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1、Investment Opportunities Agri-food sector in Brazil Prepared by the Climate Bonds InitiativeThis publication is funded by the Gordon and Betty Moore Foundation through the Finance Hub,which was created to advance sustainable finance.Investment Opportunities Agri-food sector in Brazil Climate Bonds I

2、nitiative 2Content Report summary 2Introduction 3Insights for investment opportunities 5Overview of financial instruments 8Barriers,challenges and solutions 9Outlook 9Report summaryThis report demonstrates how investors can use Climate Bonds Initiative(Climate Bonds)transition frameworks and guidanc

3、e to scrutinise corporate strategy and identify credible investment opportunities.The focus of the paper is entities operating in the agriculture sector.Confronting the impact of agriculture on greenhouse gas(GHG)emissions is key to dealing with climate change and biodiversity loss.Climate Bonds is

4、working across multiple hard-to-abate sectors,including agriculture,to develop science-based tools and guidance for stakeholders to align their business activities with projects and opportunities consistent with a net-zero future.Developing a transition plan is the first step in this process.Climate

5、 Bonds has developed a comprehensive framework focused on enabling transitions at the entity level.This framework provides clear guidance and standards for entities across different sectors.Crucially,the entity-level transition framework represents a critical shift from project-specific criteria to

6、a holistic,entity-wide approach.Major Brazilian companies operating in the agri-food sector are developing transition plans,which are embedded in their sustainability reporting.Two case studies(Syngenta and Amaggi)provide the standard by which companies should be assessed using the tools provided by

7、 Climate Bonds.They offer recommendations on the core activities to be continued,those that should be reviewed,and where further disclosure may be required.A credible transition plan should include details of a financing strategy.This report reviews sustainable debt instruments which can be accessed

8、 by those operating in the Brazilian agri-food sector to finance the transition to net zero.The ability to recognise credible transition plans will empower investors with an environmental or climate mandate to discern entities eligible for capital investment and inspire a broader range of entities t

9、o get started on their transition journey.AcronymsA&R:Adaptation and resilienceASTP Agri-food Systems Transition ProgrammeCDP Carbon Disclosure ProjectCSDDD Corporate Sustainability Due Diligence DirectiveESG:Environmental,social,and governanceEU European UnionEUDR EU Deforestation RegulationGHG:Gre

10、enhouse gasesGtCO2e Billion tonnes of carbon dioxide equivalentLCA Agribusiness Letter of CreditSLB:Sustainability-linked bondUN SDGs United Nations Sustainable Development GoalsBrazils Scorecard Total Amount(USD)LAC RankingGreen15.2bn1stSocial699m4th Sustainability3.2bn4thSLB11.9bn1stTransition670.

11、4m1st&onlyInvestment Opportunities Agri-food sector in Brazil Climate Bonds Initiative 3IntroductionBrazil ranks as the 7th largest greenhouse gas(GHG)emitter worldwide,contributing nearly 3%of the global total of 50 GtCO2e in 2020.The countrys gross emissions stand at 2.16 GtCO2e,with net emissions

12、 at 1.53 GtCO2e after accounting for forestry and land use removals(FOLU).Land use changes(46%)and agriculture(27%)represent the most significant sources,accounting for almost 75%of Brazils gross emissions.More than 80%of agricultural emissions are attributed to livestock emissions,of which cattle c

13、onstitute over 90%(almost 80%for beef and over 10%for dairy).Whilst livestock emissions have stabilised since 2005,crop emissions have been steadily increasing,largely due to the increased cultivation of crops such as soy(which is also linked to animal feed),leading to deforestation and land use cha

14、nge across the country.1 Therefore,tackling the impact of agriculture on the environment is key to limiting climate change and biodiversity loss.Sustainable activities are those that meet the needs of the present without compromising the ability of future generations to meet their own needs.2 Due to

15、 the agricultural sectors complexity,however,a standard narrative on sustainable agriculture is yet to emerge,leading to greenwashing and incremental change.In 2019,Climate Bonds developed science-based guidelines and screening criteria for assets,projects and activities based on mitigation,resilien

16、ce,and adaptation considerations to support investors in identifying climate-credible agri-food investments.These Agriculture Criteria are a set of rules and standards designed In 2021,Climate Bonds launched the Agri-food Systems Transition Programme(ASTP),under its wider transition programme.The ov

17、erarching goal was to mobilise global capital for financing the transition of key sectors of the economy to align with a net-zero,resilient,and sustainable future as well as ensure deforestation and conversion free agri-food production.The programme had two key outcomes that contribute to this goal:

18、Outcome 1:to build a common shared understanding,that is rooted in climate science,of 1.5-degree and climate resilient transition pathways(and associated standards)that are consistent with other food system transition outcomes.specifically for agricultural projects and assets to encourage the transi

19、tion of the agricultural sector towards more sustainable and climate-friendly practices.3 These are now being updated to include transition pathways and address biodiversity loss,water and waste management,circularity,and just transition under the Agri-food Transition Programme.4 As part of this upd

20、ate,the Principles for Credible Transition and guidance for corporate transition plans have been published to enable investors to identify credible and net zero-aligned investments using the Hallmarks and Principles,which are further detailed below.An essential element of the transition is clear tim

