Green Bonds, Sustainability and New Amazon Forest Financial Products

Justine Leigh-Bell:

Good afternoon. It’s a pleasure to be with all of you today. Of course, I should probably also start with welcome to 2020. What an extraordinary time that we are living in and one that we could never have predicted as the start of our year that we would be faced with a global pandemic. Of course, the warnings have been there. We have been told that this is a highly likely scenario to play out in our lifetime. But of course, we heard the warnings and got on with our life. But we are now faced with a global pandemic crisis which has put us on the back foot and made us quickly realize that we as humanity are not prepared for such crises.

Of course, if we’re not prepared for a global pandemic, then how can we possibly be prepared for future crises? One that has been looming in the backdrop to this pandemic, climate change. Climate change and the warnings around it have been with us for decades. But we continue to look past it and get on with our daily lives, get on with our business as usual and work as we do. But this is one that we will have to pay attention to, one that will make future pandemics more likely, extreme weather events more common, and in fact, what we are experiencing now and into the future will be the norm.

And we as humanity, in order for us to survive what is going to be the century of volatility, we need to learn quickly how to adapt to what is already the extreme events that we are experiencing, and how we move into the future more sustainably. Now, backdrop to all of that is something very exciting. That despite the challenges that we are faced with and are currently experiencing now, and of course the feeling of hopelessness that we all may be having right now, we should also look at the positivity behind all of this, the opportunity that we have before us.

Sustainable finance has been an emerging theme in the backdrop to these challenges. In the last decade, we’ve seen a huge rise in the demand from the investment community on providing investments that are going to work towards the solutions we need to address climate change and other environmental and social challenges. The poster child of the sustainable finance agenda has been the green bond. Green bonds being a debt instrument where all of the financing is used for climate change and environmental solutions. So, things like renewable energy, if we’re talking about our energy systems, water infrastructure that takes into account resilience to ensure better quality and quantity of our resources in light of drought, low carbon transport, and our land use systems are also areas of focus.

In fact, every major sector of our global economy is the focus and being able to transition those sectors to ones that contribute to a greener, more sustainable economy is what is currently developing. In the last 10 years, we have seen the rise of green bonds from as little as 3 billion US dollars to now a total of 800 billion outstanding, ever closer to the $1 trillion mark of a global green bonds market. This is a huge opportunity before us. Why? Because we have access to capital that we’ve never had before.

Huge amounts of institutional capital, hundreds of trillions. Potentially cheaper sources of capital for us to finance this urgent transition that we must make. A transition that will bring resilience and a low-carbon future for humanity and most importantly, better integration of our natural resource environment, more responsibility and care and sustainable management of our natural resources and the environment as we go. This is the opportunity. If we look at Brazil, Brazil is a huge economy and it is one that is most well known for its agribusinesses. Brazil has huge potential in leading the world on sustainable agriculture production at scale.

In the last decades, Brazil has been pushing the frontier on technological innovation in its agribusinesses. It has been trying to work towards better regulation in the agribusiness environment to ensure minimal impact on the environment, most notably the Amazon. Of course, there is a tremendous amount of work that still needs to be done. But if we look at what Brazil has before us, it has the ability to produce more with less, a model that no other country has been able to work towards perfecting. It is an opportunity that is allowing us to lessen the pressure on our need to continue to expand into the Amazon environment.

Degraded pasture lands, being able to integrate agroforestry systems, and being able to take those opportunities and connect those to the international investment community is where we need to focus our attentions. Food security is going to be critical in the decades ahead and is susceptible and vulnerable to climate risks. And it is also the rising demand for food as the population moves towards 9 billion in 2050. We must think creatively. We must be smart in the way in which we produce our food. With Brazil being the largest producer agriculture for the world, in order for it to meet that new economic opportunity for rising food demand, it must be able to produce sustainably and also at scale.

So, how can we package the technological innovation on moving towards sustainable agri practices? If we look at Brazil’s potential in a publication earlier this year, Brazil’s investment roadmap to sustainable agriculture, it was identified that over 160 billion US dollars exists of investment opportunities today to help Brazil transition in this dimension. Of course, there is also the regulatory environment and what many do not realize the extent of Brazil’s regulation in the agribusiness, in the land use space, more explicitly. This, of course, also needs to be where we can match the investments in compliance to those regulations.

We need to utilize sustainable finance as an incentive to transition the agribusiness towards sustainable practices. With the rising demand coming from the investment community internationally for having greener investments, this presents Brazil’s agribusiness with an opportunity. By packaging sustainable agri production activities into green bonds or other types of labeled debt products that match the appetite of investors for green. This presents a new source of capital, potentially cheaper capital, for Brazil’s agribusiness to transition and scale up in sustainable agriculture. Of course, in the backdrop of all of this is the Amazon. And with all of the attention that we have seen, particularly in the last 2 years given the forest fires that Brazil’s Amazon has been experiencing, better management of those impacts is in its urgency.

The Amazon is one of the last remaining lungs of the earth intact, and we must be responsible and take care to ensure the longevity of its natural resource services, not only to Brazil’s economy, but also to the world. By [verb unclear] sustainable agricultural production at scale in Brazil, that allows for harmonization within the Amazon and less pressure on deforestation, utilizing existing land mass with producing more with less. As the journey continues, we must, with urgency, look to implement sustainable agriculture practices, and Brazil is the place to start. Of course, Brazil is not the only country in the world that is faced with the need to preserve its natural resource environment.

If we look across Southeast Asia, Indonesia, Malaysia, for example, all of those areas are also critically under threat. And so, as the world embraces this new paradigm, this new century of volatility, we must be able to move the capital and the investments in the right direction to help us be able to adapt and be able to mitigate these risks. Going back to the opportunity for Brazil, this is a call for action, an action from the investment community, the agri producers, the governments, and also civil society to recognize that there is an opportunity to be had and that what we need to do is to be able to start putting our minds and putting those investments into the market together so that we can realize the potential.