The World Bank´s board of directors approved in December 2022 a $500 million project in Brazil to expand sustainability-linked finance and strengthen the private sector’s capacity to access carbon credit markets and help the country curb deforestation. The initiative, in collaboration with Brazilian state-controlled lender Banco do Brasil, adopts an approach to lending linked to sustainability to help Brazil meet its climate goals and deliver “robust” mitigation benefits, a bank statement said.

Sustainability-linked financing (SLF) allows for lower financing costs when certain environmental, social and governance (ESG) requirements are met by a company but does not require the funds to be used for climate-friendly purposes. At the start of December 2022, the World Bank and its partners launched a global tracking system to clean up the opaque market for carbon credits, the Climate Action Data (CAD) Trust, and help developing countries raise much-needed climate finance quickly and more cheaply.

“Up to 90 million tCO2e in emission reductions are expected by 2030, the equivalent to about 4.5% of what Brazil needs to stay on track with its net-zero commitments,” the World Bank said. The project is also expected to mobilize up to $1.4 billion in private capital through the scale-up of financing by Banco do Brasil and private investors.

Banco do Brasil will be able to offer its clients packages that integrate financing with support to access carbon markets through a “one-stop shop”, as the World Bank explained it. “This will provide Brazilian firms — small- and medium-sized companies in particular — with an accessible end-to-end service starting from measuring their carbon footprint to generating returns from high-integrity carbon credits,” it said.

Excerpts from Steven Grattan, World Bank to lend $500 million to help Brazil meet climate goals, Reuters, Dec. 23, 2022