21、elines for improvement for different practices alongside phase-out dates for activities that cannot align with net zero.Principle 1.Credible transition goals and pathways align with 1.5C global warming limits.Principle 2:Credible transition goals and pathways are established by the climate science c

22、ommunity and are not entity specific.Principle 3:Credible transition goals and pathways dont count offsets,but should count upstream scope 3 emissions as much as possible.Principle 4:Credible transition goals and pathways take into account technological viability,but not economic competitiveness.Pri

23、nciple 5:Credible transition means actually following the transition pathway pledges and policies are not sufficient.The Carbon Disclosure Project(CDP)defines a climate transition plan as a time-bound action plan that clearly outlines how an organisation will pivot its existing assets,operations,and

24、 entire business model towards a trajectory that aligns with the latest and most ambitious climate science recommendations i.e.,halving greenhouse gas(GHG)emissions by 2030 and reaching net-zero by 2050 at the latest,thereby limiting global warming to 1.5C.5The Climate Bonds Transition Principles sp

25、ecify the fundamental requirements for transition plans and activities to be credible and ambitious(Figure 1).As such,any entity,activity or project meeting these principles contributes substantially to attaining the Paris Agreement goals and is eligible for capital investment with a climate or envi

26、ronmental mandate.6 Whilst they were initially designed to address GHG emissions reductions,they could also be adapted to other agri-food system goals such as biodiversity and water protection,pollution prevention or just transition.This approach is currently being developed in the updated Climate B

27、onds Sector Criteria due 2024,focusing on key areas for agri-food transition finance,such as crop and livestock production.This report presents and exemplifies the use of Climate Bonds screening toolkit,applied to the agri-food sector in Brazil.It presents two case studies,and then examines the main

28、 financial instruments,barriers,challenges,and solutions.Figure 1:Five Transition Principles.7Outcome 2:to facilitate financial instruments;including SLBs and loans,transition bonds,and green bonds to be issued for demonstration purposes by public and private sectors,using common definitions and sta

29、ndards,for the finance of credible transition assets,activities,and strategies in agri-food systems.Relevant Sector Criteria development started in early 2023.Crop Production,Livestock Production and Deforestation/Conversion-free sourcing will be the first under development and available for Certifi

30、cation under the Climate Bonds Standard.The new Criteria will build upon Climate Bonds existing Agriculture Criteria,which can already be used to Certify assets and activities.Climate Bonds Agri-Food Transition ProgrammeInvestment Opportunities Agri-food sector in Brazil Climate Bonds Initiative 4Fi

31、gure 2:Triple A transition plan framework and five hallmarks8The Hallmarks can be used by investors to scrutinise the strategies of companies and determine their environmental credentials.In order to do that,the Hallmarks should be applied respecting the following hierarchy:i.There must be a public

32、commitment to ambitious targets(Hallmark 1);ii.These targets are only valid when the foundation has been established to deliver on them(Hallmark 2);Key Performance Indicators(KPIs):measurable values such as a companys total greenhouse gas(GHG)emissions;and related Performance Targets(PTs)to define w

33、hat needs to be achieved,e.g.,a 50%reduction in GHGs by 2030.A companys specific KPIs need to be:relevant,which is defined as being material to the firms core sustainability and business strategy,and addressing relevant sector environmental,social and/Transition Plans need to include:or governance c

34、hallenges.They also need to be under management control,of high strategic significance to the firms current and/or future operations,;and measurable or quantifiable on a consistent methodological basis,externally verifiable,and able to be benchmarked using external references or definitions.Transiti

35、on Plans must also define a robust and transparent implementation plan to define how they will achieve their goals.This transition guidance acknowledges that to meet global climate goals,businesses and organisations must implement systematic changes across their operations,not just within specific p

36、rojects or assets.The transition framework,developed in line with the Paris Agreements goals,outlines criteria that entities must meet to demonstrate the ability and intent to transition.These criteria cover operations,including business models,strategic planning,governance structure,as well as clea

37、r,science-based benchmarks for reducing GHGs,limiting global warming to below 1.5oC above pre-industrial levels.The framework also emphasises the need for a credible,robust,transparent transition plan,which demonstrates how the entity intends to transform its operations and align with a low-carbon,c

38、limate-resilient trajectory over time.The transition plan is subject to independent assessment and approval,ensuring transparency and credibility.This framework is called the Hallmarks of credible transition and these five Hallmarks are captured in the Triple A framework of Ambition,Action and Accou

39、ntability(Figure 2).Together these demonstrate the company is willing,able,and transparent about moving toward a sustainable future.The five Hallmarks enable an encompassing view of a companys transition plan,taking into consideration the following:a.The level of ambition of the targets set(Hallmark

40、 1-which itself encompasses the five Transition Principles);b.The willingness and ability to deliver on those targets(Hallmarks 2 to 4);and,c.General reporting robustness and transparency(Hallmark 5).To address concerns from issuers and investors over the burden of information and reporting requirem

41、ents while maintaining robustness and credibility,the Hallmarks focus on the essentials needed to demonstrate a credible transition.While complementing existing ESG frameworks and methodologies,this framework also goes beyond them.It emphasises key governance elements that indicate a companys willin

