A one-stop-shop will offer Brazilian firms easier options to reduce their carbon footprint
BRASILIA, Dec. 22, 2022¡ª ľ¹ÏÓ°Ôº Board of Directors approved today a US$500 million project to expand sustainability-linked finance and strengthen the private sector¡¯s capacity to access carbon credit markets. In collaboration with Banco do Brasil, one of the largest financial institutions in Latin America, the project will adopt, for the first time, a sustainability-linked lending approach to help Brazil meet its climate goals.
The project aims to deliver robust mitigation benefits. Up to 90 million tCO2e in emission reductions are expected by 2030, the equivalent to about 4.5% of what Brazil needs to stay on track with its net-zero commitments. The project is also expected to mobilize up to US$1.4 billion in private capital through the scale-up of financing by Banco do Brasil and private investors. As a leader in the Brazilian agribusiness sector, with around 60% of all rural credit in financial markets, Banco do Brasil is committed to supporting customers, partners and society in the transition to a low-carbon economy, with methodologies, lines of credit and sustainable solutions.
¡°Brazil has significant potential to become a global leader in the transition to a low-carbon economy. To do so, urgent action is required to complement public interventions with private solutions and financing,¡± said Johannes Zutt, World Bank Country Director for Brazil. ¡°Banco do Brasil, which has a long history of providing financing for Brazilian companies that wish to become more sustainable and innovative, is a great partner for the initiative we are laying out today.¡±
The Brazil Climate Finance Project adopts an innovative, outcome-based financing approach that incentivizes firms to adopt and implement credible GHG emission reduction plans to reduce their company-wide carbon footprint. The initiative also links these firms to high quality carbon markets.
With the new initiative, Banco do Brasil will be able to offer its clients packages that integrate financing with support to access carbon markets through a ¡°one-stop-shop¡±. This will provide Brazilian firms ¡ª small and medium sized companies in particular ¡ª with an accessible end-to-end service starting from measuring their carbon footprint to generating returns from high-integrity carbon credits.
The project will provide a US$400 million credit line, and Banco do Brasil will use these resources to originate sustainability linked loans to companies committed to reducing their carbon footprint. The initiative also includes a US$98 million pilot Climate Debt Fund, which is expected to leverage private capital to expand sustainability-linked finance in the broader economy.
These financing instruments are complemented by US$2 million in resources for increasing the capacity of Banco do Brasil to support firms in adopting credible mitigation plans and in accessing high quality carbon markets, through technical assistance.
¡°Both public and private sectors have a vital role in supporting the transition to a greener economy. We welcome the partnership with the World Bank not only because it is the world's largest funder of climate action in developing countries, but also because of its expertise in creating and strengthening local capital markets and greening domestic financial sectors. The project has synergy with our strategy of being a reference in sustainability, promoting business in the ESG sphere. We hope that the initiative will have a very positive effect, integrating knowledge and financing in favor of a low-carbon economy among our customers throughout the country,¡± stated Fausto Ribeiro, President of Banco do Brasil.
Globally and in Brazil, financial institutions are channeling more resources to green and climate-related activities through a range of financial products. By mainstreaming mitigation-based financing within a large financial institution, the project pilots an innovative approach with strong potential for replicability at scale in Brazil and around the world.
The project directly contributes to advance the current World Bank partnership with Brazil, which focuses on equitable and sustainable development, including supporting Brazil¡¯s efforts to reduce GHG emissions and adapt to the impacts of climate change. Developing financial instruments to reduce carbon emissions across economic sectors will be critical to this goal.
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