Spotlight: New financial tool to support sustainable soy production in Brazil

Source: Xinhua| 2019-07-05 03:56:14|Editor: yan
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LONDON, July 4 (Xinhua) -- A financial scheme was launched in London on Thursday to encourage sustainable soy production in Brazil, in a fresh effort to save the cerrado, the world's most biodiverse savanna, and significantly cut greenhouse gas emissions linked to deforestation for agriculture.

The Responsible Commodities Facility (RCF), unveiled at the London Stock Exchange, plans to provide low-interest credit lines to Brazilian soy and corn farmers who commit to using abandoned pasture lands rather than clearing forests and native grassland for agriculture.

The RCF aims to raise 1 billion U.S. dollars over the next four years to fund the production of more than 180 million tonnes of responsible soy and corn and save cerrado, where a majority of the deforestation for agriculture purposes has come from.

Historically, cattle ranching is one of the main causes of conversion of savanna to farmland. New technologies have allowed soy, corn, cotton and sugarcane production to expand into the cerrado since 2000, which continues at a fast pace as global demand for soy soars.

If vegetation change were to continue at 2004 rates, the natural ecosystem of the cerrado could virtually disappear within the next three decades, the World Wildlife Fund has predicted.

One option to ease this pressure is to redirect agricultural production towards lands already cleared from native vegetation and degraded pasture lands, yet existing funding mechanisms are not enough to redirect soy production into these areas.

"In order to address the negative effects of climate change and to stop the dramatic loss of biodiversity that we have witnessed in the last 30 years, we need to urgently and rapidly move to food production and financing models that do not depend on conversion of forests and natural habitat," said Bruno Pozzi, Director of the Europe Office, United Nations Environment Program (UNEP).

Pozzi described the RCF as an "innovative and much-needed way" to unlock private capital at scale to address some of the most defining environmental challenges of the 21st century.

The RCF will be funded by the issuance of green bonds listed in the London Stock Exchange. The facility is an initiative of Sustainable Investment Management (SIM), a boutique environmental finance firm, with the support from the UK government and the UNEP.

"This combination of innovative financial tools, increased transparency and traceability, and a focused effort on compliance with strict guidelines, has the potential to accelerate the growth of responsible commodities," said Pedro Moura Costa, CEO of SIM.

Almost 18 million hectares of degraded pasture land could be used for soy production in the cerrado region alone, which is three times more land than the sector will need over the next decade, according to SIM.

Brazil has committed it will cut greenhouse gas emissions by 37 percent by 2025, and possibly by 43 percent by 2030 compared to 2005 levels by reducing deforestation and boosting the share of renewable sources in its energy mix, with almost 90 percent of this reduction expected to come from reduced deforestation.

Emissions linked to deforestation for agriculture accounts for 51 percent of Brazil's greenhouse gas emissions.