42、gness and ability to deliver on its decarbonisation targets.It also adds the granularity to ensure those targets are ambitious and aligned with agreed climate goals.This framework was built upon material from the Transition Pathways Initiative and the Climate Action 100+benchmark,CDPs initiatives(As

43、sessing Low-Carbon Transition Initiative and Science Based Targets initiative),UNs Race to Zero,ICMAs SLB Principles and the TCFD recommendations.All of these frameworks have been designed to improve information for investors or offer guidance to corporates,with the objective of driving ambitious co

44、rporate action.iii.There must be evidence of change derived from tangible milestones in the corporate strategy and capex/opex investments(Hallmark 3);iv.Internal feedback must be present to track progress and recalibrate plans if necessary(Hallmark 4);v.External reporting is essential to build trust

45、 in the market(Hallmark 5).Performance targetsAccountabilityRobust plansActionGovernanceDisclosureClimate mitigationAdaptation and resilienceNatureJust transitionVisionStrategic narrativeAction plan scope 1,2&3 GHGsAction plans-other performance targetsInternal policy alignmentSensitivity analysisIn

46、terim milestonesAnnual verification of progressBoard and senior executive responsibility(Re)setting and monitoring targets and plansCorrectionsInformation to discloseComparability and accessibilityHallmarks 4&5Hallmark 1Hallmarks 2&3AmbitionActionInvestment Opportunities Agri-food sector in Brazil C

47、limate Bonds Initiative 5The first step to identifying potential investments in the agri-food sector is to target those companies with transition strategies,and assess the pathways using the Hallmarks and Principles for credible transition to establish whether a company has environmental credentials

48、.Large corporates in the sector such as Bunge,Syngenta,Marfrig,Minerva Foods,Carrefour,Danone,Nestle and Amaggi have formally disclosed their strategies within their sustainability reports.9,10,11,12,13,14,15,16 Among these names,two case studies were selected to serve as benchmarks illustrating how

49、 companies should be assessed against the tools provided by Climate Bonds.Brief recommendations are made on the main actions the company should continue doing,as well as aspects that it should review and/or where it should provide more information.Syngenta case studySyngenta is a leading science-bas

50、ed AgTech company,serving millions of farmers worldwide,and provides various inputs for food and fibre production,such as pesticides,herbicides,fungicides,and fertilisers.The company is the source of relatively large scope 1,2 and 3 emissions,and potentially poses threats to other environmental asse

51、ts,such as biodiversity and water through its activities.The company publicly commits to fast-track innovation and invest in promoting more sustainable agricultural practices,beneficial for nature,farmers,and society as a whole.The following analysis was conducted based on the companys 2021 ESG repo

52、rt and its Carbon Disclosure Project(CDP)annual reporting.17,18The Syngenta Foundation for Sustainable Agriculture(SFSA),an integral part of the company,is dedicated and reported to be spearheading innovation that bolsters small-scale farmers in developing countries with the declared aim of enhancin

53、g their productivity,income,and resilience.The Foundation concentrates on improving seed access,offering insurance,and providing agricultural services.In support of these initiatives,SFSA is involved in research and development with the goal of increasing yields for smallholdings,and advocates for p

54、olicies fostering better opportunities for farmers and rural youth.Syngenta underscores its commitment to transparency by disclosing its transition KPIs as part of the Good Growth Plan(GGP).The term GGP is used to define the companys ESG strategy,which seeks to deliver on these KPIs Insights for inv

55、estment opportunitiesthrough strategic actions and consistently reporting on its progress.Syngenta targets scope 1,2 and 3 emissions.Scope 3 emissions include 12 of the 15 scope 3 categories under the CDP Reporting framework,excluding only the categories:use of sold products,franchises,and investmen

56、ts.Regarding the use of sold products,the company states that the end-use of its products results in carbon savings through the more efficient use of resources and land in the agricultural value chain.Continue:Governance structure Review:Transition pathway 1.5C aligned Provide:A broader financial st

57、rategy to meet performance targetsHallmark 1:Performance targets Under the GGP,Syngenta has established targets categorised into four groups,each aligned with a primary objective:1.Accelerating innovation for farmers and nature which includes continuous investment in sustainable agricultural breakth

58、roughs,delivering two new sustainable technological innovations each year,and striving to minimise residues in crops and the environment.2.Striving for carbon-neutral agriculture,which involves measuring and facilitating carbon capture and mitigation in agriculture,improving biodiversity and soil he

59、alth on three million hectares of rural farmland annually,and a reduction of 50%in the carbon intensity of Syngenta Crop Protection and Seeds operations by 2030.3.Helping people stay safe and healthy which includes achieving zero incidents in operations,training eight million farm workers annually o

60、n safe usage,and advocating for fair labour throughout the supply chain.4.Partnering for impact involves building cohesive partnerships and publishing their sustainability objectives,initiating innovation dialogues for inclusive consultation on sustainability,and implementing board-level sustainabil

61、ity governance.Simultaneously,the companys carbon reduction targets are set and validated by the Science Based Targets initiative(SBTi)guidelines,marking them as science based.SBTi asserts Syngentas pathway aligns with sector-specific guidelines to limit warming below 2C although the company is enco

