Risk assessment
Risk assessments support ICR’s risk-based program administration, adjustment account management, insurance or guarantee determinations, transparency, and the ongoing integrity of International Carbon Credits (ICCs) issued under the ICR Program.
Risk assessments may be conducted or updated where required under ICR requirements, including in relation to the adjustment mechanisms for non-performance, non-permanence, and non-corresponding adjustment risks.
Overview
ICR uses risk assessments to identify, assess, monitor, and manage risks that may affect project performance, ICC integrity, adjustment account requirements, insurance or guarantee arrangements, and continued eligibility under the ICR Program.
ICR has partnered with Kita to support and conduct risk assessments under the ICR Program.
Kita’s risk assessments support ICR’s risk-based program administration, including the assessment of non-performance, non-permanence, non-corresponding adjustment, insurance, guarantee, warranty, adjustment account, and other risk-related matters.
Risk assessment outputs may inform ICR decisions relating to adjustment account contributions, issuance conditions, conversion conditions, enhanced monitoring, continued listing, suspension, or other measures required to maintain program integrity.
Risk assessments and inputs from Kita are advisory inputs to ICR’s risk-based program administration. Decisions relating to registration, issuance, conversion, adjustment account management, continued listing, suspension, and other ICR Program measures remain with ICR in accordance with applicable ICR requirements.
How ICR uses risk assessments
ICR uses risk assessments to support consistent, risk-based administration of projects and ICCs across the project lifecycle.
Risk assessments may be used by ICR to:
determine contribution requirements to non-performance, non-permanence, or non-corresponding adjustment accounts;
assess whether insurance, guarantees, warranties, or other risk mitigation instruments may be accepted or required;
determine risk-adjusted deductions or allocations at issuance or conversion;
manage adjustment account liquidity and portfolio-level risk;
assess whether enhanced monitoring, reporting, evidence, or review is required;
identify whether additional clarification, corrective action, or further review is needed;
support routine assessment, integrity assessment, or another oversight process;
inform suspension of project-related actions, withholding of issuance, withholding of conversion, or other measures under ICR requirements; and
support public transparency regarding risk classifications, adjustment account contributions, or risk-related project information, where applicable.
Risk assessments also support ICR’s management of adjustment accounts at portfolio level, including assessment of systemic risk factors, depletion scenarios, and the sufficiency of adjustment account balances to compensate for non-performance, non-permanence, or non-corresponding adjustment events.
ICR may take a conservative approach where risk assessment information is incomplete, uncertain, unavailable, inconsistent, disputed, or not accepted by ICR.
How risk assessments benefit projects
Risk assessments are not only used for ICR Program administration. They can also provide practical value to project proponents, project developers, buyers, investors, insurance providers, and other market participants.
For projects, risk assessments may help:
provide a structured view of project risks and risk mitigation measures;
support transparency around non-performance, non-permanence, and other material project risks;
identify areas where project documentation, monitoring arrangements, governance, implementation controls, or risk mitigation measures may be strengthened;
support engagement with insurers, guarantors, investors, buyers, and other counterparties;
provide additional information to support market confidence in the project;
clarify how adjustment account contributions, insurance, guarantees, warranties, or other risk mitigation requirements may apply;
reduce uncertainty around issuance, conversion, and ongoing project administration;
support continued monitoring and improvement over the project lifecycle; and
help demonstrate that risk management is being addressed in a structured and transparent manner.
A risk assessment does not guarantee project performance, future issuance, market value, insurance coverage, buyer acceptance, or continued eligibility. However, it can provide a more transparent basis for understanding project-specific and portfolio-level risk and for identifying appropriate risk mitigation measures.
Purpose of risk assessments
Risk assessments may support:
determining contributions to non-performance, non-permanence, or non-corresponding adjustment accounts;
assessing whether insurance, guarantees, warranties, or other risk mitigation instruments may be accepted or required;
determining risk-adjusted deductions or allocations at issuance or conversion;
managing adjustment account liquidity and portfolio-level risk;
identifying whether enhanced monitoring, reporting, evidence, or review is required;
supporting routine assessment or integrity assessment;
informing suspension of project-related actions, withholding of issuance, withholding of conversion, or other measures under ICR requirements; and
supporting public transparency regarding risk classifications or adjustment account contributions, where applicable.
Timing of risk assessments
Risk assessments may be conducted or updated at relevant points in the ICR project cycle, including:
before issuance of ex-ante ICCs or ex-post ICCs;
before conversion of ex-ante ICCs to ex-post ICCs;
in connection with Article 6.2 ICC designation;
following material project changes;
following verification;
following events that may affect project performance or permanence;
following events relevant to non-performance, non-permanence, or non-corresponding adjustment mechanisms; and
during periodic or portfolio-level reviews.
Before issuance of ICCs, ICR may conduct or require the applicable risk assessment to determine the relevant adjustment account contribution, where applicable.
Risk assessments may also be updated where new information becomes available, including updated monitoring data, verification findings, changes in project implementation, changes in host country circumstances, changes in ownership or governance, non-performance events, non-permanence events, non-corresponding adjustment events, or other material developments.
