# Rainforest to Revenue: Brazil’s Carbon Market Opening

An episode of [Switched On](https://invisiblenetwork.ai/podcast/1469286286), 17 Apr 2025, 37 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/01a10738-3608-4dec-883c-ae3c00026b36/2b5d6fea-d745-4eb2-815c-b2c2007e858b/audio.mp3?utm_source=Podcast&in_playlist=6d114f63-833d-4b78-bbf5-ae3c00026b44

Brazil, the host nation of this year’s COP30, looks set to be at the center of most major carbon market developments in 2025. The country is working hard to develop its domestic carbon market, and could quickly leapfrog others in terms of scale and impact, with the ramping up of its nature-based carbon supply for international trading. At the 2025 BloombergNEF Forum Sao Paulo, Kyle Harrison, BNEF’s Head of Environmental Markets, moderated a panel titled “Brazil’s Role in the Evolution of Global Carbon Markets.” This episode brings listeners that panel, which featured Thiago Picolo, chief executive officer at re.green; Fabiana Alves, chief executive officer at Rabobank; Fabio Galindo, chief executive officer at Future Climate; and Angela Pinhati, chief sustainability officer at Natura. Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal or on bnef.com Links to BNEF Forums and Summits: Link to BNEF's Regional Forums page - https://bbgevent.app/bloombergnef-forum-2024/#/ Link to BNEF's Flagship Summits page - https://about.bnef.com/summit/ See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: This is Tom ronnans Reese and you're listening to Switched
[0:02] Speaker 1: on the BNF podcast, and today we bring you a
[0:04] Speaker 1: recording from our Bloomberg NEF Forum Salpaolo, which took place
[0:08] Speaker 1: on the first of April. The panel feature on today's
[0:10] Speaker 1: show is titled Brazil's Role in the evolution of Global
[0:13] Speaker 1: Carbon Markets. Twenty twenty five is likely to see Brazil
[0:16] Speaker 1: at the center of most major carbon market developments, with
[0:19] Speaker 1: the nation hosting COP thirty later this year. They've been
[0:22] Speaker 1: working hard to develop their domestic carbon market and given
[0:25] Speaker 1: the natural resources at their disposal, including vast swaths of
[0:28] Speaker 1: the Amazon rainforest, they're looking to ramp up their nature
[0:30] Speaker 1: based carbon supply for international trading. But what is needed
[0:33] Speaker 1: to ensure Brazil can be the hub for a high
[0:35] Speaker 1: quality nature based carbon credit supply and what role do
[0:38] Speaker 1: they play in a global un regulated carbon market. On
[0:41] Speaker 1: today's show, the panelists discuss how best to get people
[0:43] Speaker 1: excited about carbon credits, the types of credits the buyers
[0:46] Speaker 1: are looking for, and the role that banks can play
[0:48] Speaker 1: in the carbon market. The panelists include Tiago Piccolo, Chief
[0:52] Speaker 1: executive Officer, at Ari Green, Babiana Alvez, chief executive officer
[0:57] Speaker 1: at Rabobank, Fabio Galindo, chief executive officer at Future Climate,
[1:01] Speaker 1: and Angela Pinnati, chief sustainability officer at Natura. The panel
[1:06] Speaker 1: was moderated by Kyle Harrison, Bloomberg and EF's head of
[1:09] Speaker 1: Environmental Markets Research. For more information on BNF's events, including
[1:13] Speaker 1: our upcoming BNF Summit in New York on the twenty
[1:15] Speaker 1: ninth and thirtieth of April, and to view recordings from
[1:17] Speaker 1: our previous events, had to about BNF dot com slash summits.
[1:31] Speaker 2: Thank you all so much. I love the diversity that
[1:34] Speaker 2: we have on this panel. I think we cover the
[1:36] Speaker 2: entire value chain from the development of a project all
[1:39] Speaker 2: the way to the end user. Right that off ramp, Jiago,
[1:42] Speaker 2: I want to throw it right back to you actually,
[1:44] Speaker 2: so tell us what does a good carbon credit project
[1:47] Speaker 2: look like, especially in nature based solutions.
[1:49] Speaker 3: What characteristics do you need to emphasize?
[1:52] Speaker 4: Well, I guess it could start talking a little bit
[1:54] Speaker 4: about the characteristics of the project itself. And there's many
[1:58] Speaker 4: kind of traditional words that I'm sure some of you
[2:02] Speaker 4: have heard about. So the project needs to have a
[2:05] Speaker 4: clear additionality. It must be obvious and very well proven.
[2:09] Speaker 4: To whoever's buying that that your project would not go
[2:12] Speaker 4: forward unless it had the carbon credit mechanism as a
[2:15] Speaker 4: way to fund it. You need to show that you
[2:18] Speaker 4: have a strong claim to permanence, that whatever you're doing
[2:21] Speaker 4: is going to stay there for a very long time,
[2:23] Speaker 4: is not going to be reverted easily. And you also
[2:27] Speaker 4: increasingly need to show that the project comes with a
[2:30] Speaker 4: lot of co benefits. Not only are you se questioning
[2:34] Speaker 4: carbon from the atmosphere, but you're also giving a positive
[2:37] Speaker 4: contribution in other aspects, such as promoting an increase in
[2:44] Speaker 4: biodiversity or generating sustainable opportunities for the communities around. But
[2:49] Speaker 4: I would complement that a little bit. I think the
[2:52] Speaker 4: answer that I just gave to you right now, it's
[2:54] Speaker 4: a very obvious answer. It's the traditional one that you
[2:57] Speaker 4: get if you ask chat GPT, for example.