62、uraged to augment its ambition further to become fully aligned with a 1.5C scenario.Additionally,all targets within the GGP are declared to be aligned the UN Sustainable Development Goals(SDGs),clarifying the primary objectives.In general,targets are comprehensive and embed major environmental and s

63、everal social issues.However,Climate Bonds encourages Syngenta to broaden its targets,confronting additional risks its activities may trigger,such as those related to the unabated use of pesticides,herbicides,and fungicides.While Climate Bonds recognises that these inputs are essential for thriving

64、global agriculture and food safety,the development of a global target prioritising the shift,where possible,to less harmful solutions,such as biocontrol and biofertilizers,is recommended.Even though Syngenta has been investing and developing in these areas through acquisitions and research,the compa

65、ny needs to restructure its business model and prioritise these solutions over chemical inputs.Hallmark 2:Foundation and Hallmark 3:Implementation plansSyngentas stated long-term objective is to foster and establish a stronger foundation for sustainable agriculture.While Climate Bonds commends Synge

66、ntas meticulous disclosure of GHG emissions from scopes 1,2,and 3 upstream processes,these boundaries exclude the deleterious effects its products may pose to the environment and society.Climate Bonds encourages Syngenta to assess these risks more rigorously and establish clearer plans to tackle thi

67、s broader issue.Despite these disclosures,the strategy lacks specific information regarding the corporate vision for its future business model.Climate Bonds encourages Syngenta to formulate a more in-depth,strategic narrative detailing the interim or stranded activities,which articulates how they wi

68、ll be phased out and provides insights into the companys future business model.Syngenta has implemented a delivery plan for all primary objectives outlined in its ESG strategy.To reach the 2030 carbon intensity reduction target for GHG emissions in scopes 1 and 2,the company is concentrating on enha

69、ncing manufacturing process efficiency,designing and rolling out site-specific energy-saving programmes,expanding the proportion of renewable energy sources,and collaborating with crop protection and seed suppliers to diminish their carbon footprint.Syngentas internal policy framework,the Health,Saf

70、ety,and Environment Policy Framework(HSE),aligns with its ESG plan execution.Investment Opportunities Agri-food sector in Brazil Climate Bonds Initiative 6However,the strategy would benefit from further details on the finance plan,including the financial implications of the strategic narrative and t

71、he action plans.The company should elaborate on how future investments and financing will facilitate the achievement of its performance targets.Hallmark 4:Governance Climate Bonds commends Syngentas approach to sustainability governance.This aspect is overseen by the Board of the parent company,Syng

72、enta Group Co.Ltd.,which offers strategic guidance on all sustainability issues.The Board also delegates some of its responsibilities and powers to the Syngenta Group Sustainability Committee,the senior management body responsible for the companys ESG strategy.This committee oversees sustainability

73、concerns within innovation and operations,and assesses the companys sustainable practices.It supervises the companys sustainability framework and standards,including public ESG reporting,its plan,strategic sustainability partnerships,and innovation dialogues.Moreover,it reviews and provides advice o

74、n the effectiveness of internal policy implementation,as each member is tasked with incorporating sustainability into their responsibility.Hallmark 5:Disclosure Syngenta maintains an up-to-date and easily accessible repository of all information pertinent to its ESG plan on its website.The company c

75、larifies how these disclosures align with its materiality matrix,selected frameworks like GRI,SASB,UNGC,SDGs,and the GGP.Syngenta also identifies which performance indicators have been subjected to external assurance.Finally,as noted above,Syngenta reports against the CDP questionnaire.Amaggi case s

76、tudy Amaggi,a major Brazilian corporation,plays a significant role in the agri-food value chain.Its operations encompass the production of grains and fibres,the sourcing of agricultural commodities,and the processing and trading of these products.The companys logistical activities include managing t

77、erminals,ports,grain warehouses,soy-crushing plants,a fertiliser blending plant,and providing transportation services via water and land.Furthermore,Amaggi has been ramping up its investments in renewable energy generation through five Small Hydropower Plants(SHPs)and six solar-powered plants locate

78、d in Mato Grosso.It has a global presence with offices and operations across Brazil,China,Argentina,Paraguay,the Netherlands,Norway,and Switzerland.Amaggi has set ambitious goals,including achieving a 100%monitored and traced grain supply chain(soy and maize),free from deforestation and conversion(D

79、eforestation and Conversion Free-DCF)from the field to the port by 2025.The company also aims to reach net-zero emissions by 2050.It commits to the Science Based Targets initiative(SBTi)with strategies to decarbonise by 2035 and neutralise potential residual emissions.These targets are backed by a d

80、etailed implementation plan,subject to external auditing,and fully disclosed in the Amaggi ESG Report 2022.19Continue:Pursuing science-based targets.Provide:Broader guidance on reducing global emissions;a more detailed long-term financial plan.Hallmark 1:Performance targets Amaggis states that perfo

81、rmance targets are based on science-based guidelines such as those provided by the Science Based Targets initiative(SBTi),aligning the companys ambition with 1.5C pathways,with specific milestones in 2035 and 2050(see below).These targets are divided into environment,social,and governance.Furthermor

82、e,each target is linked to a specific UN SDG,clarifying the core objectives.Environmental targets encompass:Providing innovative products and solutions for an ethical,zero-deforestation and conversion of native vegetation,regenerative,and low-carbon value chain;Investing in renewable energy to maint

