About
Growing global demand for soy is driving continuous agricultural expansion and deforestation in Brazil, particularly in the Cerrado region. One option to ease this pressure is to redirect agricultural production towards lands already cleared from native vegetation and degraded pasture lands.
An estimated 40 million hectares of such lands in the Cerrado could be used for this purpose, yet existing funding mechanisms are not enough to redirect soy production into these areas. Furthermore, trade and procurement challenges still need to be solved in order to enable this new market segment to reach the scale required to meet international demand for sustainably-sourced soy.
INNOVATION
The Responsible Commodities Facility (RCF) will supply international markets with a different class of soy that is not linked to any deforestation (including legal) in the Brazilian Cerrado. It will do this through a unique combination of features:
• Attractive crop financing and land restoration loans for soy producers, combining lower interest rates and longer repayment terms than most existing alternatives, to redirect production into previously cleared and degraded lands.
• Commodities produced will be sold to international markets in a dedicated selling platform linked to a blockchain registry.
• Production and compliance with strict eligibility criteria will be constantly monitored by employing a range of traceability systems.
IMPACT
• Aims to channel low cost loans to 600 farms, for a cumulative lending amount of more than US$ 3 billion over 10 years.
• Potential to originate over US$ 20 billion worth of soy and corn produced without incurring in deforestation or further conversion of the Cerrado, ensured by strict eligibility criteria.
• Potential to restore 1.2 million hectares of degraded lands, helping to avoid and sequester up to a total of 55 million tonnes of carbon emissions.
• Positive impact on biodiversity, climate resilience, and compliance with international labor standards, human rights, and social conditions.
DESIGN
The RCF will be managed by an already established, dedicated company, responsible for i) managing the facility and its fund, ii) coordinating other stakeholders, iii) conducting the screening and monitoring of farmers. Financing for the RCF will be raised by issuing investment grade-rated green bonds with different risk profiles, primarily aimed at institutional investors. The first US$ 300 million bond is expected by early 2019.
Through a partnering trading company, the RCF will provide local soy producers, with tailored financing solutions: i) initially, a revolving one-year credit line for soy and corn cultivation in the form of crop financing; ii) then, up to six-year loans to support farmers restoring degraded lands, as well as loans for compliance with the Brazilian Forest Code and financing for on-farm infrastructures.
The soy produced will be sold in a dedicated exchange, linking producers with international buyers interested in sustainable sourcing. A blockchain registry, a land-bank and monitoring and traceability systems will allow for improved transparency, compliance and full traceability of production, and an Environmental Committee, with representatives from the producers, commodity buyers, local NGOs, and financial partners groups will oversee operations.
Details
News & Events
Financial Times: $1bn green bonds to boost sustainable Brazilian farming launched
July 8, 20192018 Brasil Lab instrument Responsible Commodities Facility announced a plan to provide US$1 billion over the next four years to fund the production of more than 180 million tonnes of responsible soy and corn in Brazil. With support from the UK Government’s programme Partnerships for Forests and a collaboration agreement with the UN Environment (UNEP), […]
Folha: Fundo financiará agricultor brasileiro em US$ 1 bi para evitar desmatamento
July 8, 2019O instrumento do Brasil Lab Responsible Commodities Facility anunciou um plano para financiar em US$ 1 bilhão a produção de 180 milhões de toneladas de soja e milho “responsáveis” nos próximos quatro anos. Com apoio do governo britânico e do programa das Nações Unidos para o Ambiente, o instrumento financeiro oferecerá linhas de crédito adicionais […]
Responsible Commodities Facility, 2018 Brasil Lab instrument, launches at London Climate Action Week
July 4, 2019Today, Sustainable Investment Management Ltd (SIM) launched The Responsible Commodities Facility, a 2017-2018 Lab instrument, at London Climate Action Week. The instrument will supply international markets with a different class of soy that is not linked to any deforestation (including legal) in the Brazilian Cerrado. It aims to channel low cost loans to 600 farms, […]
The Lab’s 2018 class of nine innovative vehicles for sustainable investment makes progress towards launch
May 30, 2018Nine new early-stage investment vehicles that aim to drive millions to clean energy, low-carbon transit, and sustainable land use in developing countries, continue to make progress towards launch. The investment vehicles comprise the Lab’s 2018 class, selected at the start of 2018 from a pool of over 100 crowd-sourced, competitive ideas to mobilize needed investment […]
The Lab picks top finance instruments for action on climate change in developing countries, particularly Brazil, India, and in Sub-Saharan Africa
February 14, 2018LONDON — The Lab – a public-private initiative composed of experts in sustainable investment from governments, development finance institutions, and the private sector – has picked a new class of investment vehicles to drive much-needed finance to low-carbon, climate-resilient global development, out of over 100 ideas submitted into a competitive pool. The nine new instruments […]
Global coalition of governments, investors, and foundations launch four new financial instruments to catalyze billions for developing country climate action
June 27, 2016London, June 27, 2016—Today the Global Innovation Lab for Climate Finance (The Lab) announced endorsement for four new investment vehicles that are ready to pilot in developing countries. This announcement is in partnership with The Lab members, including the Danish, Dutch, German, United Kingdom and United States governments, Bank of America Merrill Lynch, Willis Group, development […]