IFACC 2023 Market Report

1. “Guidelines for Alignment with IFACC Environmental and Social Approach”; “Impact Monitoring Guidelines” .2023 AT A GLANCE 2023 represented a significant milestone as IFACC expanded its scope beyond soy and cattle to include agroforestry systems and non- timber forest products, part of the so-called “bioeconomy.” This addition recognizes the key role that these production systems play in providing farmers with complementary livelihood opportunities that grow and protect natural vegetation. IFACC’s technical guidelines and reports have been updated to reflect this change.1 In 2023, the 16 IFACC signatories came to market with three new products and expanded three existing products that were launched in 2021 and 2022, for a total of eleven products in the market and $240 million disbursed to farmers and other recipients since the launch of the initiative in 2021. The eleven IFACC-aligned products have distinct characteristics, reflecting the variety of signatory organizations and the diversity of agriculture financing needs. In terms of geographic coverage, six of these products are focused on the Cerrado biome, four on the Amazon and one covers both biomes. None of the products launched to date targets the Chaco biome in Argentina and Paraguay. This is a result of the more gradual evolution of sustainable finance markets in these countries, a process influenced by a range of macroeconomic and political challenges. IFACC is actively engaged in initiatives designed to navigate and address these complexities, contributing to the broader effort to foster sustainable financial ecosystems. In terms of product types, five offer long-term loans to producers for a variety of sustainable practices including expansion of soy and agriculture over degraded pastureland, agricultural yield improvements, intensification of cattle ranching, and forest restoration. Three products offered loans to foster agroforestry systems and the production of NTFPs related to the bioeconomy sector in the Amazon. Another instrument offers low-cost, annual crop finance to farmers who agree to protect their forest cover beyond the legal requirements. There was also a corporate loan to a leading ethanol producer to support DCF’s sourcing of corn. Another innovative product channels carbon payment to farmers who protect forests in the Amazon. Five instruments raised financing using a securitized agricultural receivables (“CRA” - Certificado de Recebíveis do Agronegócio) structure following the local capital markets regulation. CRAs are becoming the most common structure for financing farmers using private funding in Brazil. All the products offered greater financial incentives than is generally available in the market, such as longer tenors, grace periods, or lower interest rates, to incentivize agricultural transitions and bioeconomy models – thereby recognizing the additional time and/or costs that farmers face by moving towards sustainable production models. Three products were based on guarantee structures that were offered together with commercial loans, allowing longer than usual tenors for projects that require longer payback. Five of the disbursed products were denominated in Reais, five were in dollars, while one has not yet been disbursed. While $240 million of disbursements is only a fraction of the finance opportunity to expand sustainable production of cattle, soy, agroforestry, and NTFP models in the region, the progress in 2023 represents the continued expansion of the market that is encouraging for future growth. In order, however, to meet the 2025 target of USD 1 billion, significant growth will be needed for the years 2024 and 2025. Several of the launched products are in their initial phase, generating track- record to scale up to 2025. We have also observed important challenges faced by our signatories, which are discussed in the “Mobilizing finance at scale” section of this report. Infographic 2 – Graphic details: breakdown of the 11 products distributed by type of instruments. * Products disbursements were converted from reais (R$) to dollars (US$) adopting R$ 5 / 1 exchange rate. ** No products are reported within the Chaco Biome up to 2023. *** Official disbursments yet to be annouced© Vert / Natura In addition to products developed by IFACC signatories, two other notable announcements in 2023 were the IDB US$ 250 million loan to Molinos Agro, with Santander and Rabobank, to boost agricultural production and promote exports in Argentina, and the Cargill financing of Belterra, a leading agroforestry company in Brazil, to expand cocoa production on degraded land in the Amazon region of Mato Grosso.#Product Name Partners 2022 Disbursements in dollars* 2023 Disbursements in dollars* Cummulative Disbursements under IFACC DCF Cattle DCF Soy Bioeconomy Amazon Cerrado**Type of product 1Reverte Syngenta, Itaú, TNC19,4 97,5 116,9  Farm Loan Products 2Responsible Commodities Facility SIM, OPEA/Planeta, Agri3, Rabobank and Santander11 36,2 47,2   Capital Markets Offerings 3&Green & FS - Corn Ethanol loan 30 - 30  Corporate Debt Instruments 4Locks Group Sustainable Agriculture Lending Agri3, Rabobank, Grupo Locks, IDH and ReNature20 - 20 Corporate Debt Instruments 5Agri3 Restoration of degraded pastureland loan Agri3, Producer not disclosed13 - 13   Farm Loan Products 6Renova Pasto Agri3, Rabobank and IDH- 3,9 3,9  Farm Loan Products 7GreenGalaxy JGP Asset, Agrogalaxy and Vert Capital3,5 - 3,5   Capital Markets Offerings 8Conexsus-Belterra-Gaia-Santander Green CRA Conexsus, Belterra, Gaia and Santander- 3,5 3,5  Capital Markets Offerings 9Natura Living Amazon Natura, Vert- 1,9 1,9  Capital Markets Offerings 10SIMFlor Program SIM, BVRio, and Ecosecurities- - -  Carbon Based Structures 11FIDC Fiagro Belterra Agroforestry Productive Restoration JGP, Belterra- - -***  Farm Loan Products Total 96,9 143,0 239,9IFACC 2022 AND 2023 PRODUCTS DISTRIBUTED BY INSTRUMENTS AND CARACTERISTICS 7 IFACC 2023 MARKET REPORT