83、ain self-sufficiency in production versus consumption;Ensuring a grain supply chain that is 100%monitored and traced,free from deforestation and conversion(DCF)for agricultural production until 2025 for direct suppliers,and applicable to all biomes,countries,and regions where the company operates;Ac

84、hieving net-zero emissions by 2050,aligning with the SBTi through decarbonisation strategies by 2035 and neutralisation of potential residual emissions,primarily through promoting regenerative,low-carbon agriculture capable of protecting biodiversity;Remaining DCF(since 2008)for agricultural product

85、ion on owned farms,ensuring expansion only in existing areas.Social targets include:Encouraging initiatives to bolster agricultural productivity and income for small farmers,with a focus on rural women and family farmers;Ensuring and promoting a healthy environment that prioritises safety,quality of

86、 life,and the well-being of employees and contractors;Significantly increasing the number of courses offered to employees and contractors through AMAGGI University;Investing in actions to develop critical suppliers in the chain and facilitating the professional development of vulnerable individuals

87、for decent work opportunities;Highlighting the positive impact generated in the communities where the company operates,prioritising projects in strategically significant territories for the business and the most socially,economically,and environmentally vulnerable populations;Upholding activities th

88、at respect and promote human rights in all operations and throughout the value chain,especially among indigenous peoples and traditional communities.Governance targets comprise:Enhancing the communication process of relevant ESG issues to stakeholders concerning metrics,indicators,form,and content;I

89、mplementing a diversity program by 2025,aiming at social inclusion for all;Ensuring the continuous improvement of the companys corporate governance and relations with all stakeholders that preserves a culture of integrity,ethics,responsibility,risk management,and best business practices;Maintaining

90、the Confidential Channel for all stakeholders and the Woman Channel to address non-compliance with the Amaggi Code of Ethics and Conduct.Investment Opportunities Agri-food sector in Brazil Climate Bonds Initiative 7Hallmark 2:Foundation and Hallmark 3:Implementation plansAmaggi has structured a stra

91、tegy for its transition plan,highlighting strategic objectives and priorities aligning with the companys targets.The focus is on future economic activities and business models,such as promoting regenerative agriculture as a prevalent future production system.Amaggi lays out a strategic narrative,des

92、cribing its transition towards this vision.For instance,the company plans to promote regenerative agriculture initially within its farms and gradually expand the concept and practices to include production partners.This strategy involves investing in agricultural technology and employing innovative

93、techniques that support ecosystem regeneration.In 2022,Amaggi partnered with ReNature,a consultancy specialised in regenerative transition,with the goal of providing support in developing a regenerative agriculture programme,now named Amaggi Regenera.20 The company states that the programme aims to

94、improve initiatives and performance indicators to ensure climate targets are effectively met through regenerative agriculture,and monitor regenerative transition indicators informing necessary improvements.The programme was launched in June 2023.However,Climate Bonds recommends that Amaggi should fu

95、rther clarify which indicators are to be monitored and how much is actually being invested in this transition of practices.Amaggis vision and strategic narrative both align with social and environmental aspects.For instance,Amaggis productive activities occur outside full protection conservation uni

96、ts and indigenous lands boundaries.The company implements policies and monitoring activities to ensure respect for traditional communities,family farmers,and land use rights.Additionally,the company has initiated a pilot programme to monitor the flora and fauna of the agricultural landscape,forming

97、a task force to understand its comprehensive impact on biodiversity.Amaggi has established a clear roadmap featuring action plans,milestones,and initiatives that it is currently implementing(or planning)to achieve its performance targets.The company effectively uses internal policies to support this

98、 strategy,frequently revising and adapting them to meet future target requirements.This implementation plan highlights the Originar traceability platform,designed to ensure compliance with social and environmental criteria.21 This tool comprehensively monitors the entire grain supply chain using sat

99、ellite imagery for socio-environmental and agricultural production analysis.This is cross-referenced with the companys commercial data,enhancing safety and traceability.Originar 2.0 continuously refines its process for monitoring suppliers and tracing the grains sourced,adopting geospatial identific

100、ation of all suppliers at the point of product trading.Climate Bonds commends the companys annual release of the GHG emissions report via the Public Emissions Registry of the Brazilian GHG Protocol Programme.This report includes scope 1,2,and 3(upstream)emissions,clearly associating data fluctuation

101、s over time with their causes and highlighting actions to address each indicator.Despite the clarity in reporting structure and a 31%reduction in scope 2 emissions,the company disclosed an increase of 83%in scope 1 and 23%in scope 3 emissions its 2022 ESG report.The company attributes the increase o

102、f scope 1 to:i.Completion of the system integration process initiated after the acquisition of O Telhar Agro Groups operations in Brazil;ii.The governance improvements resulting from this process which have enabled more accurate reporting;iii.The expansion of cultivated area through the optimisation

103、 of less agriculturally suitable areas within farms,which required increased investment in inputs and the use of agricultural practices tailored to the soil characteristics;iv.An accidental fire outbreak accounting for 67%of the total increase in emissions within this scope.22 For the increment in s