[3:00] Speaker 5: I think there's one thing that makes a lot of.
[3:02] Speaker 4: Differences, sort of the level of professionalism that your company has.
[3:08] Speaker 5: You were showing this graph up.
[3:09] Speaker 4: Here where you plotted the carbon intensity of the companies
[3:13] Speaker 4: and the profitability, and regardless of which one of those
[3:17] Speaker 4: squares you choose to play in, these are all very
[3:20] Speaker 4: large companies. These are companies that are used to buying
[3:23] Speaker 4: very large amounts of lots of products from very professional suppliers.
[3:27] Speaker 5: And I think, at least in.
[3:28] Speaker 4: The restoration space, traditionally this was the sector that was
[3:32] Speaker 4: led by entrepreneurs, ecologists, people that had a real passion
[3:38] Speaker 4: for actually nature, which is extremely important, but not necessarily
[3:43] Speaker 4: we're thinking about building these very large professional companies. They
[3:46] Speaker 4: had more of a philanthropic where ecological bent to it.
[3:49] Speaker 4: I think today, in order to be a player in
[3:51] Speaker 4: this market, you also need to have that corporate structure.
[3:54] Speaker 4: You need to have executives and finance people and lawyers
[3:59] Speaker 4: and financing struct You need to understand the contract so
[4:01] Speaker 4: that you can sit across from one of these big
[4:03] Speaker 4: companies and actually negotiate I'm not going to say on
[4:06] Speaker 4: an equal to equal basis.
[4:07] Speaker 5: But at a level sort of a level playing ground.
[4:10] Speaker 4: I think this adds a lot of credibility and gives
[4:12] Speaker 4: a lot of a comfort to whoever's negotiating with you.
[4:15] Speaker 6: Yeah.
[4:16] Speaker 2: No, I think that's a really great point. I know,
[4:18] Speaker 2: like some of the media outlets have even referred to
[4:20] Speaker 2: some of the kind of legacy company companies in this
[4:22] Speaker 2: space as carbon cowboys, right, And how this market is
[4:25] Speaker 2: closer to the wild West, for example, so that that
[4:28] Speaker 2: level of professionalism and that corporate structure is really important.
[4:31] Speaker 4: And the carbon cowboys, it's sort of of a negative
[4:35] Speaker 4: bent to it, and there's certainly that type of actor,
[4:38] Speaker 4: but I think there's a lot of really.
[4:39] Speaker 5: Good actors.
[4:41] Speaker 4: Who are you know, ecologists or had it in their
[4:45] Speaker 4: hearts that they wanted to do this, And this is
[4:47] Speaker 4: very important. You need purpose in the companies. We have
[4:50] Speaker 4: tons of people have dedicated their own whole life to it.
[4:52] Speaker 4: But I think what we need to do and what
[4:54] Speaker 4: we try to do with agree is sort of combine
[4:56] Speaker 4: that sense of purpose, that pioneering spirit, that love for nature,
[5:00] Speaker 4: with a professional kind of management style as well in
[5:03] Speaker 4: order to do these big deals.
[5:04] Speaker 2: Yes, absolutely, And Fabiana maybe going to you now. So
[5:09] Speaker 2: Rabobank is looking to be an anchor investor in a
[5:12] Speaker 2: large scale nature restoration project in Brazil. What characteristics do
[5:15] Speaker 2: you all look for when you're thinking about those projects.
[5:19] Speaker 7: Yes, indeed, we are willing to be the anchor investor
[5:22] Speaker 7: in this large scale restoration project, preferably be on the
[5:25] Speaker 7: Amazon BioMA for four reasons. First, we want to enhance
[5:33] Speaker 7: the fact that large scale restoration projects are viable and second,
[5:37] Speaker 7: a's credible investors we want to contribute to if unlocking
[5:42] Speaker 7: the Cabo market offering carbo integrity and high quality. Third,
[5:49] Speaker 7: we believe that restoration and preservation are key for our
[5:53] Speaker 7: climate resilience and therefore very important for our clients business
[5:58] Speaker 7: resilience as well. Fourth, because this type of project can
[6:04] Speaker 7: have an incredible not only environmental but social impact, and
[6:09] Speaker 7: especially on Amazon, we deem that this is key to
[6:12] Speaker 7: hout deforestation. So together with Biomas, the company in which
[6:18] Speaker 7: we are shareholders, together with other financial institutions and large
[6:24] Speaker 7: companies as well, we are trying. We are looking at
[6:29] Speaker 7: and originating a degradated landing Amazon where we can provide
[6:35] Speaker 7: all these elements, and we are also looking at investors
[6:43] Speaker 7: to join us on that mission. So indeed, we are
[6:48] Speaker 7: really serious about offering the first fifty million dollars for
[6:54] Speaker 7: this project. But you know, in order to deliver all
[6:59] Speaker 7: these elements, we need more investors to come together, and
[7:04] Speaker 7: that's the main purpose, like we need to help to
[7:07] Speaker 7: unlock this market. Of course, these projects will have all
[7:13] Speaker 7: the requirements that the chag will just mentioned, but it's
[7:18] Speaker 7: a great move. I think it's a bold move that
[7:21] Speaker 7: Rubble Bank is intending to and we hope that we
[7:27] Speaker 7: will be able to have This project is structured to
[7:30] Speaker 7: be announced on the cop the upcoming copy in Brasum.
