IMPACT Awards 2023

Impact initiative of the year - Latin America and Caribbean: SIM's Responsible Commodities Facility

A zero-deforestation soy finance initiative managed by Sustainable Investment Management (SIM) has scooped the Impact initiative of the year - Latin America and Caribbean award, just months after it won the Green bond initiative of the year award in Environmental Finance's 2023 Bond Awards.

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.

100% of the funds invested in the first year were disbursed to eligible farmers in the Brazilian Cerrado selected on multiple criteria, including the farms' location and deforestation risk, area of excess native vegetation, and credit history.

This pilot recently came to the end of its first 2022 to 2023 crop cycle, with farmers harvesting and repaying the loans. RCF reports no participating farmers deforested or converted native vegetation. All farmers successfully harvested their soy crop.

For the 2023 to 2024 soy farming season in Brazil, the fund has grown more than four-fold to $47 million and increased the number of farms in the fund to 122.

This year the fund also attracted additional investment from commercial banks Santander, Rabobank, and impact fund AGRI3, leveraging the impact of the initial investment made by the food retailers.

Pedro Moura Costa"This successful leveraging means that, for every $1 invested by our impact investors (the supermarkets) there is $4 of impact on the ground," said RCF founder and SIM director, Pedro Moura Costa.

"The farms will produce over 260,000 tonnes for deforestation and conversion-free soy in the 2023-24 season, whilst also conserving approximately 43,400ha of native vegetation (11,300ha over the legal minimum) and protecting over 20 million tonnes CO2 carbon stocks from being released into the atmosphere from deforestation."

Costa expects that by 2030, $1 billion will be under management.

RCF's impact statements are reviewed by a committee made up of conservation NGOs The Nature Conservancy and Conservation International, as well as the Amazon Environmental Research Institute (IPAM).

Costa commented: "The successful RCF demonstrator project in 2022 saw UK supermarkets take an innovative approach to supporting sustainable supply chains, through investment in the RCF, creating a new model for these supply chain stakeholders to directly support sustainable soy production in Brazil.

"The RCF is a financially sustainable way of incentivising farmers not to deforest, either legally or illegally, and demonstrates a system change in the way sustainable farming can be financed."