A zero-deforestation soy finance initiative managed by Sustainable Investment Management (SIM) and backed by a 'green bond' invested in by three UK supermarket chains has scooped the Green bond initiative of the year award.
The first-of-its-kind $11 million Responsible Commodities Facility (RCF) Cerrado Programme was launched in July 2022 and provided finance to 32 farms in the Cerrado region of Brazil. Farms financed through the RCF will voluntarily commit to not clearing tracts of Cerrado land for cultivation that they are legally allowed to convert for soy production.
The low-interest loans to farmers were funded by US dollar-denominated green bonds – in the form of certificates of receivables from the agribusiness (CRAs), which are asset-backed securities considered fixed income instruments – and invested in by UK grocery firms Tesco, Sainsbury's and Waitrose.
SIM chief executive Pedro Moura Costa told Environmental Finance the programme is the "only financial instrument that allows investors to have a direct impact on stopping deforestation in the Cerrado".
This pilot is now coming to the end of its first 2022 to 2023 crop cycle, with farmers harvesting and repaying the loans. Moura Costa said this initial phase is not expecting any financial default and "most importantly, no deforestation or infringements of environmental requirements occurred".
Moura Costa said he expected the programme to be expanded to $250 million for the 2024 planting season and to expand the 'green bond' structure adopted for other commodities.
"The structure is highly scalable, and we aim to scale it to $1 billion under management by 2025," he said. "It can also be adopted to finance other crops and in other geographies. SIM is already working on the issuance of Green CRAs to finance sustainable cocoa and coffee in Brazil."