Version:  v. 1.0, March, 2023

Contact: For questions, suggestions, comments, and troubleshooting please use the Carbon Markets CoP channel on Microsoft Teams or by email (CarbonMarketsCommunityofPractice@tnc.org).

Purpose:  This tool aims to help project managers identify risks that could affect carbon projects during the design, implementation, and long-term continuity. This tool also aims to assess the need for mitigation measures when risks are considered high or extreme.

Disclaimer:  The value of this tool will depend mainly on the correct identification of risks by the project management team and stakeholders, so it is important to evaluate any possibility, even if considered minimal at some point.

General Instructions:  List all the potential risks in the tab "Risk Registry," considering all the categories. If no risk is identified in one category, it can be deleted. If more categories are needed, add those as necessary.
Assess the likelihood and impact of each risk based on your best knowledge, stakeholder consensus, and/or relevant data/ information when available. The formulas will automatically assess the risk score and if extra steps are needed.

Some risks may be related to more than one category. Select the most appropriate category.
If more lines (risks) are necessary for a given category, just add a new row and copy the formula from one cell (in the same column) to the newly added cells.

If the final risk score is HIGH or EXTREME, its necessary to identify (columns "I" to "L"):
a) causes - the key factors that could lead the risk to materialize.
b) preventive measures - the activities that could minimize the causes, and therefore the chances of the risk materializing.
c) impact - what are the negative effects that will occur if this risk materializes.
d) mitigation activities - in case the risk still turns to materialize, what can be done to reduce the negative effects.

The list of preventive actions and mitigation activities should then be incorporated into the carbon project design.

Categories instructions: 

• Project Implementation and design: Consider the risk of the proposed activities not being effective enough to tackle the root causes of the problem. Consider any possible threat to project implementation, such as lack of engagement, major diseases affecting in-person activities, presence of other projects nearby negatively affecting the project, lack of technical capacity for implementation and carrying out the project, and others.
• Project management: Consider in this section the experience of the management team, the capacity to find partners and staff with experience, the capacity of the management team to solve conflicts, and others.
• Legal and rights: in this section, consider if land and carbon rights are clearly defined. If not, are the steps to secure ownership clearly defined, or this could be a potential risk to the project? Is there any dispute of rights? Or could be in the future? Can the carbon project interfere with other use rights?
• Financial Risk: Considering the fluctuation of market prices, and opportunity cost (projects vs most likely alternative scenario), is there any up-front funding available? Are the funding sources sufficient for the project in the long term?
• Policy and Political risks: consider the risk of changes or implementation of any carbon regulation; changes or inclusion of a domestic carbon trading scheme restricting the market, and the necessity of any government approval for the project (and if this approval is likely to be obtained).
• Environmental and biodiversity risks: consider if the project activities may generate any kind of pollution, or affect any species/plant currently in the area.
• Social and community risk: consider the presence of other projects close by that could create social conflicts, any possible social critique due to real or perceived negative impacts from the project, and a decrease of interest from the community due to changes in prices. Also, check, is the community supportive of carbon projects, and if there is a fair benefit-sharing mechanism in place.
• Health, safety, and security: consider if the project activities follow rules and regulations about health, safety, and workers' rights. Is the project area unsafe? Is the project activity in an area with a polluted environment?
• Natural disaster: consider the possibility of occurring fire, pests and diseases, extreme weather (such as floodings, land slidings, hurricanes), geological failures, and others, as well as the impact those may have.
• Reputational Risk: Consider if the project developer and other project partners have experience and a good reputation. Also, does the project uses an internationally recognized carbon certification and non-controversial methodologies? Were additionality and baseline conservatively assessed?
• Others: any risk not included in the above categories.