mobilizing capital to scale responsible expansion of crop livestock in brazil

BOSTON CONSULTING GROUP 19 Recognizing the crucial role of development banks and multilateral institutions in the transition is essential for bolstering their role in providing access to affordable, subordinated and long-term financing. It is clear, however, that this catalytic capital shall be used only during a limited period of time, until a sufficient and solid track record is established through blended finance, for further financing by private capital. As mentioned earlier, several financial structures are possible to finance the recovery of degraded pastures but some key features are emerging in order to be able to finance at scale for small and medium producers with high perceived credit risk: • Diversification of producers (borrowers) is necessary to mitigate credit risk. This is why we are focusing on a securitization-like structure. • A portion in grant will be necessary to finance the technical assistance and/or some Payment for Environmental Services to compensate producers who are not deforesting lands they would be legally entitled to clear.• Build a proof of concept • Enable the establishment of a track record • Pave the way for scalability mobilizing value chain actors and technical assistanceSecuring catalytic capital is the paramount factor to de-risk and unlock private investments Riskier resources via subordinated quotas aimed at building a track recordStandard financing at market rates for which only large producers will be eligibleGrants that yield no financial ROI and have a reduced likelihood of achieving the required scalePreferred: most effective to close the financing gap Less effective options