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- Brazil launches a new investment vehicle to boost sustainable projects, aiming to generate $10-20 billion in financing.
- The initiative excludes mature sectors like wind and solar energy, focusing on emerging sectors.
- Foreign investors expected to embrace the new mechanism for financing ESG projects.
Brazil’s Treasury and Securities and Exchange Commission (CVM) are set to launch an innovative investment fund consortium aimed at early-stage sustainable ventures. This new vehicle will function similarly to private equity funds (FIPs) and receivables investment funds (FIDCs), providing crucial financing for projects aligned with ecological transformation.
Boosting the Economy:
Rogerio Ceron, a senior Treasury official, emphasized that improved inflation data in the U.S. suggests a favorable global economic outlook, which positively impacts Brazil. “It is a matter of time for things to become fully normalized,” Ceron said. Recent government signals towards fiscal responsibility have already led to a partial recovery in local assets.
Green Project Focus:
The new investment vehicle is part of a broader initiative to attract private investments and strengthen Brazil’s environmental and climate agenda. Initially announced in February, the green project structuring credit line will support financial institutions in creating new structured investment funds. The notice for this credit line auction is expected in September. Resources will assist in funding projects with long cycles, offering a 12-year term with up to seven years grace for principal and interest repayment.
Excluding Mature Sectors:
The EcoInvest program will exclude wind, solar energy projects, and transmission lines, focusing instead on emerging sectors. Ceron explained that mature sectors no longer require government support. With leverage reaching up to ten times, a government contribution of $1-2 billion could generate $10-20 billion in financing. “This opens the possibility for private financial institutions to access medium and long-term funding for productive investments, previously only available through public banks,” Ceron stated.
Related Article: BNDES Secures BRL 9.1 Billion from Asian Banks for Sustainable Investments in Brazil
ESG Investment Drive:
The Brazilian government also plans to attract $20 billion for private ESG projects by leveraging $1-2 billion from its climate fund to stimulate bank lending. Banks selected for the program must on-lend at least six times the amount they receive from the climate fund. At least four banks will be chosen based on their commitment to maximize private funding for ESG investments. The selection process is underway and expected to be completed within three months, according to a finance ministry source. Each bank will access up to 25% of the public funds available, promoting competition and efficient use of resources.
Target Sectors:
The initiative aims to draw foreign investment into biofuels, water and sanitation, railways, and land recovery. Solar and wind farms are excluded to focus on sectors needing more support. By increasing demand for ESG finance, the program seeks to drive sustainable growth and development.