World Bank approves funding for Brazil to meet climate goals

The World Bank´s board of directors approved a $500 million project in Brazil to expand sustainability-linked finance and strengthen the private sector’s capacity to access carbon credit markets and help the country curb deforestation.

Sustainability-linked financing (SLF) allows for lower financing costs when certain environmental, social and governance (ESG) requirements are met by a company but does not require the funds to be used for climate-friendly purposes.

At the start of December, the World Bank and its partners launched a global tracking system to clean up the opaque market for carbon credits and help developing countries raise much-needed climate finance quickly and more cheaply.

Carbon credits – generated through activities such as planting forests or pulling climate-damaging carbon dioxide from the air – are sold to polluters to offset their emissions as a way of helping them reach net-zero emissions to limit global warming.

The project is also expected to mobilize up to $1.4 billion in private capital through the scale-up of financing by Banco do Brasil and private investors.

The project adopts an “innovative, outcome-based financing approach” that encourages firms to adopt and implement credible GHG emission reduction plans to reduce their company-wide carbon footprint, as well as linking these firms to high quality carbon markets, the World Bank said.

Stopping deforestation in the Amazon, which absorbs vast amounts of planet-warming greenhouse gas, is part Brazilian President-elect Luiz Inacio Lula da Silva’s sweeping plan for the country to reclaim leadership on climate change measures, which were previously abandoned by the Bolsonaro administration.