The Board of directors at the World Bank has approved a $500 million project in Brazil to strengthen the private sector’s capacity to access carbon credit markets and help the country curb deforestation and expand sustainability-linked finance.
Stopping deforestation in the Amazon, which absorbs vast amounts of planet-warming greenhouse gas, is part of Brazilian President-elect Luiz Inacio Lula da Silva’s sweeping plan for the country to reclaim leadership on climate change measures, which were previously abandoned by the Bolsonaro administration.
In collaboration with Brazilian state-controlled lender Banco do Brasil, the initiative 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 do not require the funds to be used for climate-friendly purposes.
Read also: US fails to give money promised for developing countries to ease climate impacts
At the start of December, the World Bank and its partners launched a global tracking system to clean up the opaque market for carbon credits and help developing countries raise much-needed climate finance quickly and more cheaply.
Carbon credits – generated through activities such as planting forests or pulling climate-damaging carbon dioxide from the air – are sold to polluters to offset their emissions as a way of helping them reach net-zero emissions to limit global warming.
According to the World Bank, while about 90 million tCO2e in emission reductions are expected by 2030, a figure that is equivalent to about 4.5% of what Brazil needs to stay on track with its net-zero commitments, 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.
The project adopts an “innovative, outcome-based financing approach” that encourages firms to adopt and implement credible GHG emission reduction plans to reduce their company-wide carbon footprint, as well as linking these firms to high-quality carbon markets, the World Bank said.
Story was adapted from Reuters.
