a regulated ratings agency in the financial sector, we have an information wall in house which separates our ratings and commercial teams. This means that the teams have access to separate information and work independently from one another. 
   

4. Will BeZero consider rating project developers on their ability to deliver as a means to mitigate against project execution risk?
   
   Project execution risk is assessed within our ex ante process. This is specifically picked up within the technical drivers of risk by looking at the experience of the project developer in a particular project sector and region. We also look at legal and regulatory risk as well as operational risk, which determines the political context of the project as well as how established the project type is. There will inevitably be a lower risk in project execution if the project activity is longstanding and established.
   

5. How will ratings evolve and change as we move closer toward Article 6 implementation?
   
   This is a popular question and reiterates the lack of direct answers that we were hoping for out of COP28. We can see that the 6.2 market is taking off, bilateral agreements are being implemented, and credit transactions are already beginning to take place.
   
   We are expecting to see a patchwork landscape that the bilateral governments agree on (standards, barriers, and hurdles). There is an important role for rating agencies to continue to build trust and confidence in this market by pushing transparency and providing information to help stakeholders navigate uncertainties.
   
   Article 6 developments are influencing the information we include on the BeZero platform, such as the share of proceeds and corresponding adjustments, but this does not directly impact our risk factors. Our current rating infrastructure has a clear part to play. 
   
   Future iterations of the platform and our model will consider the national landscape of Article 6 implementation and implication. We are keeping an eye on the adjacent labels and tags that will be added to 6.2 credits and look to reflect this in the projects that we are already rating. 
   

6. In the case of ex post analysis, does the developer have to ask for the rating to be done, or does BeZero do it automatically without the developer’s approval?
   
   We rate projects based on market demand. In relation to whether they are added to our pipeline by client request, some of our clients have ratings included in their subscription, or we may make this decision independently to expand our coverage of a particular region or sector. 
   
   Since we base our ratings on public information, we will not seek permission from project developers but we will notify them of our plans to rate their project.
   

7. Do you have plans to rank every listed project in the market?
   
   We will continue to expand our coverage across all sectors and regions. Last year we rated our first projects in the biochar and concrete carbon capture sub-sectors and we plan to keep advancing into new sectors. Rating every listed project would be a huge task and we have to prioritise based on demand.
   

8. In ex ante ratings, how does a likelihood of under-crediting affect a rating?
   
   For ex ante ratings, risk of under- or over-crediting is assessed within a risk factor called ‘carbon accounting’, which combines all elements of a project's emissions reduction/avoidance calculations. Where carbon accounting assessments have been conservative, thorough, and justified, we generally find the lowest carbon accounting risk. However, if a project’s fundamental assessment of carbon flows has been assessed well but there is an unmitigated risk of leakage, the headline risk level for carbon accounting may be higher. In this way, similar to our ex post ratings, our ex ante approach also considers project-specific crediting risks. Finally, as with our ex post assessments, carbon accounting is only one element of the headline rating; an assessment of carbon accounting risk is considered alongside additionality, non-permanence, and project execution risks.
   

9. Is the rating brief for project developers the same material that is in the ‘deep dive’ available for BeZero customers?
   
   Yes, the rating brief contains the full written analysis that is available on our platform, and all the charts included in the write-up. 
   
   Our platform also provides further tools such as a geospatial tab and rating distribution charts broken down by risk factor.
   

10. For existing REDD+ projects, how will the switch to Verra’s consolidated REDD+ methodology (VM0048) that uses a standardised jurisdictional methodology affect the ratings of these projects?
    
    It is important to note that we are not evaluating projects on their methodologies. We’re looking at project-level factors, although we appreciate that these are an artefact of the methodology that was used.
    
    We closely monitor the changes to methodologies as they happen. We put out a blog explaining our thoughts on VM0048 specifically, where we touch on both areas of improvement as well as areas where we see continued risk. Please read the blog here for more details. Similarly, we published a blog when the new VM0047 ARR methodology came out, which you can read here.
    
    We also respond to public consultation on new methodologies, for example, we recently responded to ACR’s proposed 2.1 update for their US IFM methodology.
    

11. I see you have a solid geospatial team and databases, which is great for fires, droughts, and carbon stocks, but what tool do you use for the analysis of, say, waste or energy projects?
    
    BeZero Carbon uses a range of tools and resources to provide a thorough rating of each project. Our non-NBS analysis increasingly involves using geospatial and satellite data to inform our ratings. For example, where possible, we use satellite imagery to evaluate the leakage risk during project construction by identifying any likely sources of upstream emissions.
    
    We use our geospatial capabilities in the Energy sector group by first looking at media reports of deforestation during energy project construction and then using geospatial and Earth observation (GEO) analysis to understand the extent of forest clearance. We compare imagery before and after construction to evaluate the extent of the project’s deforestation. We then use our database of peer-reviewed literature to model the likely carbon stocks lost during this activity, to conclude whether the project faces some risk of leakage as a result. 
    
    We use GEO in the Waste sector group to evaluate the project’s baseline scenario. For example, in the agricultural methane recovery (AMR) sector, satellite imagery in the US shows the prevalence of large-scale lagoons of manure: the typical baseline scenario for an AMR project.
    
    Beyond our GEO capabilities, every rating is powered by sector-specific models that assess additionality, carbon accounting, and non-permanence risks. You can read more about the specific tools used to rate projects in each sub-sector in our sector-specific methodologies.
    

12. How do you make sure your ratings are accurate?
    
    BeZero Carbon’s rating approach is evidence-based. It is supported by verified project documents, developer engagement, and independent analysis. The rating is enriched by unique databases and partnerships, from space agencies to global research institutions, to ensure that our ratings are as accurate as possible. 
    

13. How is BeZero different from other project ratings agencies?
    
    BeZero Carbon is the only carbon ratings agency with a full lifecycle toolkit. We can assess any project at any point of the lifecycle with our tools: scorecards, ex ante and ex post ratings, and our discounting framework.
    
    BeZero Carbon takes a holistic approach to project analysis. We build unique datasets from geospatial analysis, on-the-ground partnerships, and thousands of peer-reviewed resources. Our expert team then interrogates risks identified through machine learning models and extensive research to form their opinion on carbon efficacy.
    
    Our on-the-ground partnerships have led to an increased understanding of projects which goes further than geo-analysis. The impact of this can be seen through our project-specific analysis, where BeZero Carbon has demonstrated clear evidence of selective logging through government reports on improved monitoring which would be unavailable to other rating agencies.