mobilizing capital to scale responsible expansion of crop livestock in brazil

BOSTON CONSULTING GROUP 21 Producers should be provided with distinct incentives or compensation to encourage them to maintain areas they could legally clear or convert: • More attractive fiscal and financial instruments for DCF activities required to incentivize behavior that exceeds legal requirements • Payments for Environmental Services (PES) should also be considered • Financial and administrative assistance to formalize land ownership as paperwork can be impractical An approach must be adopted to develop a flexible, unified framework and KPIs adapted to the local reality. This framework should be shared among the multiple investors and lenders: • A practical approach needs to be grounded in four key principles: Adaptability, Defensibility, Simplicity, and Explainability • To foster buy-in and credibility, it is essential to refine the channels and formats used to share information with stakeholders and investors Technical assistance for producers to recover degraded pastures and intensify cattle production: • Technical assistance is crucial for producers to effectively transition. There is a critical need for scaled implementation support and specialized assistance for cattle intensification, as well as soy to a lesser extent • Companies from the value chain (e.g, traders, input seller, meatpackers) that are in contact with the producers should participate in the agenda and actively disseminate and promote good practices • Ideally, companies from the supply chain could also provide some catalytic capital to build a track record of new financing modelsTo make catalytic capital efficient: Technical assistance, financial incentives, and adaptation of ESG frameworks to Brazilian reality On top of the financings, success will require a deep understanding of agricultural conditions in Brazil and an adaptation and standardization of the ESG framework to suit local reality. This should be supported by regulatory and policy frameworks from lenders, whether DFIs or private players. This should be coupled with financial incentives for conservation for producers who are maintaining the native vegetation they are legally entitled to clear, along with robust technical support. To expedite deals and meet these targets within the desired timeframe, additional measures are crucial to ensure a transition that is both feasible and adapted to the producers’ context. Adaptability Easy to adjust to evolving industry consensus Simplicity Can be calculated by investment teamDefensibility Fair & transparent methodology Explainability Understood & used by stakeholders