Understanding Pre-Issuance Ratings

In this blog, we'll explore the risk associated with pre-issuance projects, the need for Pre-Issuance Ratings to ensure quality carbon credits, and what an industry best Pre-Issuance Rating looks like.

According to MSCI Carbon and our recent Supply and Demand Survey, demand for high-quality carbon credits is likely to outstrip supply 2:1 (in the low demand case). We’ve seen in our recent Q1 2025 Carbon Data Snapshot that 2025 marks the first year where negative net issuances are set to occur – where more credits are being retired than issued.

The need for robust carbon project validation and financial backing is therefore becoming more critical than ever.

In response to this need, pre-issuance is becoming an increasingly favoured route. 

Pre-issuance refers to the phase of a carbon project before the actual issuance of carbon credits (also called ‘ex-ante’, meaning ‘before the event’). Pre-issuance allows project developers to validate their methodologies, attract necessary funding, and ensure compliance with international standards before the carbon credits get issued. 

And crucially for corporate buyers and investors, forward-thinking market actors can secure supply at the right price – to either retire for their own needs, or sell on in the future.

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Pre-issuance is a vital stage in the lifecycle of a carbon project, acting as the bridge between initial project conception, and the full-scale issuance of carbon credits, and for investing companies it means that they can secure access to the best projects, control quality and reduce costs. 

Although it’s not without its challenges…

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The risks of pre-issuance projects

There is more uncertainty with pre-issuance projects compared with established and vetted carbon projects, such as: 

1. Execution risk:
   It may take a number of years for a pre-issuance project to actually deliver credits to the market, and essentially an investor bases their decision on a plan to be implemented. The implementation doesn't always go according to plan. For instance, timelines can be changed  and unforeseen obstacles may arise.‍
2. Evolving policy landscape:
   Given these long timeframes, the projects fall risk to constantly evolving scientific, policy, and market landscapes.‍
3. Risk of non-delivery:
   Pre-issuance projects are yet to deliver their credits, and hence there is the possibility that a project either underdelivers, or does not deliver at all. 

So while investors would assess the risk profile of a project in that given moment in time, the timelines of pre-issuance projects mean that they are highly susceptible to change as the project progresses and takes shape. 

This is where Pre-Issuance Ratings come in.

The need for Pre-Issuance Ratings‍

Given the risks and general uncertainty associated with pre-issuance projects, it’s crucial investors engage with a neutral third party to assess the project – allowing them to thoroughly evaluate the quality and credibility of the project, and reduce the risk involved. 

These Ratings ensure a project: 

• Meets investor criteria
• Reduces risk associated with project failures or overestimated carbon reductions
• Provides remedial actions in such cases when emerging risk is identified
• Verifies the integrity of the credits they might be purchasing in the future. 

Failing to source a Pre-Issuance Rating from a credible third party leaves investors grappling with a big information asymmetry – complicating the process of identifying, evaluating, and comparing quality projects, resulting in a challenging experience for market participants.

At Sylvera, we’ve developed Pre-Issuance Ratings as part of our full end-to-end Pre-Issuance solution – providing the tools, data and expertise to help investors navigate the end-to-end pre-issuance investment journey. 

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Our Pre-Issuance Ratings cover the following risks:

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Integrity
Evaluating the potential drivers of compromised carbon credit quality and project integrity across additionality, carbon accounting, permanence, safeguards and co-benefits.

Delivery
Analysing the present and potential sources of non-delivery or under-delivery of carbon credits.

Reputational
Surfacing the reputational implications of the project, proponent(s), project type, methodology and data disclosures.

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This is done by breaking down the assessment into our 3 key modules:

1. Integrity. What rating this project is expected to receive at issuance‍

2. Delivery. How credits will be issued and when‍

3. Value. How this translates into money using our price rating correlation. 
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And across these 3 modules, remedial actions provide guidance on how to improve the project's quality and value.

Understanding Pre-Issuance

Before buying and carrying out a Pre-Issuance Rating, it’s worth having a good understanding of the pre-issuance process in general. 

The diagram below outlines the general process of how a carbon credit becomes available for purchase and retirement.

It can take years for a project to get from the initial ideation, planning and development phase to the stage where it can actually deliver credits to the market. And there are several variables over this time that need assessing and monitoring.

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Get started

Investing in pre-issuance carbon projects offers major opportunities but also presents challenges. Sourcing reliable projects, assessing their risks, and monitoring their implementation can be complex and time-consuming. 

Pre-Issuance with Sylvera addresses these challenges head-on, providing a comprehensive way to streamline your entire investment lifecycle.

To learn more about Pre-Issuance Ratings, download the Pre-Issuance Primer or join our upcoming Live Pre-Issuance Demo with Annalise.

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Live Demo: Pre-Issuance with Sylvera

Tuesday 20th May 2025 - 5pm UK Time, 12pm EST, 9am PST

With Annalise Downey, Head of Climate Consulting

Join the live demo and find out how to source, assess, and monitor early-stage carbon projects. 

For corporate buyers and investors, we’ll demonstrate how to:

- Find the right projects through our extensive catalog, detailed data, and efficient prioritization tools.

- Make informed investment decisions with detailed Ratings, plus business case support.

- Track performance, address potential issues with remedial actions, and assess their impact.

Register now

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