Brazil allocates BRL 10.4 bi for projects to combat climate change

On Monday (Apr. 1), Brazil’s Ministry of the Environment and Climate Change and the National Bank for Economic and Social Development (BNDES) signed a contract for the disbursement of BRL 10.4 billion from the National Climate Change Fund (Climate Fund).

This marks the largest allocation of resources in the fund’s history, which was created in 2009 and has maintained a portfolio of contracts totaling BRL 2.5 billion. Despite this, the fund has been virtually inactive for the past four years, according to the Brazilian government.

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“We’ve increased from [an average of] BRL 400 million [per year] to BRL 10 billion, and these resources will undoubtedly make a difference in the process of changing our energy matrix and promote resilient agriculture and cities, with a focus on adaptation and other agendas,” said Minister Marina Silva in an interview with journalists after meeting with President Luiz Inácio Lula da Silva at the Planalto presidential palace. She was accompanied by the president of BNDES, Aloizio Mercadante, who confirmed the interest rates for the projects to be financed by the fund.

The highest rates, set at 8 percent per year, will be for solar and wind energy projects, which have a well-established market in Brazil. Forest restoration projects, on the other hand, will have a rate of just 1 percent per year. For all other areas, such as financing for the purchase of electric buses, resilience works for climate adaptation in cities, decarbonization of industry and agriculture, among others, the interest rate will be 6.15 percent per year.

“The interest rate we are offering is equivalent to that of an investment-grade country raising funds in dollars. With one difference: those who take out financing have no exchange rate risk because the Treasury guarantees this rate [through a guarantee fund against exchange rate risk.] So, it’s a very competitive rate, and demand is very strong. We’re going to release these funds very quickly,” said Mercadante. He did not disclose the specific allocation for each segment. BNDES is set to launch a specific platform with information on each contemplated project, including disbursements and progress updates.

The BRL 10.4 billion portfolio became possible last year when the federal government issued sustainable public bonds on the international market for the first time, yielding over $2 billion.

The Climate Fund’s purpose is to finance projects, studies, and initiatives aimed at reducing greenhouse gas emissions and adapting to the effects of climate change. Resources are available in the form of reimbursable loans, administered by the BNDES, and non-reimbursable loans, managed by the Ministry of the Environment and Climate Change.

The Fund will focus on resilient and sustainable urban development, green industry, transport logistics, public transportation and green mobility, energy transition, native forests, water resources, and green services and innovation.