[7:36] Speaker 2: And you mentioned those other investors. How do you get
[7:39] Speaker 2: them excited about a project like this, right, you do
[7:42] Speaker 2: have a you know, a large bank with a great
[7:44] Speaker 2: reputation in rubber Bank being that kind of anchor investor,
[7:48] Speaker 2: But how else do you get them excited about carbon
[7:50] Speaker 2: credits specifically and getting involved?
[7:53] Speaker 7: Well, I think all the aspects that Chago mentioned basically
[7:59] Speaker 7: requirement that you need to prove. Of course, you know,
[8:05] Speaker 7: being able to execute your project is also key, uh
[8:11] Speaker 7: and providing the you know, the the legal and fund
[8:16] Speaker 7: diary comfort is also one of the main challenges that
[8:19] Speaker 7: we have in Brazil for this type of projects. But overall,
[8:24] Speaker 7: I think there is an aspect regarding with regarding to Brazil.
[8:32] Speaker 7: I mean, as you mentioned, Brazil it's a key player
[8:35] Speaker 7: on this on this market, so we need to use
[8:40] Speaker 7: our connection power in the rubble Bank network to attract
[8:44] Speaker 7: off takers and to attract other investors because Brazil must
[8:51] Speaker 7: be a main player in this market.
[8:55] Speaker 2: Right well, speaking of main players in this market, Angela,
[8:58] Speaker 2: I would love to turn it over to you and
[9:00] Speaker 2: look at this from the buyer's perspective. Now, So in
[9:03] Speaker 2: nota sure A's long history of purchasing carbon credits, what
[9:06] Speaker 2: are the characteristics that you.
[9:07] Speaker 3: All look out for?
[9:09] Speaker 8: Yes, for me, the first thing is to guarantee a
[9:12] Speaker 8: very good governance and accountability inside of the company, you know,
[9:16] Speaker 8: guaranteeing that you have a clear footprint for your carbon
[9:20] Speaker 8: but also understanding how much you're going to upset and
[9:23] Speaker 8: how the reports related with that. But specifically for the projects,
[9:29] Speaker 8: I think the key criteria is to guarantee permanent removal
[9:34] Speaker 8: of the emissions, removal or reduction of these emissions. The
[9:38] Speaker 8: second one we look for clear core benefits for people
[9:44] Speaker 8: and biodiversity, and also we understand that infect people, biodiversity
[9:49] Speaker 8: and climate walk altogether in this history. The third one
[9:54] Speaker 8: is to improve income for the local communities in order
[10:00] Speaker 8: to strength the social development for people. And also one
[10:06] Speaker 8: that is important and Fablus is going to talk about
[10:09] Speaker 8: this is also we try to invest in low carbon
[10:14] Speaker 8: new technologies projects as well.
[10:17] Speaker 9: Besides that, for us is crucial that the projects that.
[10:22] Speaker 8: Are related with nature based solutions, giving the roots of
[10:27] Speaker 8: our company. So, as I said previously, this project that
[10:31] Speaker 8: we have of in seting for carbon in our partner communities.
[10:38] Speaker 8: The idea is up to twenty thirty to have fifty
[10:42] Speaker 8: percent of our projects returning these investments in projects to
[10:48] Speaker 8: improve and to support the conservation of standing forest within
[10:54] Speaker 8: our communities.
[10:56] Speaker 2: And that co benefits point is so important. I think
[10:59] Speaker 2: it's so often overlooked in this market as well. Right,
[11:02] Speaker 2: we spend so much time thinking about whether the tree
[11:05] Speaker 2: is actually sequestering carbon.
[11:07] Speaker 3: But if you look at a plot of land.
[11:08] Speaker 2: With a tree and you look at the overall stack
[11:10] Speaker 2: of theoretical revenue sources, sure a large chunk of that
[11:14] Speaker 2: comes from carbon sequestration. But as you mentioned, Angela, there's
[11:17] Speaker 2: also benefits to local communities. There's preservation of biodiversity, there's
[11:21] Speaker 2: agriculture co benefits. Right, all of these things add up,
[11:25] Speaker 2: and we need to take into account all of these
[11:26] Speaker 2: things in order to again scale up markets like Brazil.
[11:29] Speaker 1: Exactly.
[11:30] Speaker 9: That's true.
[11:32] Speaker 2: So we've spent obviously a lot of time talking about
[11:34] Speaker 2: nature based solutions Fabio. Obviously your organization is looking at
[11:38] Speaker 2: many other different sources of carbon credits.
[11:40] Speaker 3: Can you walk us through some of those in a
[11:42] Speaker 3: little bit more detail.
[11:44] Speaker 6: Yes, just to get the last point here, to be
[11:46] Speaker 6: part of the discussion when we talk about carbon markets,
[11:51] Speaker 6: I believe in terms of global carbon marked or the
[11:54] Speaker 6: Brazilian carbon marked, we need to have in mind what
[11:59] Speaker 6: kind of carbon market we are talking about. With carbon
[12:02] Speaker 6: market we are talking about because the Guardian article made
[12:06] Speaker 6: a very huge watershed between the one point zero carbon
[12:10] Speaker 6: marked and the two points zero carbon marked. The one
[12:13] Speaker 6: point zero was made by low governance, low traceability, low transparency,
[12:21] Speaker 6: a lack of KPIs and so on, and that's the
[12:25] Speaker 6: point what we have very large scandals on it. But
[12:29] Speaker 6: after that, since twenty twenty one, we have a two
[12:33] Speaker 6: point zero carbon marked. We have a lot of new
[12:36] Speaker 6: companies established since twenty twenty one, a Green Future, Climbed, Biomas,
[12:43] Speaker 6: Mumbaik and a lot of the one.
