Agriculture Sustainable Finance State of the Market 2023 Climate Bonds Initiative 2
Brazilian agriculture, including livestock and
agricultural activities, was responsible for 9.8%
of the global agricultural sector emissions in
2022.1 Given that methane is its largest source of
greenhouse gas (GHG) emissions, Brazil is the fih
largest emitter globally with 91.6% coming from
enteric fermentation of cattle.2 Consequently,
dealing with the environmental impacts of agri-
food systems plays a pivotal role in the country’s
transition to net zero, both in terms of climate
change mitigation and adaptation.
The growth of the agriculture sector in Brazil
has resulted in deforestation and change of land
use, which has also increased domestic GHG
emissions.3 The sector, including production
and agribusiness supply chains, now accounts
for nearly 25% of the economy. Despite climatic
adversities and the global economic impact of
the pandemic, the sector has shown resilience
accounting for a fih of GDP growth in the Q1
2023, boosted by delayed harvests.4,5
Sustainable finance is playing an increasingly
important role in the decarbonisation of the
agricultural sector. By the end of H1 2023,
the Brazilian sustainable debt market had
Thematic labels
Green, social, sustainability
and transition
Green, social, sustainability, and
transition bonds oer climate and
social benefits through their UoP.
The proceeds from the sale of such
bonds are earmarked to support
climate or social expenditures in categories
specified in the issuer’s sustainable financing
framework. Green bonds focus on UoP with
climate or environmental benefits such as
Low-Carbon Energyergy Energy, Low-Carbon
Introduction
reached cumulative volume of USD33.3bn.6
Brazil was the third largest source of green,
social, sustainability, sustainability-linked, and
transition (GSS+) debt in the Latin America
and the Caribbean (LAC) region following Chile
(USD47.7bn) and Mexico (USD42bn).
The green theme dominates the Brazil
GSS+ volume (45%) with the more nascent
sustainability-linked bond (SLB) market the
second largest segment (32%). Agriculture,
Forestry and Bioenergy were the most funded
use of proceeds (UoP) categories for green
bonds from Brazilian corporate issuers, and
recent advances in regulation have encouraged
the practice of aggregating smaller projects and
assets, bringing them to the sustainable debt
market through asset-backed securities (ABS).
This briefing provides an update of Climate
Bonds Agriculture Sustainable Finance State of
the Market published in June 2021.7 It focuses on
labelled instruments used to finance projects,
assets, and activities in sustainable agriculture
originating from Brazil, and includes thematic
debt issued between May 2015 and June 2023.
Content
Introduction 2
Brazil’s growing sustainable
debt market 3
Use of Proceeds categories 4
Across the agriculture themes 6
Outlook 7
Building, or Low-Carbon Transport.
Bonds bearing the transition label are
a subset of green and are oen issued
by entities operating in hard-to-abate
sectors such as steel, chemical, or
cement. Social categories include
Education, Microfinance, and Support
for Marginalised Communities.
Sustainability bonds include a combination of
green and social categories.
Sustainability-linked
bonds (SLBs)
The UoP of SLBs are general
purpose, i.e., not earmarked for
any specific social or environmental purpose.
However, key performance indicators (KPIs)
are selected as areas for improvement over
the lifetime of the bond and time-bound
sustainability performance targets (SPTs) are set
to measure their achievement. The achievement
of the SPTs is linked to coupon step-ups or
step-downs, or early repayment obligations.
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