A $10.7m senior debt facility for a clean cookstove rollout in Zambia is emerging as a test case for whether carbon projects can be financed through conventional debt rather than grants or equity — a shift that could broaden the pool of capital available to the sector.
Africa Go Green (AGG), a climate-focused debt fund managed by Cygnum Capital, has provided the facility to BioLite, a New York-based manufacturer of off-grid energy products, to finance the purchase and distribution of at least 163,500 improved cookstoves across Zambia. The transaction is being implemented under the Article 6.2 bilateral agreement between Zambia and Switzerland, signed at COP30 in Belém, Brazil, in November 2025 and formally inaugurated in January 2026.
Unlike many carbon projects, which have traditionally relied on grants, equity or upfront credit pre-purchases, this facility is structured to be repaid from future carbon revenues. The question is whether that makes it a replicable template — or an exception that proves the rule.
A compliance-backed offtake
The financing is anchored by a long-term offtake agreement with the KliK Foundation, the Swiss entity mandated under the country’s CO₂ Act to identify and financially support greenhouse gas mitigation activities abroad. KliK has entered into a Mitigation Outcomes Purchase Agreement (MOPA) with BioLite for the purchase of Internationally Transferred Mitigation Outcomes (ITMOs) generated by the project.
Zambia’s bilateral agreement with Switzerland is the third Article 6 agreement the country has signed in the past two years, according to the Zambian Ministry of Green Economy and Environment. The framework allows Switzerland to count verified carbon credits toward its climate commitments while channelling international finance into Zambian mitigation activities that go beyond the country’s Nationally Determined Contributions.
For lenders, that compliance-driven demand anchor provides a degree of revenue certainty that voluntary carbon markets have struggled to offer. “The KliK Foundation plays a crucial role in translating the Zambian-Swiss bilateral climate agreement into measurable climate action,” said Darja Aepli, the foundation’s chief operating officer, at the agreement’s inauguration.
The debt question
Carbon project finance has long been constrained by a mismatch between the scale of investment needed and the risk appetite of commercial lenders. The AGG-BioLite transaction attempts to bridge that gap by using future carbon credit revenues as the repayment source — a structure that depends on the credits being generated, verified and transferred as projected.
AGG, launched by KfW on behalf of the German Federal Ministry for Economic Cooperation and Development in early 2021, is the first structured debt fund in Africa focused on energy efficiency solutions. It has current committed capital of $232m and provides senior and mezzanine financing to climate-friendly projects across the continent. The fund’s investors include the African Development Bank, the International Finance Corporation, the Nordic Development Fund, British International Investment and Calvert Impact Capital, among others.
BioLite, founded in 2009, has raised $16.2m across 11 funding rounds, including early-stage equity, debt and grants. The company operates across multiple African markets, including Rwanda, Nigeria, Uganda, Senegal, Côte d’Ivoire, Madagascar and Malawi.
Insurance as a bridge
Insurance is the third component of the financing structure. CFC Underwriting and Kita, a Lloyd’s of London coverholder specialising in carbon insurance, provided a carbon delivery insurance solution brokered by Texel.
Carbon insurance is a nascent but growing market. Kita, which offers carbon purchase protection cover for delivery risk and political risk cover for host country risks, increased its underwriting capacity to £22.5m in 2025. CFC, meanwhile, covers voluntary carbon credits across a range of project types. The insurance is designed to protect against the risk that credits are not delivered as contracted — a risk that has kept many lenders on the sidelines.
The inclusion of insurance in the AGG-BioLite structure is significant because it addresses one of the primary barriers to debt financing for carbon projects: the uncertainty of credit delivery. “By pairing a compliance-backed Article 6.2 offtake with debt financing and an insurance overlay, AGG has shown a route from pilot-scale carbon projects toward something commercially repeatable,” said Laurène Aigrain, managing director of AGG.
A sector under pressure
The transaction comes at a moment of reckoning for carbon-financed clean cooking in Africa. In February 2026, Koko Networks, a Nairobi-based clean cooking company that had raised substantial investment, collapsed after the Kenyan government refused to issue a Letter of Authorisation for carbon credit sales. The company had built a network of automated bioethanol dispensers serving more than 1m households, but without carbon revenues to subsidise fuel prices, its operating model proved unsustainable.
The AGG-BioLite structure is fundamentally different: the debt is tied to the procurement and distribution of cookstoves — a discrete capital expenditure — rather than to ongoing fuel subsidies. That distinction may prove critical. Clean cooking is among the most underfunded climate solutions, with an estimated $6bn annual investment needed in sub-Saharan Africa alone. Debt capital accounted for 79 per cent of investment in the sector in 2022, according to industry data, but much of that has been concentrated in a small number of larger enterprises.
In Zambia, where many households still cook with charcoal and firewood, BioLite’s cookstoves are intended to reduce fuel use and emissions while improving health outcomes, particularly for women and children in rural areas. The project is grouped under Verra’s VCS 4151 programme.
A replicable template?
Whether the AGG-BioLite model can be replicated at scale depends on several factors. The Article 6.2 framework provides a compliance-grade demand signal that voluntary carbon markets cannot match — but bilateral agreements take time to negotiate and require political will on both sides. Switzerland has now signed Article 6.2 agreements with 17 countries, but the pipeline of projects that meet both countries’ standards remains limited.
Insurance capacity is also growing but remains concentrated among a handful of specialist underwriters. And the underlying projects must still demonstrate that they can generate verified emission reductions on schedule — a operational challenge that no amount of financial engineering can eliminate.
“This transaction demonstrates both the value of insurer collaboration in expanding insurance capacity and the critical role insurance can play in unlocking investment into high-integrity carbon projects,” said Thomas Merriman, Kita’s chief underwriting officer and co-founder.
For now, the AGG-BioLite facility offers a proof of concept: that carbon projects can be structured as bankable assets, provided the right combination of offtake, insurance and debt financing is in place. Whether that proof can be scaled into a market-wide shift remains to be seen.