[12:45] Speaker 9: We have a new supply chain.
[12:47] Speaker 6: We have a new framework because ICVCM, the Inteprety Comes
[12:52] Speaker 6: for Voluntary Carbon Market and Core Carbon Principles are creating
[12:57] Speaker 6: a good framework.
[12:58] Speaker 9: To all the standards. We have new methodologies.
[13:01] Speaker 6: We have the rating agencies madeing a very good job
[13:05] Speaker 6: in terms of quality. We have a lot of different
[13:09] Speaker 6: players work in this market. So when we talk about
[13:13] Speaker 6: carbon market, we need to answer these question which carbon
[13:17] Speaker 6: market are you talking about? Because the first one have
[13:20] Speaker 6: some characterists, but the second one is moving forward very well.
[13:25] Speaker 9: We are not.
[13:27] Speaker 6: Done because that's a rolling basis work, but we are
[13:32] Speaker 6: doing a very good job in Brazil and all around
[13:36] Speaker 6: the world. So it's good to be in mind which
[13:39] Speaker 6: kind of carbon market we are talking about. And in
[13:43] Speaker 6: terms of Portofolio, I believe Kyo Brazil could play a
[13:49] Speaker 6: very very.
[13:49] Speaker 9: Good role as a global powerhouse.
[13:52] Speaker 6: Supplier because we have in our development economics sector three
[13:58] Speaker 6: very huge sector. First one, it's our vocation in nature
[14:03] Speaker 6: based solutions projects conservation for three hundred million actors of
[14:10] Speaker 6: standing forests and restoration are kind of one hundred million
[14:14] Speaker 6: actors of debradated pastures. So it's very huge when we
[14:20] Speaker 6: talk about nature based solutions products. But it's not only
[14:23] Speaker 6: not only nature based solutions products. Brazil have a very
[14:28] Speaker 6: huge sector in terms of energy transition, and we have
[14:32] Speaker 6: the possibility to create and generate carbon credits on solar, wind, biofuels, biogas,
[14:41] Speaker 6: waste of energy, green hydrogen, sustainable aviation fuels, all switched
[14:48] Speaker 6: fossil fuels sources could generate carbon credits in good standards
[14:53] Speaker 6: and good methodology, and Brazil could play a very pivot
[14:58] Speaker 6: point role in terms of agribusiness because we could be
[15:03] Speaker 6: the first one in terms of agriculture land management, especially
[15:08] Speaker 6: if we bet a lot in terms of agro forests
[15:12] Speaker 6: and in terms of regenerative agriculture. And I would like
[15:17] Speaker 6: just to highlight three different projects that we are running
[15:21] Speaker 6: here in Brazil.
[15:22] Speaker 9: The first one is the first back project.
[15:25] Speaker 6: In Latin America bio energy, carbon capture and storagy in
[15:29] Speaker 6: Mato Grosso State. The second one is a huge regenerative
[15:34] Speaker 6: agriculture with a huge bank here in Brazil. And the
[15:37] Speaker 6: third one is a spoiler. It's the partnership between Natura
[15:41] Speaker 6: and Future Climate running the biochar agenda here in Brazil,
[15:45] Speaker 6: CO investing, CO developing not just to remove all carbon
[15:49] Speaker 6: credits to the atmosphere, but much more than this, investing
[15:54] Speaker 6: on the economicy and social development of poor region here
[15:58] Speaker 6: in our country.
[16:00] Speaker 9: That's the overview, and.
[16:01] Speaker 6: That's why Brazil could be divisiversified powerhouse of carbon credits
[16:07] Speaker 6: for export to the world.
[16:09] Speaker 2: Yeah, and I think the word you used before methodologies
[16:11] Speaker 2: is really key here, right, because there's all these theoretical
[16:14] Speaker 2: sources of carbon credit creation, and many of them are
[16:17] Speaker 2: completely legitimate, but unless you have some type of scientific
[16:20] Speaker 2: framework and a standardized framework for creating those, you're still
[16:24] Speaker 2: going to run into some of those reputational risks, right,
[16:26] Speaker 2: And so I think that's going to be kind of
[16:28] Speaker 2: you know, you mentioned VCM two point zero. I think
[16:30] Speaker 2: that could be VCM two point five is expanding these
[16:33] Speaker 2: methodologies to really, you know, kind of look into some
[16:35] Speaker 2: of these new areas fabio. Another thing that you mentioned before,
[16:39] Speaker 2: obviously there's this little Guardian article that came out a
[16:41] Speaker 2: couple of years ago. What it said is that ninety
[16:44] Speaker 2: percent of rainforest projects that we're creating carbon credits, we're
[16:47] Speaker 2: effectively creating bogus ones. And that led to a massive
[16:51] Speaker 2: hit in the reputation of the voluntary carbon credit market.
[16:54] Speaker 2: So Angela, I want I want to go back to
[16:56] Speaker 2: you now, as as a public company, right that you
[16:58] Speaker 2: need to go to your investors, you need to go
[17:00] Speaker 2: to management and say, well, we need to maintain this
[17:02] Speaker 2: carbon neutrality goal that we continue to do or continue
[17:06] Speaker 2: to hit. How has that conversation changed over time? How
[17:09] Speaker 2: is perception both publicly and then internally around carbon credits
[17:13] Speaker 2: change for your organization.
