Brazil’s Agriculture Industry will need to leverage private capital. There's an urgent need to change the way the agri sector is financed in Brazil.
What’s it all about?
Institutional investors and executive members of the Brazil Green Finance Initiative (BGFI) representing over US$ 3.5 trillion in assets under management gathered last week at Brasilprev headquarters in São Paulo to discuss the need to diversify their portfolios beyond government debt and prioritise green investments across key sectors.
In the meeting, delegates from UBS, Natixis, Bradesco Seguros, SulAmerica Investimentos, Vinci Partners, among others, were presented with green investment opportunities in sugar cane, large-scale organic agriculture and waste to energy projects.
This led to a set of proposals put forward by members on what will be required for insitutional investment to flow into these sector. These include non-financial risk assessment capacity, as well as tailoring structures in terms of duration, credit profile, governance and use of proceeds. These suggestions were put forward for discussion at the the Agriculture Subcommittee, which sits under the BGFI, held the next day at Pinheiro Neto Advogados headquarters on how to increase private capital in the sustainable agriculture sector, given the draw back of public funding and bank credit lines in the sector.
Members of the Subcommittee highlighted that communicating both producers and the financial market the sustainability of the agriculture sector in Brazil is crucial to promote the green finance boom.
Who’s saying what?
Marcelo Wagner, Chief Investment Officer, Brasil Prev
"Brazil plays a crucial role in the green finance arena and we see great opportunities for institutional investors and pension funds. Today we have our own channel to make such investments and to help develop sustainable financing in the country."
Fabio Coelho, Director, Previc
"We know that in order to foster the green finance market in Brazil we must work hard on transparency and governance. They are fundamental pillars, especially for Pension Funds. We are working hard on creating more awareness of the numbers in order to inspire future issuances."
Moacir Teixeira, Ecoagro
"After working together to consolidate green finance in recent years, we will be making the first issuance in April. Our goal for 2019 is ambitious: BRL 1 billion in operations in the sugar and alcohol sector alone, a great year for the agricultural sector."
Justine Leigh-Bell, Deputy CEO Climate Bonds Initiative
"We are now hovering about USD 5bi globally on Brazilian green bonds and this number will continue to grow in 2019. Brazil continues to show an immense potential, and we're especially looking forward to witnessing the development of the local agri sector.
"Brazil already has several mechanisms and it is not necessary to reinvent the wheel, but to work to implement changes in these mechanisms and public policies, and also to disseminate this to the producer."
The Last Word
This will be a year to consolidate the green finance agenda in Brazil. With the rising capital market and increased investor confidence we expect a new wave of investments in various sectors of the economy.
We all know that the capital market focused on green assets and projects presents itself as a complementary source of investment and can accelerate the implementation of sustainable agriculture at scale.
Sectors such as coffee and sugar cane offer high demand and we'll keep working on ways to bring to Brazil this source of funding.