104、cope 3 emissions,the company states that increased agricultural production and,consequently,higher shipping and export volumes were the main cause.Climate Bonds strongly opposes the increase in Amaggis GHG emissions.This goes against the objective of transition strategies to align industries to 1.5o

105、C pathways,which are essential to meeting the Paris Agreement goals.Rather than increase GHG emissions,Amaggi needs to develop a better strategy to reduce global emissions in line with its decarbonisation targets.Furthermore,Climate Bonds recommends more clarity in Amaggis ESG reporting on the finan

106、cial actions to fund their transition plan.The disclosure of the finance plan should encompass more than just its current sustainable debt issues.It should also outline future deals and funding plans to support the companys performance targets.Hallmark 4:Governance The Board provides general guidanc

107、e for business,policies,targets,and long-term goals.As such,they oversee the companys transition strategy,approving and monitoring targets.The Director of ESG is the Board member responsible for executing the plan and ensuring all necessary resources are available.This structure is ideal for deliver

108、ing a credible transition plan.Hallmark 5:Disclosure Amaggi ensures that all information pertinent to its sustainability plan is accessible and regularly updated on its website.The company prepares all its reports and disclosures in compliance with the guidelines set by the Global Reporting Initiati

109、ve(GRI).23Investment Opportunities Agri-food sector in Brazil Climate Bonds Initiative 8Overview of financial instrumentsFigure 3:Evolution of share of rural credit by funding source;total in BRLbn.242042070%20%40%60%80%100%BRLbnCompulsory ResourcesBNDES/FINAME(equalizable)Agri

110、culture Letter of Credit(LCA)OthersRural Savings(restricted)Rural Savings(unrestricted)Unrestricted resources2062020206200Source:SDA Socioeconomic Development Advisors based on Brazilian Central Bank Data(2022).Available at:https:/dadosabertos.bcb.gov.br/Recent innovations in B

111、razilian agri-food financing have broadened financial and capital market opportunities.This trend is set to continue,as agriculture remains a critical sector for the countrys economy,contributing to social justice and overall welfare,both of which are key policies of the current government elected i

112、n 2022.In the Brazilian capital market,popular agricultural finance instruments include the Agribusiness Letter of Credit(LCA),Rural Product Notes(CPR),Agribusiness Receivables Certificate(CRA),and Investment Fund in Agro-industrial Production Chains(FIAGRO).Although trade finance instruments are le

113、ss widely used in the sector compared to the instruments mentioned above,they have potential to serve as a sustainability lever and should be considered by both issuers and investors.LCAs have become an important funding source for rural credit in Brazil,increasing from less than 1%of rural credit f

114、lows in 2014 to 15%in 2020,which represents approximately BRL43bn.25 LCAs are particularly appealing to domestic investors due to their 35%income tax exemption,which goes towards funding rural credit.CPR is a credit instrument rural producers and cooperatives use to secure resources,primarily for pr

115、oduction costs.Despite its widespread use,the extent of its usage has been obscured as most transactions still need to be officially registered.Recent regulatory changes,however,mandate that all CPRs must be registered as of 2024,resulting in a surge in registered transactions by over 400%in 18 mont

116、hs.Registration is an important factor for investors,as it assures the instrument is being priced properly and administered according to local legislation.By the end of 2021,registered CPR transactions reached BRL86bn with volumes expected to align with the total amount of rural credit by 2024.26The

117、 Green Rural Product Certificate(Green CPR),designed to fund reforestation activities and natural resource protection on rural properties,represents a promising innovation to traditional CPR.The barrier to uptake of Green CPRs is the requirement for specific methodologies to verify and validate envi

118、ronmental services.CRAs,backed by receivables,are another form of fixed-income security.Companies can transfer their receivables to a securitisation company,which will issue CRAs for capital market trading,usually supported by a financial institution.This allows the company to anticipate its receiva

119、bles.Although CRAs have historically been backed by a single corporate credit,the market is starting to explore diversification to broaden potential issuers,which could lead to a strong expansion of the registered CPR market.FIAGROs,a new addition to financial instruments,are investment funds encomp

120、assing various agri-food assets,including credit rights,real estate,securities,and company shares.Since their legal creation and approval in 2021,FIAGROs have seen good market uptake and have the potential to spur market growth,opening up agri-food assets to new investors.Brazil is one of the larges

121、t potential markets for sustainable finance growth in sectors related to land use and agri-food.A 2020 Climate Bonds report Unlocking Brazils Green Investment Potential for Agriculture highlighted an estimated USD163bn investment potential up to 2030.27 Sustainable finance mechanisms are becoming wi

122、dely recognised as important alternatives.The Land Use category of the Climate Bonds Taxonomy,which covers agriculture,livestock production and forestry,is a prolific source of green,sustainability,sustainability-linked and transition bonds representing around 60%of the total volume originating from

123、 Brazil.Other agriculture related sectors,such as renewable energy(including bioenergy),industry,buildings,water,waste and transport are also relevant across these labels and together represent around 30%of Brazils total issue volume across these four labels.Brazil has committed to pricing its first

124、 sovereign sustainability bond in Q4 2023.The Sovereign Sustainability Bond framework was published in September 2023,and the Climate Bonds Brazil team have collaborated with the Treasury on best practice.28 This deal is expected to attract crowding in from the private sector and encourage the momen