[17:15] Speaker 8: Well, firstly, we firstly we have lots of investors that
[17:19] Speaker 8: are very focused on the sustainability gender and also it's
[17:23] Speaker 8: important the second thing I think for Natura this is
[17:27] Speaker 8: always come as a challenge, that is to transform social
[17:31] Speaker 8: environmental challenges into business opportunities. So our agenda is completely
[17:37] Speaker 8: integrated to the business now. So when I'm talking about
[17:41] Speaker 8: investing communities and implementing nineteen small factories in these cooperatives
[17:47] Speaker 8: to produce soio for our supply chain, this is not
[17:51] Speaker 8: only reducing carbon foot printing but also contributing to conserve
[17:59] Speaker 8: for the conservation of two million actors of the standing forest.
[18:03] Speaker 8: But it also generated a new total new line of
[18:07] Speaker 8: products that is echos line in Brazil that has not.
[18:11] Speaker 9: Heaven us bigger than one.
[18:13] Speaker 8: Billion hair eyes per year. So I think for the
[18:17] Speaker 8: business it's crucial to have the discussions of sustainability together
[18:25] Speaker 8: with the financial aspectors integrated to the business. No, and
[18:30] Speaker 8: in my perspective, I think how the regulatory agenda that
[18:34] Speaker 8: we are facing, such as i FRS that is coming
[18:38] Speaker 8: will help us even more and further to connect these
[18:43] Speaker 8: two agendas, because you are going to talk about risks
[18:46] Speaker 8: and opportunities facing the impacts in the business. So it
[18:52] Speaker 8: couldn't be just a sustainability to ideology, but it got
[18:59] Speaker 8: to be connected with the business absolutely.
[19:02] Speaker 2: And that point about risk is so big because that
[19:04] Speaker 2: goes far beyond just carbon credits.
[19:06] Speaker 3: Right.
[19:07] Speaker 2: The sustainability and ESG discussion within organizations has very much
[19:11] Speaker 2: turned to one that's thinking about risks and opportunities, right,
[19:14] Speaker 2: rather than just carbon emissions. As my colleague Tiffin mentioned
[19:16] Speaker 2: earlier Chiago, maybe jumping back to you now, I showed
[19:20] Speaker 2: that scatterplot earlier of kind of the companies in the
[19:23] Speaker 2: bottom right, the Microsoft's of the world, if you will,
[19:25] Speaker 2: that will always buy these carbon credits. I think the
[19:28] Speaker 2: concern for a lot of folks in the market is
[19:30] Speaker 2: that every time an article from the Guardian or another
[19:32] Speaker 2: organization comes out, one of those blue bubbles disappears from
[19:35] Speaker 2: that chart, right, because that demand goes away due to
[19:38] Speaker 2: reputational risk. So what is your organization doing, and more broadly,
[19:42] Speaker 2: how can Brazil unlock that second tier of companies that
[19:45] Speaker 2: are maybe less profitable and have higher emissions.
[19:50] Speaker 4: So before you know addressing your question, I think the
[19:53] Speaker 4: first thing I would say is, you know those blue
[19:56] Speaker 4: dots in the lower right hand side of the graph
[19:59] Speaker 4: where the big tech and pharmase that's a big market
[20:03] Speaker 4: by itself. A company like Microsoft has been working feverishly
[20:07] Speaker 4: at reducing their footprint. They're very serious about it. You know,
[20:10] Speaker 4: not only do they buy a lot of high quality
[20:13] Speaker 4: projects like ours, but they're also trying to reduce their emissions.
[20:18] Speaker 4: Yet over the last few years, I think the last
[20:20] Speaker 4: three or four years, their emission's gone up thirty percent,
[20:23] Speaker 4: in large part because of the investments they are making
[20:25] Speaker 4: in data centers for AI. So I don't want to
[20:27] Speaker 4: minimize the size of that market because it's already very large.
[20:31] Speaker 4: It can support several regreens. But I do agree that
[20:34] Speaker 4: if we think bigger, if we think about a global market,
[20:37] Speaker 4: if we think about billions and eventually trillions, we're going
[20:40] Speaker 4: to need a lot of those blue dots, a lot
[20:41] Speaker 4: of those companies to come online. And I think there's
[20:45] Speaker 4: two things that need to happen. I think first is
[20:48] Speaker 4: we need to increase the cost of inaction, you know,
[20:52] Speaker 4: either through regulation or even through pressure from stakeholders. It
[20:57] Speaker 4: needs to become you know, a bigger part of a
[21:00] Speaker 4: company's mandate to reduce their emissions. Today, I think even
[21:04] Speaker 4: with some of the political climate that we're facing, companies
[21:07] Speaker 4: are even having more of a justification to sit on
[21:10] Speaker 4: the sidelines and wait until things are sorted out. So
[21:14] Speaker 4: I think we need to connect you know, the cost
[21:17] Speaker 4: of carbon emissions a little bit more to the operations
[21:20] Speaker 4: of the company and you know, either through stakeholder pressure
[21:24] Speaker 4: or through regulation, get them to act. By doing that,
[21:28] Speaker 4: you know, those blue dots cannot disappear from the graft.
[21:30] Speaker 3: They need to be there.
[21:32] Speaker 4: But I don't think it's it can be magic either, right,
[21:34] Speaker 4: I mean, it needs to have some sort of financial sense,
[21:38] Speaker 4: and that's where I think we need to evolve also
[21:41] Speaker 4: from a cost perspective. And I'll stay within my lane
[21:45] Speaker 4: here and talk about restoration. This is an activity that
[21:48] Speaker 4: has never been done at a quote unquote industrial scale.
[21:53] Speaker 4: This is something that in the past has always been done,
[21:55] Speaker 4: you know, in a more amateurish kind of way.
