Federal government signs contract for BRL 10.4 billion from the Climate Fund

In the presence of President Luiz Inácio Lula da Silva, the Ministry of the Environment and Climate Change (MMA) and the National Bank for Economic and Social Development (BNDES) signed a new contract for the management of resources from the Climate Fund on Monday, April 1, at the Planalto Palace. It provides for the transfer of up to BRL 10.4 billion, to be used by the bank for reimbursable financing of projects aimed at mitigating and adapting to climate change and its effects, and the payment of BRL 6.2 million as remuneration to the BNDES, as financial agent.

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The Fund will use part of the resources raised by the Ministry of Finance in November 2023 from the issuing of USD 2 billion in sustainable sovereign bonds on the international market. In addition, around BRL 400 million will come from special participation from oil and gas exploration, as well as from the return on the Fund's own financial operations.

So far, the Ministry of the Environment's Climate Fund has operated with resources averaging between 400 and 500 million reais a year. But after four years without working, we managed, together with the BNDES and the Ministry of Finance, to get it reinforced"
MARINA SILVA
Minister of the Environment and Climate Change

The contract signed on Monday by the president of the BNDES, Aloizio Mercadante, and Minister Marina Silva (MMA) considerably increases the financing capacity of the Climate Fund, whose budget was around BRL 2.9 billion until last year. With the record amount of BRL 10.4 billion, the initiative now has stable funding and becomes the Federal Government's main instrument, and one of the largest in the world, for combating climate change and investing in adaptation.

For Mercadante, the document shows how Lula’s government treats the issue of the climate emergency as a central point. "Minister Fernando Haddad was instrumental in issuing these 2 billion dollars of sustainable bonds, which is what finances this fund. We will now have R$10 billion contributing to Brazil continuing to lead the way in tackling the climate crisis, energy production, the transition to a sustainable green economy. These are investments that will generate jobs, wages and, above all, will help fight the climate crisis," he said.

"So far, the Ministry of the Environment's Climate Fund has operated with resources averaging between 400 and 500 million reais a year. But after four years without working, we managed, together with the BNDES and the Ministry of Finance, to get it reinforced," said Minister Marina Silva.

The modalities eligible for funding under the new Climate Fund are divided into 6 lines, which include: resilient and sustainable urban development; green industry; transport logistics, public transportation and green mobility; energy transition; native forests and hybrid resources; and green services and innovation.

More items in automatic support - Previously, indirect financing (through banks and transfer agents) was restricted to a reduced set of machinery and equipment. In order to support the reduction of greenhouse gas emissions and adaptation to climate change and its effects, the range of items eligible for financing (provided they are new, domestic and registered with BNDES Finame) under the Automatic Climate Fund has been expanded.

Thus, under the new regulations, machinery and equipment such as LED luminaires for public lighting, electric buses and trucks powered by biofuels, photovoltaic generating systems, wind turbines and solar collectors, refrigeration technologies with inverters, equipment for the sustainable intensification of agriculture and livestock, energy storage systems with batteries and hydrogen, as well as products certified by the Brazilian Labeling Program (PBE) and the Procel seal, among others, can be financed under the automatic indirect modality.

COST - The new Climate Fund brings changes to financial costs such as interest rates and amortization periods, which vary according to the type of support, but the big news is the possibility of financing up to 100% of the items provided for in each type. Projects under the Native Forests and Water Resources modality have the lowest financial cost (1% per year) with a minimum financing amount of R$10 million and a maximum of R$250 million per investor per year, a limit also applicable to Urban Development projects. For Solar and Wind Energy Generation projects, the cost will be the highest (8% per year), while in the other support modalities the cost is set at 6.15% per year. In the other direct support modalities, the minimum amount is R$20 million and the maximum is R$500 million per economic group every 12 months.

In automatic indirect support, the financial cost also varies between 6.15% and 8.00% per year. In these operations, the BNDES' basic remuneration for micro, small and medium-sized companies, with Gross Operating Revenue (ROB) of up to R$90 million, is 0.9% per year, while for companies with ROB of more than R$90 million, it is 1.4%. The financial agent's maximum cost is limited to 2.5% per year for all operations. In indirect operations, there is no minimum amount per project and the maximum amount is R$150 million per client.

SUSTAINABLE URBANIZATION -  The Resilient and Sustainable Urban Development modality provides support for investments involving energy efficiency in public buildings and lighting; waste treatment; structuring and management of sanitary landfills and elimination of dumps with biogas generation and management; biological treatment systems; recycling; parks and urban green areas; preservation of urban springs and rivers; urban requalification for populations in risk areas (slums and outskirts) and disaster risk management.

INDUSTRY - The Climate Fund will finance investments in the Green Industry modality, which covers efficient machinery and equipment; energy efficiency projects and the adoption of alternative fuels; the conversion of biomass into energy and high value-added products; sustainable agricultural solutions; the manufacturing of bioeconomy products; and decarbonization.

LOGISTICS –As part of the effort to achieve a cleaner transition in the logistics and urban mobility structure, the Climate Fund plans to finance investments in public passenger transport on rails; electrification of bus fleets, including school buses; cycling and electric vehicle infrastructure; bus rapid transit lanes (BRTs); modernization of electric rail, water and waterway transport; manufacture of electric, hybrid or biofuel urban trucks; and intercity electric trains.

ENERGY - Investments in the Energy Transition will be able to access financing from the new Climate Fund when they involve solar, wind and new renewable sources; conversion of biomass, co-processing and waste into energy; energy storage; modernization of networks (smart grid); biofuels; infrastructure and production chain for the use of hydrogen with renewable sources; and technological development.

FORESTS – The new Climate Fund will finance, at a cost of 1% per year, investments in sustainable forest management; restoration and maintenance of vegetation cover; revitalization of water sources; payments for environmental services; socio-biodiversity production chains; planting native species and agroforestry systems; combating desertification; conservation units; and support for the chain of timber and non-timber products made from native species. The Green Services and Innovation modality provides support for climate change training; emissions management in health, tourism and other activities; climate innovation and climate change consultancies.

2023 - Last year, the Climate Fund contracted R$733.2 million in 27 operations, the best result in five years. These operations alone prevented the emission of 4.3 million tons of carbon dioxide - which represents 10 months without cars in the São Paulo metropolitan region.

Find out more about the forms of support and new financial conditions of the New Climate Fund (in Portuguese).