For farmers like Teia Fava, finance can play a significant role in the ability to expand commodity production in a forest-positive way.
“Every rural producer wants to broaden their production and increase the yield per hectare, and of course, there are more efficient and nature-positive models to do so.” Said Fava, who works as a businesswoman and producer on a farm in the Mato Grosso province of Brazil. However, she identifies challenges faced by producers seeking to shift production models to be nature-positive, “but it requires funding and infrastructure change.”
Fava’s firsthand experience illustrates the paradox of current commodity production models; humans depend on the wide range of ecological services that forests provide, yet they are destroying forests to grow food. Agriculture is the leading driver of global deforestation, and an increasing demand for food and agricultural products, especially animal proteins, is expected to drive deforestation in the coming years, contributing to the high risk of reaching a ”tipping point” of forest dieback in certain biomes.
The Amazon and Cerrado regions of Brazil and the Chaco regions of Paraguay and Argentina are at the center of this challenge. They are major food production centers; Brazil produces and exports more soy than any nation in the world - accounting for more than 30% of global production and is the world’s largest exporter of beef. Demand for soybeans is currently tied to global meat consumption- and both are expected to grow. However, these biomes are also identified as three of our planet’s most important stores of carbon, freshwater and biodiversity - and cattle ranching and soy production are the primary drivers of habitat loss. The Brazilian Amazon is almost 19% cleared; the Cerrado is now half cleared, and the Chaco has lost 25% of its historic forest cover to date. To meet global climate and nature targets, including the Paris Agreement goals , the 2021 UN Framework Convention on Climate Change and collectively limiting the global average temperature to 1.5°C, there is a significant need to accelerate efforts towards a sectoral transition of sustainable commodity production.
Through the adoption of sustainable business models, additional deforestation and conversion of native vegetation can be avoided entirely, productivity on farms can increase and lenders and investors can achieve, in the long run, higher returns on investment. For example, The Nature Conservancy estimates soy farmers in the Cerrado could have productivity increases up to 30%. Fava stresses, “I may not speak on behalf of 100% of producers in Brazil, but I’m confident that I speak for most of them when I say that we would rather intensify than further deforest our lands.”
As Teja Fava envisions the future of her work in the farming sector, she identifies how finance can be an impactful leverage point in the industry to move towards sustainability, “If we can get financial help, we can intensify production on existing pastureland or degraded land using rotation methods – and then there is no need to deforest.”
IFACC Initiative scaling-up innovative finance to drive forest-positive commodity production
The Innovative Finance for the Amazon, Cerrado and Chaco (IFACC) is an initiative convened by the United Nations Environment Programme, The Nature Conservancy and the Tropical Forest Alliance working with producers, companies, banks and investors to overcome barriers and catalyze finance for deforestation and conversion-free beef and soy production in South America. IFACC has been endorsed as a Catalytic Initiative by the CEO Principals of the Glasgow Financial Alliance for Net Zero (GFANZ), the global coalition of leading financial institutions committed to accelerating the decarbonisation of the economy, chaired by Mark Carney the UN Special Envoy on Climate Action and Finance and anchored in the UN’s Race to Zero campaign.
IFACC calls on financial institutions to scale-up investments in forest-positive solutions, such as farm loan products, farmland investment funds, corporate debt instruments, capital markets offerings, and other innovative mechanisms. These mechanisms can establish new norms for lending and investing, aimed to provide greater market transparency, reduce risk, and generate proof of concept for loans and investments that follow high environmental and social impact standards.
As of October 2022, thirteen financial institutions and agribusinesses have signed the IFACC declaration, with financial commitments worth 4.2 billion, with more than $200 million in disbursements by 2022. Commitments from signatories - &Green Fund, Gaia Impacto, DuAgro, AGRI3 Fund, JGP Asset Management, Syngenta, Sustainable Investment Management, VERT Capital, Mauá Capital, 3J Capital, Opea, Agrogalaxy and Agdev – are part of the companies’ plans to shift commodity production in South America to a more sustainable model.
In addition, Global Forest Watch WWF-Brazil, The PCI Institute, and Climate Policy Initiative’s Global Innovation Lab for Climate Finance (CPI The Lab) have recently joined IFACC as Collaborating Partners. These institutions have established their formal support and intent to leverage their unique capabilities and opportunities to pursue the collective IFACC goals through signing the IFACC Collaborating Partner Agreement, whereby they share technical expertise and experience with IFACC signatories and partners, engage and inform companies and financial institutions of IFACC and encourage participation where appropriate.
Ivo Mulder, Head of the United Nations Environment Programme’s (UNEP) Climate Finance Unit states, “We would hope that by getting commitments from traders and financial institutions we can have minimum positive impact standards and help enlarge the number of traders, banks and investors that are committing to this”. In this way, finance can be a catalyst to standardize deforestation- and conversion-free agricultural production.
In a world facing a triple planetary crisis - climate change, nature and biodiversity loss, and pollution - it is essential to work together to overcome barriers to transition commodity production to align with climate and environmental targets. This call for action is reinforced by producers working on the ground, Teja Fava declares “We (producers) cannot do this alone, and we cannot do this without the support from financial institutions”.
Finance plays a critical piece of the puzzle in achieving sustainable commodity production, as demonstrated through the work of the IFACC Initiative. Yet, the barriers to scale DCF agriculture still exist. Ivo Mudler urges additional institutional leadership as he emphasizes, “the time to act is now”. In order to meet the demands of a growing global population, immediate action is not a choice, but rather a necessity.
To learn more and get involved with sustainable commodity production through IFACC, visit IFACC’s website at https://www.tropicalforestalliance.org/en/collective-action-agenda/finance/ifacc/.
Written by Fiona Cromarty