[21:57] Speaker 5: And if we.
[21:58] Speaker 4: Look in the last fifty years, pretty much every commodity
[22:02] Speaker 4: at which Brazil is a leader at, take for example, eucalyptus,
[22:06] Speaker 4: which we talk a lot about the productivity of a
[22:10] Speaker 4: hector of eucalyptus has gone up by a factor of
[22:12] Speaker 4: four to five in the last fifty years. We've learned
[22:15] Speaker 4: how to grow eucalyptus a lot better than we used
[22:17] Speaker 4: to do in the past. I think we can do
[22:19] Speaker 4: the same too to growing native forests. You know, epei
[22:25] Speaker 4: or jateauba or jikichibai grows the same way today as
[22:28] Speaker 4: it grew in fifteen hundred and peduavires cap landed here
[22:32] Speaker 4: and I think there's lots that we can do through science,
[22:35] Speaker 4: through kind of continuous improvement of our operations and management
[22:38] Speaker 4: in order to make that a lot more efficient and
[22:40] Speaker 4: passed some of the cost onto the project itself. Another
[22:44] Speaker 4: important factor just to finish is financing. We haven't talked
[22:48] Speaker 4: a lot about this. I know the previous panel here
[22:50] Speaker 4: talked a lot about financing. A very large portion of
[22:53] Speaker 4: my costs is capital costs. You know, these most of
[22:57] Speaker 4: these carbon projects there are capital intensive. They have you know,
[23:01] Speaker 4: paybacks that are long. I invest a lot in the
[23:04] Speaker 4: first year, first two years in the project, and I
[23:06] Speaker 4: generate a carbon captured the last fifty years. So the
[23:09] Speaker 4: lower those capital costs are, the lower I can charge
[23:13] Speaker 4: for you know, the asset that I'm generating, and therefore,
[23:17] Speaker 4: the more companies can participate in actually buying credits and
[23:20] Speaker 4: doing their part, they're part of the responsibility for reducing emissions.
[23:25] Speaker 2: Yeah, these are all great points, and you can make
[23:27] Speaker 2: very similar parallels, for example, to the scaling up of
[23:30] Speaker 2: clean energy procurement among corporations around the world. Right that
[23:34] Speaker 2: cost of capital, access to projects, right government governance structure.
[23:39] Speaker 3: All that's really important.
[23:40] Speaker 5: And just a compliment. Yesterday I was at Petrobras.
[23:43] Speaker 4: There was a big announcement between Petrobras and BNDS where
[23:46] Speaker 4: Petrobize is going to open a public bid where they're
[23:50] Speaker 4: willing to buy i think five million tons of carbon
[23:54] Speaker 4: with twenty five year contracts, you very standardized contract and
[24:00] Speaker 4: where BNDS is coming in with resources from the beginning
[24:04] Speaker 4: from Funduklima at very attractive rates. So that type of
[24:07] Speaker 4: thing will obviously crowd in more investors, will crowd in
[24:11] Speaker 4: more companies that will seek to participating in this bid
[24:14] Speaker 4: and will help us get the wheels moving the same
[24:16] Speaker 4: way they did it, and they use this example a lot.
[24:18] Speaker 4: A lot of the people that were there announcing this
[24:20] Speaker 4: project were pioneers in the renewable energy. They talk about
[24:24] Speaker 4: Prayinfa and what they did with solar power twenty years ago,
[24:27] Speaker 4: and it was a very similar kind of.
[24:29] Speaker 2: Process exactly the power purchase agreement model, and now you
[24:32] Speaker 2: have the emission reduction purchase agreement. Maybe, staying on the
[24:35] Speaker 2: topic of banks and financing, Fabiana, can you talk a.
[24:39] Speaker 3: Little bit more.
[24:39] Speaker 2: I think when you think about a bank's role within
[24:42] Speaker 2: the carbon market, there's so many roles that it can play, right.
[24:45] Speaker 3: It could be a potential buyer of.
[24:46] Speaker 2: Credits, there's a trading desk element, there's an advisory perspective.
[24:50] Speaker 2: What are some of the challenges that you all have
[24:52] Speaker 2: faced and how have those changed over time? But then
[24:54] Speaker 2: also what are you hearing from your clients on this market, right,
[24:57] Speaker 2: has their perception of the market changed?
[25:00] Speaker 4: Well?
[25:02] Speaker 7: First of all, I think the financial industry is highly regulated,
[25:07] Speaker 7: right so, and it has been called to incorporate sustainability
[25:12] Speaker 7: into the traditional risk return balance. But in order to
[25:17] Speaker 7: deliver that, we need to count on transparency, on a
[25:21] Speaker 7: regulatory framework, and especially on green washing guardios. So if
[25:29] Speaker 7: you take the sustainability perspective, well, the investments and the
[25:34] Speaker 7: projects being large scale projects or being projects from our clients.
[25:41] Speaker 7: By the way, we are focused on the agribusiness in pursue,
[25:44] Speaker 7: so many of our clients have must do some restoration
[25:50] Speaker 7: and preservation projects by the FOE pull the projects they
[25:56] Speaker 7: need to demonstrate their impact. Right that we need proper
[26:01] Speaker 7: taxonomy and proper regulation to be clear and to be transparent.
[26:07] Speaker 7: And from the risk perspective, not only the project execution capabilities,
[26:12] Speaker 7: but the regulatory framework is it due to be improved
[26:16] Speaker 7: in this country. Proper pro public data, legal and fungiary
[26:23] Speaker 7: safety are basic requirements that are not fully met yet.
