Brazil advances energy transition and sustainability financing program

With support from the Inter-American Development Bank (IDB), Brazil advanced a key initiative to boost financing for energy transition and sustainability projects.

The government’s first auction as part of the Eco Invest Brasil program attracted a contribution of 7bn reais (US$1.2bn) through the blended finance instrument, which will result in up to 45bn reais in investments.

On social media, IDB president Ilan Goldfajn hailed the result and wrote that “Eco Invest is an important innovation, both for Brazil and as a potential model for other countries around the world.”

The finance ministry announced the program in February as part of efforts to raise interest in tenders in key areas. Eco Invest Brasil involves additional forex protection for contracts related to the energy transition and sustainable projects.

"This financing mechanism will be used extensively in projects in the so-called circular economy, the creation of a low-carbon hydrogen industry, fuels of the future, in addition to the already known wind and solar energy," Paulo Dantas, an infrastructure and project financing specialist at law firm Castro Barros Advogados, told BNamericas.

"It is an important moment to ensure that projects are effectively implemented. It is important that both the private sector and the government provide the necessary sustainability to be able to send the correct message and make these segments viable, in which Brazil has a natural vocation to develop and be one of the protagonists," added Dantas.

The IDB acts as an intermediary to contract an international bank that will offer exchange rate protection in Brazil. 

"Our partnership with the Brazilian government in Eco Invest, which began last November, is already a reality. The result of the first auction was very encouraging and illustrative of the appetite that exists for this type of initiative," Goldfajn wrote.

Eco Invest represents a pillar of Brazil’s plans to become a global energy transition and sustainability powerhouse.

“Brazil has enormous potential to be explored in the energy transition, due to the already intense use of renewable energy and the various projects in this segment, in addition to the existing potential in critical minerals. This has attracted a lot of interest from international investors, and mechanisms that provide exchange rate protection for investments are very important to attract more international agents,” Mário Sérgio Lima, an analyst at Medley Global Advisors, told BNamericas. 

"It is also important to mention the agricultural sector, which is a very large source of attraction for foreign investment, especially the large projects that have a sustainable production profile," said Lima. 

The government has been trying to attract financial agents to its energy transition initiatives, which include projects linked to renewable energy, the development of carbon credits and investments in critical minerals projects.