The global food system is the primary driver of biodiversity loss and a major source of greenhouse gas emissions. According to the report, the expansion of agriculture into natural landscapes is fueling the climate crisis and threatens 86% of species at risk of extinction.
“The increased demand for agricultural land use is driving the growth of deforestation across the world,” said Ivo Mulder, Head of UNEP’s Climate Finance Unit. In Brazil, where soy production has doubled over the last ten years, agricultural production in the highly biodiverse Cerrado region is placing significant pressure on natural ecosystems.
Systems change requires innovative approaches to finance
Transforming our food production system towards deforestation and conversion free (DCF) land use practices requires a significant shift in how food is produced and procured. The financial incentives embedded within these processes need to shift to reflect the value of our ecosystems.
The corporate and finance sectors have begun to ‘walk-the-talk’ to balance the competing objectives of strengthening supply chain resilience and supporting increased landscape conservation by investing directly in the Responsible Commodities Facility (RCF) Cerrado Programme 1, a new system of financial incentives for farmers in Brazil who commit to DCF soy cultivation.
In 2022, British supermarkets Tesco, Sainsbury’s and Waitrose invested US $11 million in RCF’s pilot programme, demonstrating how private capital can be unlocked to accelerate sustainable commodity production to help protect vast tracts of native Cerrado vegetation in Brazil, enhance biodiversity, improve water quality and increase carbon sequestration.
The RCF provides low-interest credit line financing to incentivize farmers to sustainably expand the production of soy in the Cerrado by increasing agricultural yields on existing pastureland, without contributing to additional greenhouse gas emissions and biodiversity loss associated with further deforestation.
The facility enables private finance to drive positive environmental and economic impacts across the agricultural supply chain in line with the UN Decade on Ecosystem Restoration and contribute to closing the nature finance gap, which is necessary to meet global climate change and biodiversity targets identified in UNEP’s State of Finance for Nature Report.
“Direct investment by major UK supermarkets into sustainable agricultural practices in the Cerrado signals an encouraging consumer-facing alignment with zero-deforestation free supply chains, laying the foundation for broad market transformation to sustainable food production and increased consumer awareness of the benefits DCF food consumption,” said Mulder.
After the first crop season the Cerrado Programme 1 has demonstrated strong proof of concept of how the facility can effectively unlock private finance to transform soy production practices in Brazil. The year one impacts across the 32 participating farms have been:
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8,541 ha of native vegetation conserved in the Cerrado
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2,145 ha of native vegetation conserved in excess of legal reserve requirements
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0 deforestation or conversion of any native vegetation
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2.90 MtCo2 carbon stocks in native vegetation protected by the RCF
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0 t Co2 emitted from land use change
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42,400 tonnes of vDCF soy produced in the main crop season
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27,000 tonnes of vDCF maize and 3,200 tonnes of vDCF cotton produced in the winter crop preceding the soy planting season
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0 financial default on repayment of loans
Read more in the RCF Annual Report for the 2022- 2023 crop season here.
The success of RCF has been recognized by Environmental Finance as ‘Initiative of the year - Green Bond’ and IFLR who named RCF’s Green CRAs fund as the ‘Structured Finance Deal of the Year.’
Scaling up investment to scale up impact
Solutions such as the RCF provide a mechanism for the over 160 global agri-food companies who have signed the Cerrado Manifesto Statement of Support to materialize their commitment to halt deforestation and move towards DCF soy. The RCF also provides a pathway for Tesco, who are targeting a net-zero supply chain by 2050 and currently setting a scope 3 target, Waitrose, who are currently setting a scope 3 target and Sainsbury’s, who are targeting 30% scope 3 reduction by 2030, to meet their science-based scope 3 carbon emissions targets and uphold the integrity of their environmental commitments across the value-chain.
With Brazil’s total soybean export market worth approximately US $38.6 billion, RCF’s initial fund to support 32 farms during the pilot phase is a modest start, however the Facility's debt finance incentive model has been designed to be rapidly scalable. By creating a financial framework that does not rely on long-term public and philanthropic resources, the RCF is expected to provide a financially sustainable solution to protect significant areas of native vegetation and biodiversity in the Cerrado region of Brazil into the future. Following the initial success of the pilot phase, the RCF is currently working on expanding the fund to US $100 million in time to scale up environmental and social impacts in the next crop planting season in 2023.
