AGRI3 Fund and Rabobank have launched the Renova Pasto initiative providing long-term financing for cattle farmers to support the transition to more sustainable farming practices
Impact fund AGRI3 Fund (AGRI3) and Dutch bank Rabobank have launched a new initiative to provide financing to cattle farmers in Brazil in order to restore degraded pasturelands and protect and restore critical forest ecosystems.
In addition to providing cattle farmers in the Cerrado and Amazon regions of Brazil with 10 year loans to sustainably renovate degraded pastureland, the Renova Pasto initiative offers farmers a technical assistance (TA) facility managed by Dutch social enterprise IDH, THE Sustainable Trade Initiative (IDH), which includes the provision of local advice for implementing good agricultural practices and monitoring of impacts.
The aim of the initiative is to help farmers generate higher yielding production while also accelerating compliance with Brazil’s Forest Code, improving forest conservation and restoring forest areas on cattle farms.
The first pilot loan has been made to a small family-run cattle farm ‘Juliana Glaucia Xavier’ in the southern part of Mato Grosso state in central Brazil, who AGRI3 says could choose from among five standard areas of assistance being offered as part of the initiative; cattle management and rotational grazing techniques, water infrastructure design, pastureland renovation, the restoration of Areas of Permanent Protection (APP) and legal reserve restoration.
Speaking to Impact Investor Francisco Silva, investment advisor to the AGRI3 Fund, said the combination of the extended tenor of the loans provided by Rabobank, supported by partial guarantees from AGRI3, and the provision of the TA, made Renova Pasto an attractive proposition for farmers “along with the opportunity to be recognised as leading sustainable cattle farmers.”
Silva explained that by making existing pastureland more productive, you took away the need to deforest new areas and that one of the KPIs of the initiative was to increase the rate of cattle per hectare, in the case of the pilot project from 1 to 4 heads.
“The aim of the program is to facilitate the restoration of existing pasture lands, improving productivity and therefore reducing the requirement of the farmer to expand into forest areas”, he added.
Forest conservation
Kate Mathias, head of impact and ESG for AGRI3, explained that all farmers in Brazil were required to comply with the Forest Code, but that some had “compliance gaps” because of the lack of finance to enable them to protect areas in line with the requirements.
She said that “this protection may require the fencing of APP areas or legal reserves to protect them from cattle or to procure forest areas for protection. A proportion of the loans will be specifically related to finance those needs..”
Mathias said that farmers are also given an Environmental and Social Action Plan, a contractual obligation, which is adapted to the specific ESG gaps identified with specific clients. In the case of the pilot project four time-bound action points were identified; accelerating compliance with the forest code using the funds allocated, development of a comprehensive pasture restoration plan, improving traceability and developing a communications channel for workers and communities.
Farmers are also required to comply with a number of conditions, including a zero deforestation commitment across all their farms, beyond just those supported directly by the financing.
Measuring impact
Mathias said all recipients of the loans were required to report on a range of KPIs on an annual basis including reporting on the area under forest conservation or restoration, degraded pasture land restored, increased productivity of the land, and on social impacts such as job creation, training and development, and community engagement. AGRI3 has also developed an impact monitoring tool that takes a baseline and conducts annual reviews using remote sensing.
AGRI3 Fund is a blended finance instrument which works by providing guarantees to commercial banks and financing institutions such as Rabobank, who in turn provide loans to agribusinesses that work to prevent deforestation, stimulate reforestation, contribute to efficient sustainable agricultural production, and improve rural livelihoods. It is co-managed by investment management and advisory firm FOUNT and impact incubator and fund manager Cardano Development and aims to facilitate $1bn in finance for sustainable agriculture businesses in middle and low-income countries.