[26:29] Speaker 7: Land ownership and compliance especially are critical for integrity and
[26:34] Speaker 7: Brazil has not yet finalized its car it's land registration
[26:39] Speaker 7: so this definitely can be an impediment to project financing
[26:46] Speaker 7: pipeline to take off, especially large scale projects which bring
[26:53] Speaker 7: you know, additional risk and returns. The third aspect, it's
[27:00] Speaker 7: the economic feasibility. Of course, the carbon prices needs to
[27:03] Speaker 7: better reflect the impact of those projects to assure proper returns.
[27:09] Speaker 7: So as much as the financial industry is being called
[27:13] Speaker 7: the once and has the opportunity to step into this
[27:16] Speaker 7: equation bringing the sustainability to the strategic level of our
[27:23] Speaker 7: investments and also bringing these to our clients as a
[27:30] Speaker 7: new license to operate. We still face many challenges to
[27:37] Speaker 7: be bold on that segment. Our clients perception is also
[27:44] Speaker 7: related with that cable one point zero and two point zero.
[27:49] Speaker 7: They are really willing to see the cabin two point
[27:52] Speaker 7: zero taking off and heavy their initiatives reflected the impact
[28:00] Speaker 7: of their initiatives reflected on a revenue stream, which is
[28:04] Speaker 7: not fully the case yet. So all you know, I
[28:10] Speaker 7: think the financial industry in Brazil will have a major role,
[28:15] Speaker 7: of course, but also it is our job and it
[28:22] Speaker 7: is expected that we coordinate some efforts in order to
[28:28] Speaker 7: make some systemic changes that are necessary for us to
[28:33] Speaker 7: play our role in that segment.
[28:37] Speaker 2: Yeah, and the systemic changes is really important, right, because
[28:40] Speaker 2: I think that's a perfect segue to broaden this discussion
[28:42] Speaker 2: out beyond just the voluntary market for corporations and start
[28:46] Speaker 2: to think about some of those other off rams that
[28:48] Speaker 2: I mentioned before. Right, So of course he article sets
[28:51] Speaker 2: et cetera.
[28:52] Speaker 3: Fabio.
[28:53] Speaker 2: Back back to you. You mentioned that you guys have offices.
[28:56] Speaker 2: Now in the UK, you have an office and I
[28:59] Speaker 2: think in the Middle East. What are your thoughts on
[29:02] Speaker 2: Article six Corsia. Are you pulish on future demand from
[29:06] Speaker 2: those markets, and then what can Brazil best due to
[29:09] Speaker 2: position itself for those markets.
[29:11] Speaker 6: Well, I believe in the voluntary carbon market side, we
[29:15] Speaker 6: have some potential buyers outside Brazil looking for investing here
[29:19] Speaker 6: in Brazil, especially because we have of course quality carbon creds.
[29:24] Speaker 6: But much more than this, we have the challenge to
[29:27] Speaker 6: develop our country and develop our social KPIs. So it's
[29:32] Speaker 6: a threepo investment in terms of climate, in terms of
[29:36] Speaker 6: a development country, in terms of economicy and especially in
[29:39] Speaker 6: terms of social development. But I believe we have the
[29:44] Speaker 6: four different boosters for the market. The first one, of
[29:48] Speaker 6: course is the Brazilian regulated the ETS, because we will
[29:52] Speaker 6: have an obligation for the companies to have their compensation
[29:57] Speaker 6: in terms of carbon creds. And here inside Brazil zillion
[30:00] Speaker 6: ETS will have the interoperability between the voluntary carbon market
[30:05] Speaker 6: and the regulated carbon market, so it could boost the
[30:08] Speaker 6: voluntary carbon market, depends on the criteria. The second one
[30:14] Speaker 6: is the Corsia because Corsia could double or triple the
[30:18] Speaker 6: marked if it's real. And my back is especially on
[30:24] Speaker 6: the Article six because Brazil has a clear vocation to
[30:31] Speaker 6: be an exporter of commodities, and carbon credits is a
[30:36] Speaker 6: natural commodity, so.
[30:38] Speaker 9: Brazil could pay play this good rule.
[30:41] Speaker 6: I believe Article six point two much more than six
[30:45] Speaker 6: point four could create the bileral agreements, especially between Brazil
[30:50] Speaker 6: and the country that have less of natural resource as
[30:54] Speaker 6: well as Japan, Singapore unite them rates Saudia. I believe
[31:00] Speaker 6: a lot in this Golden breedge between Brazil and Middle East,
[31:05] Speaker 6: or Brazil in Asia or Switzerland that they are playing
[31:09] Speaker 6: a good role in terms of Article six. And I
[31:11] Speaker 6: believe in the group of countries creating their combination between
[31:20] Speaker 6: regulated the marks.
[31:21] Speaker 9: It's a kind of a it's not.
[31:23] Speaker 6: A global carbon marks, but it's a pool of countries
[31:26] Speaker 6: that would like to move the agenda forward.
[31:29] Speaker 9: As well as the Breeks.
[31:31] Speaker 6: We are discussing here with the Brazilian government potential breaks
[31:36] Speaker 6: carbon marks to create this combination between them under a
[31:40] Speaker 6: good regulation. So I believe we have good trends to
[31:43] Speaker 6: boost these marks on the next decade.
[31:46] Speaker 3: Yeah, and especially for Article sex.
[31:47] Speaker 2: In order for Article sex to be successful, right, you
[31:50] Speaker 2: need the support and the backing of the Brazilian government.
