How a pre-issuance rating unlocked critical investment for Sistema.bio’s methane-reducing biodigester project in India

Methane is a powerful superpollutant, responsible for nearly 30% of global warming to date, yet methane-reducing projects receive only a fraction of global climate finance. Biodigester projects can address this gap directly by avoiding methane emissions from livestock manure, while also delivering important co-benefits to farming households. But these projects occupy a less familiar corner of carbon markets: limited issuance history, few pricing benchmarks, and low visibility among the institutional investors and buyers that might support their scale-up.

Sistema.bio is a global biogas company working in 35 countries across Asia, Africa, and Latin America, with 16 years of experience developing and implementing biogas programs. The company has reached more than 150,000 small farms through its patented anaerobic digester systems, supported by biogas-adapted appliances and farm equipment, training, servicing and a 10-year warranty.

Carbon finance is central to making this technology more accessible. Sistema.bio shares part of the future value of the emissions reductions generated by each biodigester with farmers upfront, in the form of a discount on the cost of the system. Because farmer demand is highly price-sensitive, this upfront carbon benefit enables more farmers to co-invest in the technology at an affordable price, expanding access while strengthening the economic benefits for participating households.

Providing that benefit upfront, however, requires significant working capital long before the related carbon credits are issued and sold. To bridge this financing gap, Sistema.bio established FarmCarbon, an in-house financing facility designed to provide long-term working capital for the development of methane-reduction projects in priority markets such as India.

Mobilising institutional capital into FarmCarbon required investors to gain confidence in projects whose carbon performance would only be fully demonstrated over time. They therefore needed an independent, credible and comparable assessment of project quality and execution risk - one that could support investment decision-making before issuance.

The 'AA.pre' rating was a key step in the commercial process for the FarmCarbon facility to close. This vehicle (a $53 million pre-finance facility led by BNP Paribas Asset Management, British International Investment and Shell Foundation) uses a pre-financing model that enables smallholder farmers to access the economic value of future carbon credits upfront. The carbon rights from each project are held by the FarmCarbon fund, and the resulting issued carbon credits are sold directly to high-integrity carbon buyers who agree to long-term forward offtake agreements (payment on future annual delivery).

Beyond the financing process, the rating provided an independent basis for conversations with buyers. Sistema.bio reported that it made it easier to open doors and communicate that the project sits among the highest-integrity projects in its sector globally. Given the limited pricing benchmarks available for biodigester credits, the rating helped de-risk a novel superpollutant mitigation project for counterparties encountering it for the first time.