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Medium Profitability Micro-Economics Financing Project Selection

One Tree Hill

#Non Profits #Non-Profits #Environmental/Sustainability #Energy
ProHub Comment

This case tests a candidate's ability to conduct cost-benefit analysis under uncertainty while integrating qualitative factors. Strong candidates will identify the break-even carbon credit potential per tree (0.625) using unit economics rather than calculating all projects individually, then synthesize financial profitability with logistical, legal, and operational considerations to make a defensible recommendation.

Estimated Time 26 minutes
Difficulty Medium
Source ROSS
10 / 100
The nonprofit organization, One Tree Hill (OTH), has a mission of restoring forest cover globally. They typically give grants (donations) to local NGOs, communities, or startups that reforest (i.e., plant trees) in a given area. Due to the limited supply of grant funds in recent times, and in order to enter a very lucrative market, OTH is looking for ways to fund some reforestation projects through the sale of carbon credits (CC), also called “carbon financing”. They have a portfolio of projects in need of funding, and they would like to select a few for carbon financing. Should OTH pursue carbon financing, and if yes, for which projects?

Clarifying Information

  1. A carbon credit (CC) is a tradable certificate that provides the holder of the credit the right to emit greenhouse gases, typically 1 ton of carbon dioxide equivalents. Corporations and countries purchase carbon credits to “offset” their emissions above allowable limits.
  2. If the candidate asks about the process for selling carbon credits, show them the flowchart in Exhibit 1 (this is just meant to help them understand the process, candidate is not expected to draw insights from this)
  3. There is no target amount to be raised for funding these projects (there are many). The case is about whether financing a project via generating and selling carbon credits is a feasible option. If feasible, OTH will proceed with that project.
  4. The customers are typically the corporations or countries wanting to offset emissions from their operations.
  5. This is a forward-looking analysis, i.e., only for new projects. We can ignore any past planted trees or projects.
Mock Interview
Interviewer

The nonprofit organization, One Tree Hill (OTH), has a mission of restoring forest cover globally. They typically give grants (donations) to local NGOs, communities, or startups that reforest (i.e., plant trees) in a given area. Due to the limited supply of grant funds in recent times, and in order to enter a very lucrative market, OTH is looking for ways to fund some reforestation projects through the sale of carbon credits (CC), also called "carbon financing". They have a portfolio of projects in need of funding, and they would like to select a few for carbon financing. Should OTH pursue carbon financing, and if yes, for which projects?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

One Tree Hill seeks to fund reforestation projects through carbon credit sales. The case requires candidates to determine which projects are financially viable by analyzing fixed costs, variable costs, and revenue from carbon credit sales, then evaluate non-financial factors like geography, resource availability, and regulatory environment to make a final recommendation.

Key Insights:

  1. Unit economics approach is more efficient than calculating every project individually—identify the break-even CC potential per tree of 0.625
  2. Only Projects A and B are financially profitable; others have negative margins due to high planting and maintenance costs relative to carbon credit revenue
  3. Financial feasibility is necessary but not sufficient—must also consider geographical factors (existing forest cover, protection services), capital availability by country, and legal/regulatory implications of carbon credit sales
  4. Time value of money and upfront capital requirements are critical constraints—OTH needs alternative funding sources to initiate projects before receiving CC revenue
  5. Ambiguous data requires structured interpretation—Exhibit 3 shows trade-offs between Project A (better forest services, higher grant capital) and Project B (lower capital availability but fewer forest protection services)