[31:53] Speaker 2: And so I think that brings me to my final question,
[31:56] Speaker 2: And I'll just throw this one out there and you
[31:57] Speaker 2: guys can whoever wants to grab it can. What role
[32:00] Speaker 2: do we need to see from the Brazilian government to
[32:02] Speaker 2: help support you?
[32:03] Speaker 3: All right?
[32:03] Speaker 2: You're all from the private sector, right, A lot of
[32:05] Speaker 2: the activity in this market has been private sector to
[32:08] Speaker 2: private sector. What examples do we have of public private partnerships?
[32:12] Speaker 2: What examples have we seen more enthusiasm from the Brazilian government?
[32:16] Speaker 3: Do we need to see more? What are you what
[32:17] Speaker 3: are you expecting here?
[32:20] Speaker 4: And if I may, I just gave in my last
[32:22] Speaker 4: answer a quick example about Petroblaz and B and d
[32:26] Speaker 4: as partnership that was announced yesterday. I think that's a
[32:28] Speaker 4: great example, but I wanted to complement something that's not
[32:31] Speaker 4: just for Brazil. But I think it has to do
[32:33] Speaker 4: with all of these regulated markets. I see it the
[32:36] Speaker 4: same way as Fabia, with a lot of excitement to
[32:39] Speaker 4: see these additional off ramps coming online. But I worry
[32:42] Speaker 4: a lot about where do we set the quality standards,
[32:46] Speaker 4: because once you start obligating companies to buy a certain
[32:49] Speaker 4: number of credits and not doing that again for the reputation,
[32:52] Speaker 4: because they voluntarily have chosen it, kind of the incentive
[32:55] Speaker 4: that you create if you don't, if you don't you know,
[32:57] Speaker 4: act very carefully, is to have a to the bottom
[33:01] Speaker 4: and then all those words that I mentioned in the beginning, additionality, permanence,
[33:06] Speaker 4: co benefits, they're out the window. So I think Brazil,
[33:09] Speaker 4: you know, we talk a lot about developing markets. I
[33:11] Speaker 4: think one thing that Brazil could do and the other
[33:13] Speaker 4: countries could do that are establishing regulated markets, is to
[33:17] Speaker 4: ensure that we have a high standard for quality and
[33:20] Speaker 4: that we don't fall into the trap of you know,
[33:23] Speaker 4: VCM two point zero becoming you know, another bust, and
[33:26] Speaker 4: then we have to talk about VCM three point zero
[33:29] Speaker 4: and it's never fixed.
[33:31] Speaker 3: It's a great point. Anyone else any thoughts here on governance?
[33:35] Speaker 8: No, I couldn't agree more with chiagu No. I think
[33:39] Speaker 8: we needed to guarantee quality, integrity for the carbon emissions.
[33:43] Speaker 8: Otherwise we can lose trust in the whole process and
[33:48] Speaker 8: lose this power that Brazil can play as.
[33:51] Speaker 9: A major.
[33:54] Speaker 8: Commodity. How can I see supplier for other countries.
[33:59] Speaker 2: No, but.
[34:01] Speaker 8: What we've learned from our history now today is that
[34:05] Speaker 8: to do the right things, guaranteeing the process, it's what.
[34:12] Speaker 9: Gave us credibility, right, yeah.
[34:15] Speaker 2: And you know we talked about keeping those blue dots
[34:17] Speaker 2: on the on the scatter plot, and that ultimately comes
[34:20] Speaker 2: down at the end of the day to proper governance,
[34:22] Speaker 2: whether that is in the form of an ETS or
[34:24] Speaker 2: a carbon tax or something else. Government support here is
[34:29] Speaker 2: you know, the most important backstop tom, ensuring that not
[34:31] Speaker 2: only is there a healthy demand signal, but there's also consistent,
[34:35] Speaker 2: high quality, high integrity supply coming out into the market.
[34:39] Speaker 7: Well, to add upon that, I echo everything that was
[34:43] Speaker 7: already said, but I think the government it's fundamental as
[34:51] Speaker 7: providing the enablers for the market like capacity building, technology,
[34:59] Speaker 7: regulatory in work, as I already said, the legal and
[35:02] Speaker 7: fundiary safety. So those are the enablers that the private
[35:08] Speaker 7: sector must count and it's the government job to provide
[35:14] Speaker 7: for formenting developing. This is a very good table two.
[35:20] Speaker 8: Point because for Amazon rainforest the lended tenure documentation and
[35:24] Speaker 8: now also to have out the documentation regarding the environmental
[35:28] Speaker 8: registration so far so on for the Forest Code and
[35:32] Speaker 8: permanent areas. It's quite important and it's something that the
[35:37] Speaker 8: government and private sector can work together to enhance and
[35:41] Speaker 8: to spit up the whole process because it can be
[35:45] Speaker 8: a constraint.
[35:47] Speaker 2: The capacity building point is an excellent one. Well, we
[35:50] Speaker 2: are at time here, so everyone, thank you so much
[35:53] Speaker 2: for the discussion today and if everyone can please join
[35:55] Speaker 2: me in making my panelists.
[36:05] Speaker 6: Today's episode of Switched On was produced by Cam Gray
[36:09] Speaker 6: with production assistance from Kamala Shelling.
[36:11] Speaker 1: Bloomberg NIF is a service provided by Bloomberg Finance LP
[36:14] Speaker 1: and its affiliates. This recording does not constitute, nor should
[36:17] Speaker 1: it be construed, as investment advice, investment recommendations, or a
[36:21] Speaker 1: recommendation as to an investment or other strategy. Bloomberg ANIF
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[36:27] Speaker 1: base an investment decision.
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