Nature is at the center of the debate to combat climate change. At Climate Week in New York in September 2024, iCS and partners launched the Nature Investment Lab (NIL), which is a collaborative platform developed to stimulate a new economic, fiscal and regulatory model that helps to unlock financing and scale Nature-Based Solutions (NbS). The initiative, which intends to present results at COP30, aims to build an innovative environment that generates local development in the different forest regions of the country, guided by new parameters: a more equitable, low-carbon, resilient and nature-positive transition.
“Only in this way, by valuing and investing in nature and its restoration, in addition to training human capital for a new development model, will it be possible to face the immense impacts of the climate emergency and generate more jobs, income and a better life for people,” recalls Maria Netto, the executive director of the Institute for Climate and Society, and a warning:
“Without taking care of nature, we will not be able to achieve the goal of the Paris Agreement of limiting global warming to 1.5 °C above pre-industrial levels.” Nature provides valuable ecosystem services, such as carbon sequestration, climate regulation, and the purification of the air and water.
The creation of NIL is based on this premise and is the result of the performance of iCS as a convener (a coordinator of stakeholders with common objectives), with different partners and actors from society, to ensure that public policies and the creation of a sustainable and inclusive development model for Brazil are integrated into new agendas and important trends.
The initiation of this process began in November 2023, when iCS, in collaboration with the Ministry of Finance, promoted the meeting Unlocking the Potential of Nature-Based Solutions, which brought together public authorities, leaders from the financial sector and entrepreneurs to discuss the issue. This was the first in a series of initiatives about climate finance that the Institute has been developing throughout the presidency of Brazil in the G20.
With technical and scientific excellence, the initiatives have generated publications, providing evidence of the challenges and opportunities to promote climate finance in Brazil, in addition to creating a network with a mobilizing capacity to promote the necessary changes, in an agile and scalable manner, in the light of the climate emergency. NIL was created based on the need to put the learned solutions into practice.
NIL is a collaborative platform, which brings together policymakers, regulators, companies, philanthropic institutions, project developers, financial institutions and international organizations, with the objective of developing innovative instruments that allow for a safer environment for the increase of investment by the private sector in NbS. These are innovative solutions that guarantee the restoration and preservation of nature and generate sustainable development.
As well as iCS, the governance of NIL involves the Banco do Brasil (BB), the National Bank for Economic and Social Development (BNDES), the Glasgow Financial Alliance for Net Zero (GFANZ) and the Itaúsa Institute. The secretariat is led by Climate Ventures, with the support of Impacta Finanças Sustentáveis. The initiatives of NIL also include USAID as a strategic partner.
For Marcelo Furtado, the head of sustainability at Itaúsa, NIL seeks to create a favorable environment so that all the NbS initiatives are fruitful and the institutions involved in the project are “rowing in the same direction, always in cooperation and alignment.” “It is essential to guarantee that the Lab acts as a broad, welcoming area for initiatives, committed to their execution, impact and scale, without excluding anyone. Only then will the NbS projects be beneficial to the climate, nature and people,” he emphasizes.
Untangling the knots of the NbS sector
In a country rich in natural resources such as Brazil, there is no lack of opportunities for these types of initiatives that seek to protect, conserve, restore, use or sustainably manage the ecosystems and biodiversity, thereby promoting ecosystem services and climate resilience. At the same time, these initiatives aim to resolve social, economic and environmental challenges, effectively and adaptively, leveraging the people’s well-being.
In practice, these are reforestation and ecological restoration projects, products and services of sociobiodiversity, the bioeconomy, and regenerative agriculture, among others. However, there are still challenges for the development and, mainly, for the financing of projects involving nature-based solutions.
Currently, according to UNEP (the United Nations Environment Programme), approximately US$ 154 billion per year is invested in NbS worldwide, but US$ 674 billion per year would be needed by 2050 to meet the goals of the Paris Agreement and prevent the average temperature of the planet from rising beyond 1.5 °C. In Brazil, Capital for Climate, one of the technical allies of NIL, points out that there is a US$ 60 billion market of opportunities in NbS. The World Bioeconomy Forum, in its report “The Status of the Global Bioeconomy,” estimates that the total value of the bioeconomy, calculated based on disclosures from various parts of the world, is approximately US$ 4 trillion, with a potential growth to US$ 30 trillion by 2050.
“The Lab wants to help overcome the main challenges in the expansion of the financing of the NbS and, as this is a very broad field, the work will concentrate on projects of restoration, the bioeconomy and regenerative agriculture. We want the results to be fast and to be able to be presented at COP 30 in 2025,” explains Lucca Rizzo, a climate finance specialist at iCS.
According to Rizzo, the first barrier that projects of this type encounter is the requirement from financiers in relation to guarantees. “An NbS project is not usually large and, therefore, cannot provide robust guarantees like those of an agribusiness project, for example,” he says. “This points to the need to create appropriate models for the presentation of projects to potential financiers, as well as lines of financing designed to provide more confidence for investors and public policies as safeguards.”
How it will work
In the light of these challenges to be overcome, the work of NIL has been divided into three specific task forces (TFs), whose results must be integrated in order to boost the NbS market. The Regulation and Public Policy TF focuses on identifying the legal and regulatory barriers that may impede the growth of NbS investments, and then works on proposals for bills and other ways to promote regulatory and policy changes that can overcome these difficulties.
The Innovative Transactions TF aims to identify and create financial structures to increase investments in the projects. In other words, the group will work with projects with already advanced business models, but that still face challenges to obtain more financing to grow. These discussions should result in the designs of financing models and financial instruments that are adapted to the specific needs of each group – development banks, including the multilaterals, and financial institutions – in order to make large-scale projects viable.
Finally, the third TF of Costs and Impacts of the Transactions, operates in the development of financial standards and business models for NbS, including contract standards, guarantees, methodologies and impact indicators related to the projects.
“We have seen that there are specific bioeconomy projects that have managed to grow, but that took more than a year to achieve the financing. This is because the financier needs to fully understand the risks of a project prior to making any disbursements. A customized financing model is then created for that particular project, but the disadvantage is that these models, in general, cannot be replicated. Accordingly, there is the need to discuss standardization,” explains Rizzo.
People can save a forest. And it is their responsibility to save the forest that stores 49 billion tons of carbon* and influences the climate of the entire planet. These are the certainties of the Amazônia de Pé [Standing Amazon], which is a mobilization that takes place in the five regions of Brazil in order to protect the Amazonian biodiversity, populations, cultures and ancestries.
Along the Trans-Amazonian Highway, cacao produced in agroforestry systems combines income generation, forest conservation, and the restoration of degraded areas.
In February 2023, Judge Mara Elisa Andrade, head of the Seventh Federal Environmental and Agrarian Court of Amazonas, rejected the request made by farmer Dauro Parreira de Rezende, a defendant in a deforestation case, who asked that the amount of the fine imposed on him be recalculated. Accused of illegally deforesting 2,400 hectares in an agro-extractive settlement project in the south of the state, he was fined R$ 63.5 million.
According to a popular saying, unity is strength, and practice corroborates this by showing that unity also generates energy. This is the reality of the Sustainable Favela Network (RFS), which is an organization that works for climate justice and seeks solutions in the favelas for the favelas.
