Climate Regulation
FlowCarbon is a U.S.-based company operating within the voluntary carbon market, where one of its primary functions is to fund climate projects. One notable project is the Corazón Verde Del Chaco Project from Verra, located in the Gran Chaco forest of Paraguay. This project encompasses an area of 31,858 hectares and is estimated to generate annual emission reductions of 1,272,472 carbon credits from July 1, 2020, to June 30, 2050. Classified under the VCS Project Type of Agriculture, Forestry, and Other Land Use (AFOLU), the project activity is focused on REDD (Reducing Emissions from Deforestation and Forest Degradation).
On January 24, 2022, FlowCarbon entered into a Pilot Verified Emission Reduction Purchase Agreement (VERPA) with Quadriz Paraguay, SA, the proponent of the project. This agreement involved the delivery of 85,000 carbon offsets—35,000 from 2020 and 50,000 from 2021—conforming to both the VCS and Climate, Community & Biodiversity (CCB) standards, amounting to a total of $0.845 million. At the time, the project was nearing the completion of its VCS certification process, with a targeted carbon offset issuance date of August 31, 2022, and a final delivery deadline set for October 31, 2022. The average days outstanding for the offsets were anticipated to be between 60 and 90 days.
FlowCarbon had already paid 60% of the total payment due under the Pilot VERPA, with the remaining 40% contingent upon the issuance and delivery of the carbon offsets. Quadriz Paraguay, SA, is expected to deliver the carbon credits to FlowCarbon’s account in the VERRA registry and receive the remaining payment. Following this, FlowCarbon planned to sell the acquired carbon credits.
Blockchain Technologies
To attract funding, FlowCarbon opted to use Centrifuge, Inc.’s blockchain protocol system known as the Tinlake Protocol, accessible via Tinlake’s website. This decision led to the establishment of FlowCarbon Nature Offsets LLC (Issuer). The Issuer’s use of Tinlake is governed by the Tinlake Protocol Service Agreement, which was dated July 18, 2022.
On September 8, 2022, the pool “Flowcarbon Nature Offsets Series 1” was launched on Centrifuge, which included two tranches of ERC-20 tokens with the aim of attracting 845,000 DAI. The DROP Tokens would initially comprise no more than 70% of the total offered tokens, with a maximum DROP APR of 15%. Interest on the DROP Tokens would start accruing once an Effective Offering was achieved, and the NFT representing the Underlying Assets was minted and locked on Tinlake. The price for the DROP Token was set at 1 DAI.
The TIN Tokens represented at least 30% of the total offering and were subject to first losses up to the full amount of their value. To align incentives among the Issuer, Issuer Parent, and investors, at least one-third of the issued TIN Tokens (the junior tranche) would be purchased by the Issuer Parent. The price for the TIN Token was set at 1.118 DAI.
Investments were available to both U.S. and non-U.S. persons, with U.S. persons required to be accredited investors. The minimum investment was 5,000 DAI, and the offering window was expected to close once the Offering Size reached $845,000 and the Minimum TIN Ratio was satisfied. The VERPA would be assigned to the Issuer upon confirmation of an Effective Offering.
While there was no fixed asset maturity, the expected repayment period was projected from October 1 to November 30. DROP and TIN tokens were to be redeemed after the sale of the Underlying Assets to limit cash drag. Any outstanding DROP redemption requests would have seniority over TIN redemption requests, and requests from the same epoch would be treated as simultaneous, with distributions made pro rata until fulfilled.
From the approximately 591,500 DAI and 253,500 DAI received from the DROP and TIN tranches respectively in an Effective Offering, around 507,000 DAI would be distributed to the Issuer Parent as repayment for the prepayment made under the Pilot VERPA, while 338,000 DAI would be retained by the Issuer to satisfy remaining payment obligations following the delivery of Underlying Assets to the Issuer Parent as custodian.
As of now, the pool is archived, and minimal information about its movement has been retained. However, it can be inferred that the fundraising was successful, as an NFT representing the funds raised was created on October 11, 2022, and funds were disbursed on December 5, 2022. A subsequent fundraising effort on December 5, 2022, was scheduled for repayment by June 30, 2023, but current information is limited regarding its purpose or objectives.
Team, Investments, Marketing, and Community
FlowCarbon was co-founded by notable individuals including Adam Neumann, Rebekah Neumann, Dana Gibber (CEO), Phil Fogel, and Caroline Klatt. To finance the Corazón Verde Del Chaco Project, FlowCarbon initially invested 60% of the total funds, intending to recover these costs through decentralized finance (DeFi) collaboration with Centrifuge.
From a marketing perspective, FlowCarbon aimed to demonstrate the viability of on-chain financing for carbon offset projects. The project did not engage in extensive marketing efforts, particularly since participation was limited to accredited investors in the United States. The minimum investment requirement of 5,000 DAI and a relatively modest fixed interest rate of 15% for DROP Tokens may have contributed to the project’s limited visibility. Currently, official resources from FlowCarbon have removed references to this project, further complicating the availability of current information (https://www.flowcarbon.com/post/flowcarbon-partners-with-centrifuge-to-unlock-carbon-finance).
Current Investment Attractiveness
Currently, there are no available investment opportunities within FlowCarbon’s initiatives.
Areas for Improvement
Given the ambiguity surrounding the success or failure of the company in raising and returning funds, it is difficult to draw definitive conclusions. However, the concept of fundraising through decentralized finance is intriguing and holds promise. As regulatory frameworks for digital assets and carbon markets evolve in various jurisdictions, the potential for synergistic projects like FlowCarbon’s may continue to emerge.
