Rabo Foundation lança financiamento para resiliência hídrica do café brasileiro
- Consorcio Cerrado das Águas
- Jul 5, 2023
- 6 min read
An investment of R$ 1.6 million will strengthen water resilience in coffee farming, with support from the Cerrado das Águas Consortium and Cofco.
Utrecht, São Paulo and Patrocínio, July 5, 2023 - The Rabo Foundation, the impact investment arm of the Dutch bank Rabobank, the Cerrado das Águas Consortium (CCA), and Cofco International have just signed the first impact financing agreement focused on the water resilience of Brazilian coffee farming. This unprecedented credit operation, due to its water-related focus, will target coffee farms in the Cerrado Mineiro region. Cofco International, one of the world's largest trading companies and an associate member of the CCA and one of the project's originators, will guarantee the operation and the purchase of the coffee. The total value of the financing will be R$ 1.6 million.
“For projects like this to be permanent and generate lasting and replicable results, the participation of various stakeholders in the value chain is necessary. This was the factor that led COFCO International to integrate the arrangement and engage the participation of other players from different segments of the value chain in the project. In this way, the company, together with the other partners, seeks to ensure greater resilience in coffee cultivation and that the benefits and knowledge generated in the field are conveyed to the end consumer.”
Says Julia Moretti, Global Head of Sustainability at COFCO International
The project will last for one harvest season and, in its first year, will involve 10 medium-sized farms participating in the CCA's Conscious Producer Investment Program, located around Patrocínio, a region of Minas Gerais with a strong vocation for coffee cultivation and, as in other areas of the country, facing significant challenges in water sustainability. Each property will receive between R$ 130,000 and R$ 150,000 over this period.
In addition, they will receive technical guidance from the Consortium – included in the same line of credit – for the implementation of the necessary field interventions for so-called "Climate-Smart Agriculture," focusing on water resilience.
“This funding is a pilot project that provides the means to begin to value the importance of better water management in agriculture,”
Says Lygia Freire Cesar, program manager at the Rabo Foundation for Latin America.
“In Brazil, our focus is on the Cerrado biome because it is still underserved by impact investment and is crucial from the point of view of replenishing groundwater and water supply.”
The financing, arranged by the Brazilian consultancy Alimi Impact Ventures and other partners, follows an impact investment structure in which the producer accesses the resource at below-market interest rates and, in return, delivers pre-established indicators for water resilience on the property and in the hydrographic basin in which they are located.
The Cerrado das Águas Consortium provides the financial resources to the producer through the issuance of Rural Producer Certificates (CPR) and is responsible for technical guidance, from diagnosis to monitoring of areas with implemented strategies.
“The focus of this financing line is on the average producer, with consolidated coffee areas of up to 160 hectares, considered the ‘missing middle’. That is, they are not small enough to access subsidized financing lines, nor large enough to negotiate favorable financing conditions. Another relevant point is the potential of the average producer to engage small producers in the implementation of strategies beneficial to soil and water.”
According to Angélica Rotondaro, founding partner of Alimi, the lower-than-market interest rate was only possible in the pilot project due to the involvement of the Rabo Foundation with the concessionary capital and Cofco, both as the buyer of the raw material and as the guarantor of the operation, without financial intermediaries.
“In the specific case of this project, this greater resilience will occur in the management of water resources and in the adaptation of the crop to a scenario of climate change. Water is an extremely relevant resource for COFCO International, not only for coffee, but for a range of agricultural crops. The company believes that complex challenges require innovative approaches, and we believe in this pilot project as an effective tool for change and the adoption of conservative practices, with the availability of financing and the negotiation of production at the end of the cycle.”
Diz Moretti
The partnership has the support of Rabobank Brazil, through its expertise and connection with its network of clients and partners, to collaborate on the de-risking structure.
The Rabo Foundation's pro-water resilience line will initially be implemented in the Rio Grande river basin, in the municipality of Serra do Salitre, covering almost 25,000 hectares and encompassing 171 coffee farms and 5,500 hectares planted. According to a diagnosis carried out by Sebrae in 2020, 40% of the basin's APPs (Permanent Preservation Areas) need restoration.