125、tum for green market creation.The sub-sovereign market is limited in Brazil,due to guarantees required from government for municipalities and states willing to issue any kind of debt;a procedure always blocked by Brazils financial regulators.Finally,trade finance instruments currently have a limited

126、 share of overall rural credit volumes(fluctuating between 1012%over the last 4 years)but are also an important channel of investment for the sector.29 They can embed sustainability guidelines and benefits into the agri-food value chain.The Advance on Foreign Exports Contracts(ACC)and Exports Advanc

127、e Payment(ACE)are the two primary trade finance instruments in Brazil,covering about 4050%of overall Brazilian exports.The ACC provides working capital for the pre-shipment stage,while the ACE reduces payment delays for shipped goods.The International Chamber of Commerce(ICC)was the first to propose

128、 definitions and guidelines for sustainable trade finance,stating that sustainable trade involves the import,export,or trade of goods and services that actively support the UN SDGs.ICCs approach encompasses all sustainability dimensions(beyond environmental)and is recognised across jurisdictions.30M

129、arket interest ratesControlled interest ratesInvestment Opportunities Agri-food sector in Brazil Climate Bonds Initiative 9Barriers,challenges and solutions The Brazilian agri-food sector promotes optimism in terms of economic growth,GHG emissions mitigation,and the advancement of social justice thr

130、ough the assurance of both domestic and global food security.As a competitive producer of livestock and livestock feed,Brazil sees growing demand for these products.Yet,these commodities have a high environmental impact and a substantial GHG footprint.Despite noteworthy strides in reducing the carbo

131、n footprint of its major agricultural products,Brazil still has a considerable journey towards achieving net-zero emissions,a target of utmost importance,given that climate change could adversely impact the countrys agricultural production.Companies focusing on building adaptation and resilience to

132、climate impacts will be better equipped to thrive amidst the emerging physical and regulatory transition risks.The transition also presents numerous opportunities regarding new technologies and business models.Over the past decade,more than 1500 start-ups have been established,each committed to solv

133、ing challenges farmers and other stakeholders face in the value chain.These companies operate across various segments in the agri-food sector,contributing to a vibrant innovation landscape.The Brazilian Agriculture Research Corporation(EMBRAPA)plays a crucial role in this landscape,conducting fundam

134、ental and applied research to provide the scientific inputs necessary to scale up innovation.While Brazils agri-food sector is a significant recipient of Foreign Direct Investment(FDI),and possesses enormous potential within an innovative environment,some key structural issues could deter investment

135、.A significant challenge lies in the bottlenecks in farmgate-to-farmgate investment risk assessment,where lenders and debt holders who are usually farmers and growers,often need to provide more detailed financial information and traceable operations.Additionally,improved infrastructure and increased

136、 funding relative to farm support is required to develop the sector,with demand for larger investments in transport networks and rural infrastructure.31Despite Brazils comparatively low public support for the agri-food sector,the government maintains a wide range of price and credit policies,such as

137、 interventions in the credit sector through interest rate subsidies and mandating that banks allocate at least 29%of their demand deposits to agricultural lending.While larger farmers who can borrow on international markets see limited benefits from this controlled credit system,it burdens medium-si

138、zed farmers and other industries forced to borrow domestically at market rates.Implementing reforms could reduce the misallocation of resources and reduce the cost of borrowing.Finally,there is increasing pressure globally for the establishment of traceable,sustainable and deforestation-free supply

139、chains,which will have to be addressed by the public and private sectors in Brazil in order to maintain access to international markets.The European Union has adopted a new regulatory framework to curb the blocs impact on global deforestation and forest degradation around the world.The EU Deforestat

140、ion Regulation(EUDR)requires any company importing or exporting certain products derived from cattle,cocoa,coffee,oil palm,rubber,soya,and wood from or to the EU to prove the products are deforestation-free through extensive due diligence on the value chain.The regulation defines a product as defore

141、station-free when the product itself,its ingredients,or its derivatives were not produced on land subject to deforestation or forest degradation after the deadline of 31 December 2020.These requirements will come into effect in 2025,18 months after adoption by the European Parliament and Council.In

142、addition,the Corporate Sustainability Due Diligence Directive(CSDDD)will set out a horizontal framework to foster the contribution of businesses operating in the single market to the respect of human rights and the environment in their own operations and through their value chains,by identifying,pre

143、venting,mitigating and accounting for their adverse human rights,and environmental impacts,and having adequate governance,management systems and measures in place to this end.32Outlook A well-functioning agri-food sector is crucial for ensuring food safety,promoting human health,and overall well-bei

144、ng.However,the Brazilian agri-food sector is also a major contributor to the countrys deforestation,a substantial emitter of GHGs,and is associated with risks such as diminished water quality and biodiversity loss.To align with the Paris Agreement targets,entities operating in this sector must estab

145、lish ambitious yet achievable transition goals and redesign aspects of their operations.This transformation across the entire value chain requires financial capital throughout the transition journey.Consequently,investors need to be prepared to recognise credible opportunities that will definitively

146、 support this process.Climate Bonds is responsible for developing tools and outlining processes that ensure capital flows are meeting the transition needs of companies following appropriate pathways.The Five Transition Principles and Hallmarks for credibly transitioning companies are practical examp

