A low-carbon future: financial pathways for Brazilian soy and cattle

As the physical impacts of climate change accelerate and intertwine with climate-driven transitions in international regulations, trade, technological innovations, and emerging market dynamics, it is crucial for global value chain stakeholders in key agricultural sectors to collaborate.

The agricultural sector faces significant financial risks and opportunities, particularly in Brazil's soy and cattle industries. To explore this further, Innovation Forum hosted a virtual workshop in partnership with Orbitas, a Climate Advisers initiative, focused on Brazil and the effects on the country’s key agricultural sectors, cattle and soy, and to wider global value chains. The workshop convened 15 key voices and stakeholders from the financial and agricultural sector of Brazil’s agribusiness industry. Below is a summary of the discussion.

Key takeaways

Collaboration across the value chain was identified as crucial for robust and sustainable solutions across various sustainability pillars, achieved through sharing best practices. The implementation of sustainable solutions can reinforce resilience.
There is a gap between large, efficient producers adopting sustainable practices and smallholder farmers with limited access or resources.
Financing is available but lacks clarity on long-term profitability for sustainable practices. There is thus a need for technical assistance, strong incentives, and embracing a tailor made approach in agriculture. Financial institutions are actively exploring innovative approaches to expand sustainable finance.
A desire for change was emphasized alongside the necessity of incentives and engagement to drive meaningful progress.

Farmer-centric perspectives on the integration of sustainable practices

Integration of agriculture and cattle production: the primary challenge involves the complexity of planning for both agriculture and cattle production, as they are closely integrated. Investment in new technology and machinery is crucial but adds to the complexity.
Technical support, financing and cultural barriers: limited access to technical support stems from financial barriers. Obtaining financing for sustainable practices is difficult due to bureaucracy and a lack of structured support. Farmers may perceive sustainability as an obligation and a restriction, rather than an opportunity for production and new market opportunities, due to how it is communicated to them.
Role of organisations cross-sector collaboration: NGOs and private companies can potentially partner with financial institutions and technical advisors to support farmers. Carbon markets are seen as a promising tool for incentivising conversation and providing financial support. Farmer cooperatives and community networks can play a significant role in encouraging the adoption of sustainable practices.
Adoption and dissemination of integrated systems: the adoption of integrated livestock and crop systems is increasing due to their benefits for soil health and financial returns. Education and exposure are key to encouraging further adoption. Farmers become more receptive when the benefits of new practices are demonstrated within their environment.
Complexity of carbon markets: the complexity and long-term nature of carbon credits present challenges for farmers. There is a need for clearer guidelines and support to make carbon markets more accessible.

Financing pathways for climate-smart agriculture in Brazil

Mobilising financing for climate-smart agriculture: the discussion focused on how to effectively mobilise financing for climate-smart solutions in the soy and cattle sectors in Brazil. Participants debated various approaches to encourage collaboration and financial mechanisms.
Challenges and solutions in land ownership and leasing: participants highlighted the complexities and issues surrounding land ownership and leasing in Brazil. They discussed the short-term contracts for farmers, the difficulty in committing to long-term projects, and the lack of transparency and documentation in land ownership.
Defining and implementing climate-smart solutions: the need to clearly define climate-smart agriculture solutions was emphasised, due to a lack of clarity surrounding these solutions. These solutions include reducing emissions intensity, increasing land use efficiency, and investing in soil quality. There are specific challenges and approaches required for different sectors, such as soy and cattle. The workshop participants advocated for sector-specific solutions, instead of a one-size-fits-all approach.
Financial mechanisms and incentives for sustainable practices: the workshop explored various financial mechanisms to incentivise climate-resilient practices. This included securitisation, de-risking through pooling, and innovative funding models. Participants discussed the importance of creating the right incentives and the role of governments versus private sector solutions in sustainable land use. Collaboration among financial institutions, governments, and NGOs is crucial for a successful implementation of financial initiatives.
Integrating small-holder and medium-holder farmers in sustainable practices: The importance of including small and medium farmers in sustainable agriculture practices was discussed. The participants highlighted challenges such as access to capital, technical knowledge, and market access. Solutions such as securitisation and the use of technology to support small-holder farmers were proposed, along with the potential impacts of land price increases on these farmers.

Aligning supply chains in the agricultural sector

Collaboration and developing a unified approach: there is a need for a cohesive, sector-wide strategy or unified roadmap to prioritise efforts. However, achieving consensus remains challenging. The current efforts are fragmented, typically only involving two or three actors. A more unified approach would be beneficial, focused on nurturing mutual trust among actors. Encouraging precompetitive collaboration between actors is crucial for navigating regulations and laws in export markets. For example, beef companies should assist supply chain actors with Scope 3 emissions to ensure collective target achievement.
Government participation: government should create a conducive policy environment, address land tenure regulations and support producers in regulatory compliance. COP30 in Brazil presents an opportunity to mobilise resources for policy advancements; immediate action is crucial.
Dissemination of technology: There is a gap in efficiency among farmers. Knowledge and technology are available but there is a need for wider dissemination. Providing technical assistance to farmers is a potential solution to improve efficiency.
Traceability and transparency: There is an urgency of addressing traceability to address supply chain issues, including forced labour. Challenges exist in aligning different methodologies and a level playing field needs to be created through standardised frameworks and guidelines.
Inclusion of small-scale producers: the challenges that smaller producers face, such as legal compliance and financial access, cannot be ignored. Including smallholders in discussions surrounding financing initiatives and compliance is crucial to prevent them from being excluded from the supply chain.

Next steps for Brazil’s agriculture sector

Addressing misconceptions about agricultural production and enhancing data and communication on the carbon capture potential of sustainable agriculture are priorities.
Collaboration across the value chain is key for developing robust and sustainable solutions across various sustainability pillars. Sharing best practices across sectors can foster sustainable transformation. Implementation of sustainable solutions should be prioritised as it can bolster resilience within the industry and among stakeholders. This includes exploring innovative approaches to expand sustainable finance.
Farmers face challenges such as the complexity of planning for integrated agriculture and cattle production, limited access to technical support and financing, and cultural barriers. Supporting small and medium farmers is essential for inclusive sustainability efforts.
Government policy and support are crucial, advocating for a conducive policy environment, addressing land tenure regulations, and supporting producers in regulatory compliance. Developing a unified roadmap and enhancing traceability are also important steps in fostering sustainability. Government should leverage forums such as COP30 to build enabling conditions for climate transition opportunities.

The workshop was sponsored by Orbitas, a Climate Advisers Initiative.

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