Mercado Libre’s unique approach to corporate support of forest restoration in Brazil

RIO DE JANEIRO, BRAZIL – The tech sector’s fascination with tree restoration as a climate solution apparently isn’t unique to U.S. companies.

Latin America’s largest e-commerce marketplace — Mercado Libre, a company with roughly twice the market capitalization of eBay at US$78 billion — is putting part of the proceeds from its US$400 million sustainability bond toward two forest restoration projects in the remnants of the Atlantic Forest (Mata Atlantica), which once covered 15 percent of Brazil.

Those projects are both managed under Mercado Libre’s Regenera America program (Regeneration America program), which aims to restore key ecosystems throughout the region as part of its climate action strategy, using technology from climate-tech startup Pachama to monitor and verify the progress of this work. The first two initiatives, which will receive US$8 million in the first phase, aim to restore nearly 7,500 acres and more than 1 million trees.

Why would an e-commerce company get involved on the ground with a reforestation effort of this scale? Why not just buy offsets from somewhere else? From an established forest carbon marketplace? “We like to do things that are tangible,” said Pedro Arnt, executive vice president and chief financial officer of Mercado Libre.

This company is a big deal in South America with 132.5 million active users and 649.2 million items shipped during 2020. It’s growing at a rapid clip. Revenue for the fourth quarter of last year was US$1.3 billion, up almost 97 percent from the year earlier.

With that furious growth rate has come the realization that Mercado Libre needs to embrace a long-term, multiyear strategy not just to reduce its absolute emissions — especially for its logistics and shipping network, where it plans a substantial electric vehicle rollout — but also to invest in initiatives that could have a positive impact on its home turf. The bond proceeds also will be used to create a lending platform for underbanked small and microbusinesses, given that close to 85 percent of the company’s sales are related to these relationships.

The forest projects were chosen after hours of internal debate, according to Arnt. “We liked to be able to choose and engage in the biomes that we were helping preserve, near our consumers, but also that might be impacted by our emissions,” he said. “We wanted to get into the mud and get dirty.”

Of course, there’s also the expectation, with Pachama’s involvement, that these projects will originate new carbon offsets, which are in increasingly short supply as big businesses shower the world with net-zero pledges. That, of course, will benefit Mercado as its sales — and emissions — grow. “The big problem in this market is that there aren’t enough projects,” said Diego Saez-Gil, co-founder and CEO of Pachama.

Both Atlantic Forest efforts promise a big impact, not just in terms of restoration but also in terms of environmental justice. The first, the Mantiqueira Conservation Project managed by The Nature Conservancy, is focused on a mountainous region that supplies water for cities including São Paolo, Campinas and Rio de Janeiro.

Among other things, the developers are exploring how to give landholders and Indigenous communities there economic credit for restoration activities, such as planting fruit or cocoa trees. The second, the Corridors for Life Project run by Instituto de Pesquisas Ecológicas, aims to recreate wildlife corridors important for regenerating biodiversity within coastal forests that have been encroached upon by farmland and ranches.

“Part of what seduced us was that it had this element of working with small landowners and farmers,” Arnt said.

By directly engaging with Pachama to monitor the work through its network of satellites and artificial intelligence technologies, Mercado Libre expects to have a much more real-time view into how its efforts directly affect the region’s restoration. “Hopefully it sets a new standard for companies,” Saez-Gil told me. Which body will be used to certify any credits that originated? That’s apparently a question for another day.

What makes this initiative stand out isn’t just that it represents a relatively unique approach to corporate support of forest restoration but that it’s being made by an influential company within the region, one that could have the power to inspire behavior changes by other South American businesses.

Source: GreenBiz