Commentary
SBTi Just Told the Market What It Wants by 2035. What Will it Take to Supply It?

The release of SBTi’s revised corporate Net Zero Standard in June will measurably reduce the level of uncertainty that’s clouded what “credible” means for corporate climate action for years. The standard recognizes a clear role for markets, including high-integrity carbon credit markets, as part of responsible corporate action on the road to net zero. 

That’s a long-awaited victory for a market that’s spent years building supply against a moving target. It’s also, on its own, a direction but not a pathway.

Still, a demand signal on its own doesn’t build a carbon project, finance one, or decide who’ll develop it and under what rules. For those who haven’t been following this process closely, I wanted to reflect a bit on the revised Standard’s implications for demand, and in particular on how the market might troubleshoot some recurring difficulties in scaling finance to deliver high-quality credit supply by 2035 at the scale SBTi’s recent decision appears to usher in.

The system around the Standard

First, more good news: this was no random act of Market Integrity. The revised standard was released in the context of a high level of hard-won coordination happening across the voluntary and compliance markets. For instance, the Coalition to Grow Carbon Markets, representing thirteen governments committed to scaling high-integrity use of carbon credits, issued a formal response to the new SBTi standard the same day it dropped (followed by a response to ISO’s draft net-zero standard and a new policy playbook two weeks later – they had a busy month!).

The revised SBTi standard is best understood in the context of this degree of convergence: not a single standard-setter acting alone, but governments, integrity bodies, and market institutions building a coherent system around a shared direction of travel.

What’s in the SBTi Net Zero Standard 2.0?

So what did SBTi actually change? Briefly, the standard’s new Ongoing Emissions Responsibility (OER) program is voluntary and has three tiers: Engaged (a company’s covering 1% of ongoing emissions through verified third-party outcomes – i.e., credits), Advanced (10%), Leadership (100%, at a minimum $80/tCO2e price signal). None of this counts toward a company’s scope 1-3 target. It’s reported separately, so that OER sits alongside a company’s own emissions cuts, and cannot replace them.

Beginning in 2035, Category A companies will be required to support carbon removals at increasing volume and durability, scaling toward full coverage by their target net-zero year. (Note that SBTi has flagged this section as subject to revision in Version 3 “to reflect the best available science at the time,” but the direction of travel is clear, even if the details change.)

On timing: Version 1.3.1 stays open for new target submissions through the end of 2027. V2.0 takes effect February 1, 2027, so companies can choose either from that point. Companies with 2030 targets already set should plan their next cycle under V2.0 starting in 2028.

Companies now have to declare, at Target Validation, whether they intend to participate in OER. This will be reported publicly on SBTi’s dashboard. I am hopeful this shifts the incentive for companies from the “Damned if you do” status quo. (In recent years companies have reasonably concluded there’s less reputational risk in not addressing their residual emissions at all, than in purchasing carbon credits and maybe getting pilloried in the press for it.)

What this means for supply

Nature-based approaches currently make up the large majority of global removal capacity available to companies today. Whoever can build and finance more of this supply is positioned for what’s coming. SBTi’s revised standard offers the closest thing to a long-term demand signal carbon removals projects have had in a while: a defined path to compliance-adjacent volume a decade out, instead of a purely voluntary market that could go squishy at any moment. That’s the kind of line of sight that lets a project underwrite against future demand. 

In the near term, given the phased approach to 2035, voluntary uptake is where the leadership and the opportunity will live. 

There are also still questions about where nature-based projects sit on the durability spectrum, and how that interacts with a company’s own emissions cuts versus what gets purchased. A portfolio approach (every tool in the toolbox, matched to its purpose) is how serious companies will navigate the balance between their own abatement and everything else eligible under OER.

So how does the market deliver high quality supply at scale?

Developers have carried a disproportionate share of the risk in the voluntary carbon market for years. On one side, tightening integrity rules and methodology requirements; on the other, uncertain, often thin demand, and financing that hasn’t kept pace. SBTi’s ramp doesn’t remove that pressure on its own. But it gives developers something they haven’t had much of: a longer runway to plan against. So what they do with it?

Going out and raising a $200 million ten-year nature-based carbon fund on the back of SBTI’s signal is one way forward, and we’ll likely see more of those. 

Still, our latest analysis of nature-based carbon finance suggests that long-duration removals projects like ARR and IFM don’t map perfectly onto how real assets like forestry and agriculture have traditionally been financed. They run on their own (longer) timelines, with their own management demands. 

The market is already experimenting with structures built specifically for carbon outcomes instead of forcing the asset into a familiar container. Aurora Sustainable Lands for instance was launched on the observation that carbon-first forest management requires 40-year decisions that a standard 10-year closed-end fund can’t accommodate. That implied a company structure directly investing in real assets, so long-term carbon and ecological planning and commitments aren’t constrained by a ticking fund exit clock. It’s one answer to the mismatch between how capital is usually structured and what these projects actually need.

The ramp SBTi has set also raises a fair question about who gets to compete for that demand. Building removals capacity at scale favors developers who already have balance-sheet size and institutional relationships. What does that mean for community-led or smaller projects without access to that kind of capital pool?

The Kwaxala initiative in British Columbia is a useful model here. The usual path to institutional capital for a nature-based project assumes you already have the means to acquire land or already hold it, or that you’re willing to bring in equity partners who take a stake in decision-making. Kwaxala found a different on-ramp: rather than buying land outright and competing financially with logging companies for it, the Kwiakah First Nation worked with the BC Ministry of Forests to convert an existing Tree Farm License’s extractive obligation into a regenerative right. That right (not direct land ownership) is what opens the door to carbon revenue and what gets securitized into Living Forest Shares, letting investors buy a share of what the forest produces, not the forest itself. The Nation retains full ownership and sovereignty, and diligence happens once, at the protocol level, so new projects can draw down committed capital as they come online. It’s a clever way around the land-acquisition problem, and one that admittedly depends on BC’s particular licensing system. But the underlying idea, of securitizing the outcome rather than the asset, could be adapted to other contexts.

Even with the right structure and the right governance, projects stall without financing built for how they actually work. Tripurari Prasad and Edit Kiss have written about this as the missing middle in nature-based carbon: financeable offtake that acknowledges real delivery risk, risk-sharing instead of risk-dumping, tiered expectations by project size, and blended capital that pairs commercial commitments with concessional or first-loss funding. 

SBTi has offered direction. Time to get to work on building the architecture, the governance, the pipeline, and the financing that lets the whole market meet it.