147、les of such tools.These guidelines can be used to screen companies in the agri-food sector,thereby identifying credible investment opportunities.The case studies presented indicate that major companies in the sector are preparing transition plans and embedding them in their sustainability reporting

148、which is a crucial step forward.The transition conversation is in the early stages,and the companies assessed still have gaps to fill but transition plans can be fleshed out as new opportunities to decarbonise become available.Investors can support entities that have credible transition plans and en

149、courage more issuers to commit to a decarbonisation journey.Investment Opportunities Agri-food sector in Brazil Climate Bonds Initiative 10Endnotes1.Climate Watch GHG Emissions-CAIT data(2022).Available at:https:/www.climatewatchdata.org/ghg-emissions?end_year=2019&start_year=19902.Brundtland,G.(198

150、7).Report of the World Commission on Environment and Development:Our Common Future.United Nations General Assembly document A/42/427.Available at:https:/www.are.admin.ch/are/en/home/media/publications/sustainable-development/brundtland-report.html3.https:/ Note:Reporting on Transition Plans 6.Climat

151、e Bonds,(2020).Principles for Transition()7.Climate Bonds,(2020).Principles for Transition()8.Climate Bonds Initiative(2023),Guidance to asses transition plans 9.https:/.br/10.https:/.br/11.https:/.br/pt12.https:/ H-C2iTjzWNSgaQMvOSfpmFw996e1GHBoCztcQAvD_BwE14.https:/.br/Author:Leonardo Gava Mataram

152、,Climate Bonds Initiative Acknowledgements:Andrs Felipe Sanchez,Rachel Hemingway,Oluwatoyin Oyekenu,Maria Alejandra Pulido and Shaoxin Li,Climate Bonds InitiativePeter Elwin and Emma Amadi,Planet Tracker Joe Capp,Jorge Boeira and Clayton Campagnolla,SDA Socioeconomic Development Advisors Editorial s

153、upport:Stephanie Edghill,Caroline Harrison Design:Godfrey Design,Joel Milstead Published by Climate Bonds Initiative,November 2023 Disclaimer:The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment advise

154、r.Any reference to a financial organisation or debt instrument or investment product is for information purposes only.Links to external websites are for information purposes only.The Climate Bonds Initiative accepts no responsibility for content on external websites.The Climate Bonds Initiative is n

155、ot endorsing,recommending or advising on the financial merits or otherwise of any debt instrument or investment product and no information within this communication should be taken as such,nor should any information in this communication be relied upon in making any investment decision.Certification

156、 under the Climate Bond Standard only reflects the climate attributes of the use of proceeds of a designated debt instrument.It does not reflect the credit worthiness of the designated debt instrument,nor its compliance with national or international laws.A decision to invest in anything is solely y

157、ours.The Climate Bonds Initiative accepts no liability of any kind,for any investment an individual or organisation makes,nor for any investment made by third parties on behalf of an individual or organisation,based in whole or in part on any information contained within this,or any other Climate Bo

158、nds Initiative public communication.Prepared by the Climate Bonds Initiative15.https:/.br/16.https:/.br/17.Syngenta ESG Report(2021).Available at:https:/ Note:Reporting on Transition Plans19.Amaggi ESG Report(2022).Available at:https:/.br/wp-content/uploads/2023/07/ESG_Amaggi_2022_EN.pdf20.https:/.b

159、r/wp-content/uploads/2023/06/AmaggiRegenera_PT-azul.pdf21.http:/20.206.65.65/portal-seguranca/22.Amaggi ESG Report(2022).Available at:https:/.br/wp-content/uploads/2023/07/ESG_Amaggi_2022_EN.pdf23.https:/www.globalreporting.org/24.SDA Socioeconomic Development Advisors based on Brazilian Central Ban

160、k Data(2022).Available at:https:/dadosabertos.bcb.gov.br/25.Brazilian Central Bank Data(2022).Available at:https:/dadosabertos.bcb.gov.br/26.Brazilian Central Bank Data(2022).Available at:https:/dadosabertos.bcb.gov.br/27.https:/ Central Bank Data(2022).Available at:https:/dadosabertos.bcb.gov.br/30

161、.International Chamber of Commerce(2021).Standards for Sustainable Trade and Sustainable Trade finance.Available at:https:/iccwbo.org/news-publications/policies-reports/icc-standards-for-sustainable-trade-and-sustainable-trade-finance/31.OECD(2021).Agricultural Policy Monitoring and Evaluation 2021:

162、Addressing the Challenges Facing Food Systems.Available at:https:/www.oecd-ilibrary.org/sites/c09def7e-en/index.html?itemId=/content/component/c09def7e-en32.CSDDD Explanatory Memorandum,(2022).Available at:https:/eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52022PC007133.www.planet-tracker.or

163、gThis report was produced by Climate Bonds in consultation with Planet Tracker.The authors are grateful for the extensive support received from Planet Tracker in producing the report and the feedback and insights provided.However,the choice of final case studies,the analysis,and conclusions presented were provided by Climate Bonds and may differ from the views presented in Planet Trackers own research.33 This publication is funded by the Gordon and Betty Moore Foundation through The Finance Hub,which was created to advance sustainable finance.