Financial incentives to build deforestation and conversion free soy supply chains

Member/implementing partners:

• Sainsbury’s

• Tesco 

• Sustainable Investment Management (SIM)

Launched in 2022, the Responsible Commodities Facility (RCF) Cerrado Programme promotes the production of deforestation and conversion free (DCF) soy in Brazil’s Cerrado region by providing low interest rate loans to medium-to-large soy farms who commit to zero deforestation of native vegetation (over and above their legal reserves) and implement practices that avoid negative climate and nature impacts.

In the pre-implementation stage, SIM submitted RCF for inclusion in the Coalition’s portfolio of production landscapes, which resulted in Tesco and Sainsbury’s becoming involved in the initiative. 

Inclusion in the Forest Positive Coalition’s Portfolio of Landscape Initiatives helped to raise awareness of the RCF, which led to receiving grant funding from Tesco and Sainsbury’s and opened the door for discussions with them about becoming financial investors in the programme. – SIM

Through a first-of-its-kind financing mechanism, Sainsbury’s, Tesco, and Waitrose purchased green bonds (green agribusiness receivables certificates) issued by the RCF and registered on the Vienna Stock Exchange. RCF then used this capital to provide low interest rate loans to farmers who committed to the aforementioned criteria. Coalition members’ investment, alongside investment from Waitrose, enabled the fund to launch at a size of 11M USD. To learn more about the funding mechanism and fund oversight, please see the RCF annual report.

This landscape partnership is particularly innovative as it enables corporations to partner with financial institutions to have a direct impact on creating deforestation and conversion free supply chains. Furthermore, unlike support offered through grants, this program is self-sustaining and enables participating corporations to receive a return on investment. This initiative is still in the development stage, but has the potential to focus on specific subnational jurisdictions as it scales. RCF also has the potential to dovetail with existing judicial frameworks such as the Produce, Conserve, and Include (PCI) Initiative in Mato Grosso. 

In the first year of operations, the Responsible Commodities Facility disbursed [infographic style] 11M USD in loans to 32 farms, resulting in: 

• 42K tonnes of DCF soy production
• Conservation of ~8.5K ha of native vegetation (25% of which was in excess of legal requirements)

In the coming year, RCF, with continued support from Sainsbury’s and Tesco, plans to significantly expand its available funds from 11M USD in the first year to 47M USD in the second year, and launch a technical assistance programme to help farmers adopt regenerative agriculture practices.