Brazil: Cerrado, where deforestation advances, is the focus of credit lines

By Camila Souza Ramos

The Financial Innovation Initiative for Amazon, Cerrado, and Chaco (IFACC) intends to give more priority to Cerrado within the current scope of green financing incentives.

The biome is the most devastated of the program’s three targets and has the least protection since the area destined to legal reserve in the Cerrado is 20%, while it reaches 80% in the Amazon.

Besides, Amazon is already covered by sectorial commitments, such as the Soybean Moratorium for grain trading companies and the Conduct Adjustment Terms (TAC) for beef packing plants.

In 2022, deforestation in the Cerrado reached 815 thousand hectares, according to the Cerrado Deforestation Alert System (SAD Cerrado) released by the Amazon Environmental Research Institute (Ipam).

In the Amazon, satellite monitoring data from the Institute of Man and Environment of the Amazon (Imazon) indicate that deforestation in the biome has exceeded 1 million hectares.

Half of the Cerrado no longer has native vegetation, while in the Amazon, deforestation has already eliminated 17% of the forest.

Within the financing lines launched so far under the IFACC umbrella, the Cerrado is already the main star.

Of the six disbursed and two others launched but not yet disbursed in 2022, only one does not focus on the Cerrado.

A line announced last year by Louis Dreyfus Company (LDC) and the IFC – the World Bank’s corporate arm – pledged US$200 million to soybean production free of any kind of deforestation in the Cerrado, even that allowed by law.

The amount has not entered the 2022 IFACC account because the activities are still under development.

Formally, there are 15 institutions currently engaged with IFACC, but some organizations from outside are already participating in the instruments launched under the initiative’s umbrella.

In terms of banks, only Santander is formally engaged, in addition to five management companies and three securitization companies.

The initiative has been in contact with other institutions, such as the BNDES and Banco do Brasil, which last year contracted a US$500 million loan with the World Bank to expand its offer of financing linked to sustainability goals.

With information from Valor

News Brazil, English news Brazi, Brazilian biomes, Cerrado