CPI/PUC-RIO highlights 145% growth and points to opportunities to leverage investments.
Between 2021 and 2023, climate finance for land use in Brazil reached an annual average of US$ 17.1 billion. A new study by Climate Policy Initiative/PUC-RIO (CPI/PUC-RIO) identifies a growth of 99% compared to the 2015-2020 period. Rural credit is the main instrument of finance, channeling an annual average of US$ 9.9 billion between 2021 and 2023, 58% of the total tracked.
“The increase in climate finance for land use indicates both the greater mobilization of resources for the agenda and the reclassification of financial flows as sustainable. Part of this significant growth, driven by rural credit, is related to a greater declaration of sustainable practices, with a view to obtaining better credit conditions,” says Joana Chiavari, Research Director at CPI/PUC-RIO.
Private sources account for 72% of domestic climate finance, with a significant portion of these resources being directed by public policies. The Agricultural Plan (Plano Safra) plays a crucial role in this amount, due to the obligation for financial institutions to direct resources to rural credit. RENOVABIO also stands out due to the mobilization of resources from fuel distributors for the purchase of Decarbonization Credits (CBIOs).
For Priscila Souza, Head of Policy Evaluation at CPI/PUC-RIO, these figures are the result of the country’s recent efforts to make agricultural policy instruments sustainable and of changes in the records of rural credit operations. “The amount of rural credit aligned with climate objectives has been increasing in Brazil; it went from 10% in 2019 to 18% in 2023. Even so, it is a very small amount when compared to the country’s total credit operations. You also have to consider that the information on agricultural practices for rural credit operations is self-declared,” she explains.
Only 3% of the finance tracked came from international flows. Most of these funds came from public sources, including multilateral banks (US$ 331 million per year), international governments (US$ 155 million per year) and climate funds (US$ 47 million per year). International governments have mostly financed the native forest sector. The governments of Germany and Norway together account for 77% of the flows tracked for the sector.
“Although the new government has a policy committed to the environmental and the climate agenda, international fundraising is still far below potential. Attracting substantial volumes of international resources will require a commitment to clear and ambitious climate targets. Setting finance targets for strategic sectors could be a good way forward,” says Chiavari.
The public budget, which is the main instrument channeling resources for policies in the native forest sector, picked up in the period analyzed, interrupting a downward trend since 2016. However, according to Chiavari, “public resources will not be enough to achieve climate goals, and it will be necessary to attract finance from a diversity of sources and instruments.”
Capital market instruments also play an important role in channeling private resources, but they are mainly used to finance the biofuels and bioenergy and planted forest sectors.
Loss and damages flows grew by 386% between 2021 and 2023, mobilizing US$ 1.2 billion per year (7%). This was due to compensation paid by the federal government in specific programs, such as the Agriculture Activity Guarantee Program (PROAGRO) and the Crop Guarantee Fund. On the other hand, agriculture risk management instruments mobilized US$ 2.6 billion/year, 15% of the total resources, especially the Rural Insurance Premium Subsidy Program (PSR).
“Loss and damages flows are important to support producers impacted by adverse weather events. In a scenario in which rural producers are increasingly suffering the effects of droughts, floods and fires, finance for loss and damages allows them to recover and invest in production again. The Agricultural Plan needs to improve risk management policies in agriculture to make the sector more resilient and sustainable,” recommends Souza.
The Landscape of climate finance for land use in Brazil provides a baseline for characterizing the financial flows directed towards climate mitigation and adaptation actions.
“By developing this landscape of climate finance, we were able to track the status of land use finance in Brazil, identify gaps, suggest targeting efforts and optimize available resources in a way that is compatible with climate challenges,” says Miguel Motta, an analyst at CPI/PUC-RIO.
The first edition of the report was published in 2023, covering the period from 2015 to 2020. The methodology adopted is based on CPI’s international experience in tracking global climate finance for over ten years, and has been adapted to the Brazilian context.
About Climate Policy Initiative
Climate Policy Initiative (CPI) is an organization with international expertise in finance and policy analysis. CPI has seven offices around the world. In Brazil, CPI has a partnership with the Pontifical Catholic University of Rio de Janeiro (PUC-RIO). CPI/PUC-RIO works to improve the effectiveness of public policies and sustainable finance in Brazil through evidence-based analysis and strategic partnerships with members of the government, civil society, the private sector and financial institutions.
For more information, please contact
Camila Calado Lima
camila.lima@cpiglobal.org
+55 86 99966-0560
