Citigroup Inc. is exploring entirely new deal structures it says have the potential to entice risk-averse investors to emerging markets via a controversial corner of climate finance.

The market for carbon credits, which has yet to be regulated, has untapped applications that — if done right — would help mobilize capital for climate projects, according to Jay Collins, vice chairman of banking, capital markets and advisory at Citi. He said initiatives announced at the COP28 climate summit to clean up the carbon offset market are paving the way for banks like Citi to start constructing such deals.