This proposal recommends KlimaDAO's exclusive origination of the "Hygiene and Environmental Care for Tanks and Overhead Reservoirs (HECTOR)" carbon project, ensuring alignment with our strategic investment objectives and the newly introduced Green Ratio financial management framework.
The undertaking of the HECTOR project aligns with KlimaDAO's strategic goals and the Green Ratio's guidance. This project will not only yield verifiable environmental benefits and carbon credits but also enhance our operational efficiency by optimizing the deployment of our USDC reserves, thus maximizing our potential for impact and contributing to our strategic reserves in compliance with the Green Ratio.
For more background, see here: https://forum.klimadao.finance/d/289-kip-52-iot-ai-ml-on-blockchain-water-filtration-high-quality-project-kip
By initiating this project, KlimaDAO affirms its commitment to sustainable development and climate action. The project is expected to generate significant environmental benefits while also creating carbon credits. It supports multiple United Nations Sustainable Development Goals, enhances KlimaDAO's presence in the carbon credit market, and positions the DAO as a leader in applying blockchain technology to environmental initiatives.
By integrating this project into our portfolio, we optimize capital allocation, maximize our green impact, and adhere to the Green Ratio.
KlimaDAO will enter into a 5-year offtake agreement with the following detailed financial commitments:
- Purchase 27,000 credits at $14.75 per ton.
- $350,000 down payment to secure project rights and exclusivity agreement
- Total cash outlay: $748,250, constituting roughly two-thirds of the capital KlimaDAO needs to deploy under the Green Ratio framework.
- Collateral: $150,000, to be secured by selling ARR VCS3425 credits via Aither at a price of KlimaDAO’s choosing, aligning with the Treasury allocation.
- Total Year 1 investment: $898,250
- Purchase 27,000 credits at $15.25 per ton.
- Total cash outlay: $324,250
- Total investment: $286,750 after accounting for the downpayment reduction and collateral payment
- Purchase 27,000 credits at $15.75 per ton.
- Total cash outlay: $162,750
- Total investment: $50,250 after considering the downpayment reduction and collateral payment
- Purchase 27,000 credits at $16.25
- No downpayment is required, with payment of $438,750 due upon credit issuance
- Purchase 27,000 credits at $16.75
- No downpayment is required, with payment of $452,250 due upon credit issuance
Total 5-Year Commitment:
- Volume: 135,000 tons.
- Average price: $15.75 per ton.
- Total deal value: $2,126,250.
- The first Klima funded project
- The project has been tailored-made with KlimaDAO and will be exclusively funded by the DAO for the project life.
- The Company “Klima” to be added as stakeholder participant inside the PDD.*
- Duration: Binding 5-year offtake agreement
- Volume: 27kt annually, 135kt for all 5 years
- Price and Contract Size: US$ 2.1 million firm interest at US$15.75 average price. US$ 0.50/ton increment annually
- Funding - 10 Business Days after signing contract AND 5 Business days after every issuance thereafter by way of USDC
- Downpayment after signing: US$350,000, reduces 25% and 75% in the 2 following years as more payments are made
- Collateral: ARR Credits VCS3425 will be sold on KlimaDAO’s behalf for profit. Sale proceeds to be divided between (1) Aither for US$150,000 that will be utilised to pay the upcoming years 2 and 3 of issuance, alleviating Klima’s cash payment needs further and (2) Klima paid out the residual
*"Klima" will be added as a stakeholder participant in the PDD, if "Klima" wishes to be added under a different designation that can be decided in the RFC process as we escalate to KIP.
In case credits cannot be delivered
Aither will be offering at its discretion alternative projects that are of similar vintage (same year or 2 year older, depending on liquidity) in the volume equivalent to the value of the annual delivery
How does this impact KlimaDAO?
Embarking on the exclusive origination of a high-impact project like HECTOR offers multifaceted benefits to KlimaDAO that extend well into the coming decade. The benefits permeate through various layers of the organization, from enhancing monetary value to amplifying public relations and marketing impact, as well as demonstrating our capacity to effectively manage and deploy larger pools of capital. Here are some key benefits:
Accelerating Impact Investments: The direct origination of a carbon credit project such as HECTOR allows KlimaDAO to be at the forefront of the carbon credit supply chain, potentially increasing the economic value captured. By originating the project from the ground up, KlimaDAO can optimize cost efficiencies and enjoy the full breadth of financial benefits from the sale of credits in the voluntary carbon market, which often command premium prices due to their verified impact.
Public Relations and Brand Image: By spearheading a project that provides tangible benefits in terms of clean water and sanitation, KlimaDAO positions itself as a leader in environmental impact, enhancing its reputation. The project's alignment with United Nations Sustainable Development Goals showcases KlimaDAO's commitment to global priorities, earning goodwill and respect from the broader public, stakeholders, and potential partners.
Marketing Leverage: Exclusive projects provide compelling narratives for marketing campaigns. Success stories from HECTOR can be utilized to illustrate KlimaDAO's direct involvement in creating a positive environmental impact. These stories resonate with both the crypto community and the general public, raising awareness of KlimaDAO's brand and attracting new participants to the platform.
Scaling Traction: Managing a project of HECTOR's scale demonstrates KlimaDAO's capability to effectively deploy larger capital allocations and handle complex projects. This proven track record can attract larger investors and partners, looking for capable platforms to manage significant environmental projects. It also sets a precedent for scaling up operations and can pave the way for KlimaDAO to undertake even more ambitious projects in the future.
Operational Excellence: Having an exclusive project under its wing compels KlimaDAO to hone its project management, monitoring, and reporting skills. This operational experience is invaluable and can be leveraged to streamline future projects, making KlimaDAO a more attractive proposition for project developers and contributors who are seeking efficiency and reliability.
Community Engagement and Governance: Engaging the KlimaDAO community in the governance of an exclusive project fosters a deeper sense of participation and investment in the DAO's success. It can lead to increased voter turnout, more lively discussions in governance forums, and a stronger, more cohesive community.
The origination of the HECTOR project is not just a strategic impact investment for KlimaDAO; it's a catalyst for growth and a beacon for environmental and social governance. It enhances our monetary foundation in line with the Green Ratio. Year 1 cash outlay aligns with the 22% allocation for Forward Carbon Agreements, considering the current asset distribution, the $748,250 cash outlay will satisfy just over half of the capital KlimaDAO is to deploy into forward carbon this year. Brokering VCS3425 at a profit and using the proceeds to fund this project indicates KlimaDAO’s ability to manage forward assets and source favorable deal flow.
Originating this project elevates KlimaDAO's public profile, enriches our marketing narratives, demonstrates our scalability, refines our operational capabilities, unlocks a high quality stream of carbon credits, and invigorates our community. These comprehensive benefits are instrumental in propelling KlimaDAO to new heights and establishing it as a paragon of environmental action within and beyond the blockchain space.
The proposal will be put to a vote by the KRC for escalation to KIP.
Poll (active when/if escalated to KIP)
For: Authorize KlimaDAO to become the exclusive stakeholder and project originator for the HECTOR project, with financial commitments as detailed.
Against: Opt-out of exclusive origination and seek alternative capital deployment methods to fulfill KlimaDAO’s mandate of deploying capital to forward carbon.