ICR may periodically reassess risk at project or portfolio level, including at least annually where applicable, or earlier where significant changes occur.
Interim and final adjustment contributions
Where an adjustment contribution depends on a risk assessment that is completed after ICR review or issuance approval, ICR may apply the maximum applicable adjustment account contribution on an interim basis.
Following completion of the risk assessment, ICR determines the final adjustment account contribution. Where the final contribution is lower than the interim maximum contribution, ICR may return or release the excess ICCs to the project proponent’s account, subject to applicable registry, fee, designation, restriction, and program integrity requirements.
Where the final contribution is equal to or higher than the interim contribution, ICR may retain the interim contribution and may require any additional contribution, insurance, guarantee, warranty, or other risk mitigation measure necessary to satisfy the final risk assessment outcome.
Risk categories
Risk assessments may consider project-level, counterparty, country, technical, financial, operational, governance, legal, regulatory, environmental, socio-economic, natural catastrophe, and international-transfer-related risks.
Risk categories may include, as applicable:
non-performance risk, including the risk that issued ex-ante ICCs are not matched by verified GHG emission mitigations for the relevant vintage or monitoring period;
non-permanence risk, including reversal risks affecting carbon stocks, GHG reservoirs, stored or contained GHGs, or other credited GHG emission mitigation outcomes;
non-corresponding adjustment risk, including the risk that a host country does not apply a corresponding adjustment for Article 6.2 ICCs within the applicable timeframe;
over-issuance risk;
double counting, double issuance, double use, or double claiming risk;
counterparty risk, including the track record, financial standing, governance, and KYC/KYB status of the project proponent, project developer, implementation partners, or other relevant parties;
country risk, including land ownership rights, community engagement and benefit sharing, fraud and corruption indices, political risk, regulatory risk, expropriation, confiscation, export license cancellation, contract frustration, war, terrorism, civil unrest, or similar risks;
technical and implementation risk, including project-type-specific technical risks, technology risk, operational risk, supply chain disruption, implementation capacity, monitoring risk, and data quality risk;
safeguards risk, including environmental and socio-economic risks identified through project documentation, safeguards documentation, validation, verification, ICR review, or other sources;
natural catastrophe and climate-related physical risk, including risks that may affect project implementation, project performance, permanence, or the continued generation of GHG emission mitigations;
insurance, guarantee, warranty, liquidity, replacement, or adjustment account risk; and
any other risk relevant to the project, ICCs, intended use, or ICR Program integrity.
The relevant risk categories and the weight given to each category may vary by project type, sectoral scope, host country, issuance type, crediting period, project stage, and the nature of the risk being assessed.
Use of risk assessment outputs
Risk assessment outputs may include risk classifications, quantified exposures, probabilities, sensitivities, estimated financial implications, adjustment account contribution requirements, insurance or guarantee requirements, or other risk-based measures.
Such outputs may be used by ICR to determine or inform:
contribution requirements to non-performance, non-permanence, or non-corresponding adjustment accounts;
whether insurance, guarantees, warranties, or other risk mitigation instruments may be accepted or required;
risk-adjusted deductions or allocations at issuance or conversion;
adjustment account management, including liquidity management, portfolio-level risk monitoring, and scenario analysis;
enhanced monitoring, reporting, evidence, or review requirements;
whether additional clarification, corrective action, or further review is required;
routine assessment, integrity assessment, or another assessment under ICR requirements;
suspension of project-related actions, withholding of issuance, withholding of conversion, or other measures under ICR requirements and applicable Terms and Conditions; and
public transparency information relating to project risks, adjustment account contributions, or risk classifications, where applicable.
Relationship to ratings and validation
Risk assessments are separate from project ratings. Ratings support transparency, comparability, and market confidence, while risk assessments support ICR’s risk-based program administration and adjustment mechanisms.
Risk assessments do not constitute validation or verification and should not be interpreted as a validation or verification opinion, rating, certification, or confirmation of conformity with ICR requirements, ISO 14064-2, ISO 14064-3, an applied methodology, or any other applicable criteria.
Validation and verification remain the responsibility of approved VVBs. ICR retains responsibility for decisions relating to registration, issuance, conversion, adjustment account management, continued listing, suspension, and any other measures under ICR requirements.
Publication and transparency
Risk assessment outputs, risk classifications, adjustment account contribution requirements, or summary risk information may be made publicly available through the ICR registry platform or other public ICR channels where required or determined by ICR.
Public disclosure supports transparency regarding the basis for adjustment account contributions, adjustment procedures, adjustment account management, and risk-based program administration.
ICR may determine the form and level of detail of public disclosure, taking into account program transparency, confidentiality, data protection, commercial sensitivity, security, and the need to preserve the integrity of risk assessment processes.
ICR may withhold or redact confidential business information, personal data, commercially sensitive information, insurance policy details, underwriting information, internal risk modelling, security-sensitive information, or other non-public information.
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