The Cerrado Mineiro region is the first to achieve a designation of origin for coffee in Brazil.
“Today, irrigation in the Cerrado Mineiro region is a bottleneck. Our studies have identified that water will be a limiting factor for the continued cultivation of coffee in this region. For coffee and other agricultural crops to remain here, we need to take care of our water resources: the economy of its use, how it reaches the soil, how it infiltrates, and how it is retained to be released during periods of scarcity.”
Says Fabiane Sebaio, executive secretary of the Cerrado das Águas Consortium
“With this project, we are experiencing something innovative, as we don't yet have anything similar in coffee farming. The financing line is established as a synergy between all those involved in pursuit of a common cause: mitigating the effects of climate change; something that expresses the CCA's purpose that together we are stronger and can overcome challenges,”
Says Marcelo Urtado, president of the CCA.
“The project is being implemented at a very positive stage for the CCA, at a time when producers are very engaged with Climate-Smart Agriculture strategies. Thus, the maturation of our methodology and the partnerships established make us very optimistic about the results we will reap from this joint action.”
Sobre o CCA
Created in 2015 in Patrocínio, Minas Gerais, the Cerrado das Águas Consortium aims to aggregate efforts to implement strategies that guarantee the provision of ecosystem services in order to achieve a productive system resilient to climate change.
The initiative has the following companies as associate members: Nescafé, Expocaccer, Nespresso, Lavazza, Cooxupé, CofCo, Volcafé, Stockler, Daterra, Federação dos Cafeicultores do Cerrado (Cerrado Coffee Growers Federation), and Cervivo. In addition, the platform has key partners such as the Municipal Governments of Serra do Salitre and Coromandel.
About the Rabo Foundation
The Rabo Foundation is the impact fund of Rabobank. Founded in 1974 and with a global presence, the Rabo Foundation seeks to promote positive change towards a more inclusive and sustainable society. The fund invests in self-sufficient producer organizations in Africa, Asia, and Latin America through financing and by sharing the banking, agricultural, and cooperative expertise that Rabobank has built over the years.
This helps organizations achieve their goals of providing smallholder farmers with access to finance, economic opportunities, knowledge, and new markets. For nearly half a century, the Rabo Foundation has impacted millions of people. By providing impact solutions to over 400 organizations, it offers smallholder farmers opportunities to grow and improve their living conditions.
Learn more at rabobank.nl/rabofoundation or our latest Relatorio de Impacto 2022
About Alimi Impact Ventures
Alimi Impact Ventures is a consultancy specializing in structuring projects and portfolios in the area of sustainable investments in climate-friendly businesses. Our approach is based on the systemic management of value chains, the composition of different types of actors and funding sources, and the inclusion and valuation of environmental services and impact indicators.
Our activities include building blended finance models, fundraising, connecting investors and investees, market mapping, portfolio construction and monitoring, pay-for-performance structuring, and impact measurement.
Learn more at www.alimi.com.br
About COFCO International
With 11,500 people in 37 countries, COFCO International is the international agricultural business platform of COFCO Corporation, China's largest food and agriculture company. COFCO International is focused on being a leader in the global supply chains of grains, oilseeds, sugar, coffee, and cotton, with assets in the Americas, Europe, and Asia-Pacific. The company trades with more than 50 nations while offering farmers exclusive direct access to the growing Chinese market.
The company is accelerating its growth to create a world-class integrated global agricultural supply chain, anchored in China and competing globally.
Learn more at www.br.cofcointernational.com
About Rabobank
Rabobank is a global bank specializing in financial solutions for agribusiness and has in-depth knowledge of the entire food chain – from the field to the consumer's table. Through its exclusive research area, Raboresearch, the bank develops content on trends and forecasts for agribusiness in Brazil and worldwide. Headquartered in the Netherlands, Rabobank has more than 9 million customers and is present in over 30 countries.
The institution has been operating in Brazil for over 30 years and has 17 branches in the interior of the country, offering a range of financial services including consulting, loans, risk management, and investments for rural producers and large agribusiness companies.
Learn more at: www.rabobank.com.br.
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