A landmark deal with Banco do Brasil will help thousands of smallholder farmers in Brazil to farm their land more sustainably.
J.P. Morgan arranged the $800 million loan for Banco do Brasil that will be distributed to farmers across the country. This will fund greater use of no-till farming practices that prevent soil erosion and reduce the need for heavy machinery powered by fossil fuels.
The transaction featured a J.P. Morgan Development Finance Institution assessment, which articulated the sustainable development intentions of the deal and highlighted how it will support the United Nations Sustainable Development Goals (“UN SDGs”) around food security, sustainable agriculture and climate action, including plans to reduce emissions. It forms part of the firm’s target to finance more than $2.5 trillion for climate solutions and sustainable development by the end of 2030.
Climate change has brought huge challenges for Brazil, increasing the occurrence of crop-threatening heatwaves and droughts. The country is the world’s third biggest agricultural producer behind China and the U.S. and is a leading producer of coffee, sugarcane, soybeans, beef and poultry. Its smallholder farmers account for more than 75% of agricultural production and Banco do Brasil is their biggest financier.
Brazil has set a target to reduce greenhouse gas emissions by 53% by 2030 and carbon neutrality by 2050. Agriculture accounts for nearly 40% of Brazil’s total emissions.
“This is a landmark transaction for Brazilian agriculture, supporting the government’s environmental targets and the UN Sustainable Development Goals.”
Rodrigo Carmo
Head of Brazil Global Corporate Banking, J.P. Morgan
“Climate change has made food insecurity and food inflation a reality in recent years,” explained Faheen Allibhoy, global head of multilateral development banks at J.P. Morgan. “Even though Brazil is a leading producer, its agricultural economy is largely connected to global supply chains and exports, meaning there is limited protection for local consumers when prices go up. The deal will help Banco do Brasil with its plans to support more low-carbon farming and the sustainable supply of crops for local communities.”
Loans of up to $2 million will go to smallholder farmers who use conservation agriculture methods, such as no-till practices. This involves seeds being planted directly into undisturbed soil instead of churning the soil with a plow, which helps to reduce soil erosion and retain nutrients. And because these methods do not require a tractor, they also help to cut emissions.
According to the Multilateral Investment Guarantee Agency (MIGA), an arm of the World Bank Group, the loan could finance the cultivation of nearly one million hectares and help avoid almost 12 million tons of greenhouse gas emissions over the deal’s 10-year guarantee period.
“We congratulate Banco do Brasil for this innovative financing and thank MIGA for its support,” said Rodrigo Carmo, head of Brazil Global Corporate Banking at J.P. Morgan. “This is a landmark transaction for Brazilian agriculture, supporting the government’s environmental targets and the UN Sustainable Development Goals.”
This deal is the biggest-ever MIGA deal in Latin America under its Non-Honoring of Financial Obligations guarantee program.
John Meakin, global head of export and agency finance at J.P. Morgan, added: “This MIGA financing is key to support Banco do Brasil’s sustainability plan to promote good agricultural practices and low-carbon agriculture, and showcases our commitment to Brazil and its leading agricultural sector.”
Learn more about J.P. Morgan in Brazil, J.P. Morgan’s Development Finance Institution and our approach to ESG.
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