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Rabo Foundation, the partners of the Cerrado Water Consortium, and Cofco launch the first credit lin

An investment of R$ 1.6 million will be directed to producers from Cerrado Water Consortium, in Minas Gerais, and will have Cofco as a strategic partner.

Utrecht, São Paulo, and Patrocínio, July 2023 - The Rabo Foundation, the impact investment arm of Rabobank, the Cerrado Water Consortium (CCA), and Cofco Internacional have just launched the first impact financing model for climate-smart coffee production in Brazil. This credit operation, unprecedented for its water focus, will target coffee farms in the Cerrado Mineiro region. Cofco International, one of the world's largest commodity traders, an associate member of CCA, and one of the project's creators, will act as the guarantor of the operation and coffee buyer. The total value of the financing will be R$ 1.6 million.

"To ensure that projects like this are permanent and generate lasting and replicable results, the participation of various stakeholders in the value chain is necessary. This factor that led COFCO International to join the arrangement and engage the participation of other players from different segments of the value chain in the project.

Thus, the company, and other partners, seeks to ensure greater resilience of coffee culture 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 and will involve, in its first year, ten medium-sized farms participating in the CCA's "Program of Investment in Conscious Producers," located around Patrocínio, a region in Minas Gerais with a strong vocation for coffee production and, like other areas of the country, facing significant water shortage challenges. Each property will receive between R$ 130,000 and R$ 150,000 over this period. Additionally, they will receive technical guidance from the Consortium, covered by the same credit line, for implementing the necessary field interventions for so-called "Climate-Smart Agriculture," with a focus on water resilience.

"This financing is a pilot that provides the means to begin to value the relevance 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 because it is a biome that has not yet received much impact investment and is crucial from the point of view of supplying groundwater and water resources."

The financing, coordinated by the Brazilian consulting firm Alimi Impact Ventures and other partners, follows an impact investment structure in which the producer accesses the resources at below-market interest rates and, in return, provides pre-established indicators for water resilience on the property and in the watershed where they are located. The Cerrado das Águas Consortium offers financial resources for the producer through the issuance of Rural Producer Notes (CPR). It is responsible for technical guidance, from diagnosis to monitoring the areas with implemented strategies.

"The financing line focuses on medium-sized producers, with consolidated coffee areas of up to 160 hectares, considered the 'missing middle.' In other words, 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 medium-sized producers to engage small producers implementing of strategies that are beneficial for the soil and water," says Angélica Rotondaro, founding partner of Alimi.

According to her, the lower interest rate than the market's was only possible in the pilot project due to the involvement of the Rabo Foundation with concessional capital and Cofco, both as buyers of raw materials and guarantors of the operation, without financial intermediaries.

"In the specific case of this project, this greater resilience will occur in water resource management and the adaptation of culture in climate change scenarios. Water is an extremely relevant resource for COFCO International, not only for coffee but also for a series of crops. The company believes that complex challenges require innovative approaches; we believe in this pilot as an effective tool for change and adoption of conservation practices, with financing availability and production negotiation at the end of the cycle," says Moretti.

The partnership is supported by Rabobank Brasil, through its expertise and connection with its network of clients and partners, to collaborate with the de-risking structure.

The water resilience program of the Rabo Foundation will be initially implemented in the Rio Grande watershed, in the municipality of Serra do Salitre, covering nearly 25 thousand hectares with 171 coffee farms and 5,500 planted hectares. According to a diagnosis conducted by Sebrae in 2020, 40% of the Permanent Preservation Areas (APPs) in the watershed need restoration.

The Cerrado Mineiro region is the first in Brazil to obtain the denomination of origin for coffee. "Today, irrigation in the Cerrado Mineiro region is a bottleneck. Our studies have identified that water will be a limiting factor for the permanence of coffee cultivation in this region. For coffee and other crops to remain here, we need to take care of our water resources: the economy in 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 Water Consortium.

"With this project, we are experiencing something innovative since we do not yet have anything similar in coffee cultivation. The financing line establishes itself as a synergy among all involved in favor of a cause: the mitigation of climatic effects; something that expresses the purpose of the CCA that together we are greater and can overcome challenges," says Marcelo Urtado, president of CCA. "The project is being executed at a very positive phase of CCA, when producers are highly engaged with Climate Smart Agriculture strategies. Therefore, the maturity of our methodology and the established partnerships make us very optimistic about the results we will reap from this joint action."

About CCA:

Established in 2015 in Patrocínio - MG, the Cerrado das Águas Consortium aims to bring together efforts to implement strategies that guarantee the provision of ecosystem services to achieve a production 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, and Cervivo. In addition, the platform has key partners such as the Municipality of Serra do Salitre and the Municipality of Coromandel.

Learn more at: http://cerradodasaguas.org.br

About Rabo Foundation:

The Rabo Foundation is the impact fund of Rabobank. Founded in 1974 and with a global presence, Rabo Foundation seeks to promote positive change for 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 small farmers with access to financing, savings opportunities, knowledge, and new markets. For almost half a century, Rabo Foundation has impacted millions of people, providing over 400 organizations with impact solutions, offering small farmers opportunities to grow and improve their living conditions.

About Alimi Impact Ventures:

Alimi Impact Ventures is a project and portfolio structuring consultancy in the area of sustainable investments in pro-climate businesses. Their approach is based on the systemic management of value chains, the composition of different types of actors, funding sources, and the inclusion and valuation of environmental services and impact indicators. Their activities include building models in blended finance, fundraising, investor and investee connection, 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 global supply chains of grains, oilseeds, sugar, coffee, and cotton, with assets in the Americas, Europe, and the Asia-Pacific region. The company trades with over 50 nations while offering direct exclusive access to the growing Chinese market to farmers. The company is accelerating its growth to create an integrated global agricultural supply chain anchored in China and competing globally.

About Rabobank:

Rabobank is a globally active bank specializing in financial solutions for agribusiness and has deep knowledge throughout the food chain - from the field to the consumer's table. Through its exclusive research area, Raboresearch, the bank develops content on trends and forecasts in the agribusiness sector in Brazil and around the world. Headquartered in the Netherlands, Rabobank has more than 9 million customers and operates in over 30 countries. The institution has been active in Brazil for over 30 years and has 17 branches throughout the country, offering a range of financial services, including consultancy, loans, risk management, and investments for rural producers and large agro-industrial companies.

Learn more at: www.rabobank.com.br.

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