A financing programme for sustainable commodities backed by green bonds, aimed at supporting Brazilian farmers and avoiding the clearing of the country’s grasslands, has been launched in London on July 4.
According to The Lab, the Responsible Commodities Facility provides financial incentives to produce soy in existing cleared and degraded lands in order to discourage further expansion of agricultural land in the Brazilian Cerrado. The Facility plans to provide low-interest credit lines to Brazilian soya and corn farmers who commit to avoid clearing forests and native grassland for agriculture and use degraded pasture lands.
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 already degraded pasture lands by providing attractive crop financing and land restoration loans for soy producers, combining lower interest rates and longer repayment terms than most existing alternatives. This initiative will channel low cost loans to 600 farms, for a cumulative lending amount of more than US$ 3 billion over 10 years.
The Facility is thus seeking to protect or restore 1.5m hectares of natural habitat in the Cerrado, leading to an estimated emissions reduction of 250m tonnes of carbon dioxide, contributing to the implementation of the Brazilian Nationally Determined Contribution by which the country has pledged to reduce emissions by 43 per cent by 2030.