Brazil
sustainablesecuritisation

State of the market Q3 2022
CLIMATE BONDS INITIATIVE

Prepared by the
Climate Bonds Initiative

Contributions from
VBSO Advogados

Contributions fromVERT Securitizadora

Supported by the
Gordon and Betty Moore Foundation

Introduction
Asset-backed securities (ABS) are one of Brazil’s
most important and well-established debt
instrument types, allowing the financing of
smaller projects and assets through deals of
meaningful size via the capital market. They
have attracted investment to key sectors of
the Brazilian economy, such as agriculture,
forestry, and bioenergy. More recently, advancesin regulatory frameworks have extended theapplication of these instruments further toinclude infrastructure. Brazil’s sustainable(labelled) securitisation market is unique within
the Latin American and Caribbean (LAC) region
and market analysis could encourage issuersin other emerging markets (EM) to explore theformat. This report aims to provide an overview
of the Brazilian sustainable ABS market, its
regulatory foundations and case studies, aswell as highlighting opportunities to channel
investment into sustainable activities, projects,
and assets in the country.

Contents
Introduction 2
1. Overview of Brazil’s
sustainable finance market 4
2. Brazil’s securitisation market
in expansion 8
3. The appetite for securitisation 9
4. How to structure a securitisation 10
5. Case studies 11
6. The growing role of GSS+
securitisation 15

Climate Bonds has identified
five issuer benefits of
securitisation
1. Access to debt capital markets: Raising
capital through debt markets comes withadditional structuring costs and time. Brazilian
securitisation companies can supply financing
at reasonable prices, offering an alternative tothe prevalent banking and credit institutions.
Moreover, securitisation structures can match
the financing needs of small issuers to theinvestment preferences of institutional investors.
For example, small projects can be aggregated,combining different maturities and credit ratings,
and the resulting instruments can meet demands
for longer tenors and improved creditworthiness.
2. Lower cost of capital for the issuer: ABS
can offer an alternative for companies andbusinesses looking to finance their operations
without having to pay higher costs throughlending or financial operations with multiple
intermediaries. Additionally, securitisation
stimulates competition between funding sources
and capital suppliers due to the replacementof bank intermediation with a securitisationcompany that reduces the tax burden for its
retail clients.

4. Scalability of local GSS+ debt market:
ABS instruments are well-understood by local
corporate issuers and growing as funding
alternatives. Adding a thematic label could
encourage issuers to adhere to sustainable
practices and diminish investors’ risk perception,
thus generating a positive snowball effect.
International investors are keen to buy
sustainable debt instruments from a variety
of sources. Combining securitised structureswith climate-aligned and social benefits could
attract external capital to fund various smallscale activities of the Brazilian economy while
expanding the local GSS+ market.
5. Leveraging financial entities’ lending
capacity: Financial entities can use securitised
debt to offload exhausted lending portfolios andrecycle the proceeds into new loans. Brazilian
lenders can grow financing for small-scale green
and social activities by aggregating agriculture,energy, and real estate related portfolios into
sustainability-labelled Agribusiness Credit Letters(LCA) and Real Estate Credit Letters (LCI). These
ABS can combine credit letters of different tenors
and sizes to suit capital market investors’ appetite
for longer maturities and larger ticket sizes.

3. Fostering market competitiveness:
Companies can ease their balance sheets and cash
flows by wrapping their credit rights and othercontract receivables into a securitised instrument
sold in the debt capital market, generating
investing capital in advance to foster innovationand technology. The income flow from thosereceivables is then reverted to pay the investors.

7. Recommendations for leveraging
sustainable securitisation in Brazil 16

GreenSocialSustainability

Sustainability-linked

Transition

Use-of-proceeds
instrument with all net
proceeds allocatedto eligible green
projects/assets withenvironmental benefits.

All net proceeds areallocated to projects/
assets with positivesocial outcomes,
such as healthcare,gender equality, accessto infrastructure,
livelihoods, education,and income equality.

Net proceeds areallocated to projects,
assets, expenditures,
and activities with both
environmental and social
benefits.

General purpose
instruments tied to a timebound performance ofpredefined sustainability
indicators. These
structures can trigger
coupon changes according
to whether the issuer
meets its stated goals.

‘Transition’ instruments
may refer to both general
purpose and use-ofproceeds formats that
finance Paris-aligned
entities, activities,
projects, or assets fromhard-to-abate sectors toenable a transition to a
low-carbon economy.

Disclaimer: Climate Bonds Initiative screens green-labelled deals for inclusion in its Green Bond Database by referencing the Climate Bonds Taxonomy and overarching prerequisites. The labelled data contained in thisstudy is exclusively based on the Climate Bonds Database. To check the methodology, please refer to: https://www.climatebonds.net/market/green-bond-database-methodology. Climate Bonds Social, Sustainability, andSustainability-linked bonds (SSSLB) database was launched in April 2022. SSSLB data published prior to April 2022 was provisional and subject to change. The methodology is available here (not including SLBs): https://www.climatebonds.net/market/social-sustainability-bond-database-methodology. Sustainable linked bonds and loans are collected by the organization but do not go through a screening methodology.

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative2

Brazil has a rich environment that enables securitisation. Below we havesummarised and defined some key relevant mechanisms that exist in thelocal market and which are exploredthroughout this report.

Brazilian securitisation instruments glossary (Supplied by VBSO Advogados)
Real Estate Receivables Certificates (CRI)

Financial backing revolving• An ABS that connects real estate credit to the capital market.1 CRIs
are exclusively issued for real estate receivables by securitisationcompanies that acquire the credits, securitise them, and issue theinstrument to the market.

• CVM also defined the concept of ‘revolving financial backing’, which refers
to the acquisition of new credit rights with resources from matured credit
rights/goods/other backing rights within a securitised instrument.6 Thismechanism was implemented to adjust the tenor of the backing credit
rights to longer maturities from their ABS. The term of the issuance stems
from the so-called ‘revolving credit’ or revolving financial backing, asystem in which, when a specific credit ceases, another is acquired withthe transferred payment resources, creating a revolving mechanism.

• The structuring of a CRI can occur in different formats, always backed
by real estate credits assigned to the securitisation company who,
then, elaborates a Securitisation Credit Term establishing the link
between the credits and the CRI.
Agribusiness Receivables Certificates (CRA)• Inspired by CRIs, CRAs were introduced in 2004 to allow credit
receivables generated from businesses in agro-industrial chains to begrouped into a security and offered to the capital market.2• A CRA is a nominative credit instrument. It represents the promise ofa cash payment exclusively issued by a securitisation company. The
payment is linked to credit rights originating from financial transactions
related to the production, commercialisation, improvement or
industrialisation of products, agricultural inputs or machines, between
rural producers (or rural cooperatives) and third parties.
Agribusiness Credit Rights Certificates (CDCA)• CDCAs3 are a type of credit instrument that can be issued by rural
cooperatives, producers or agriculture producing companies, to raise
medium and short-term credit to invest in their activities in the off-season.
• The issuance is backed by credit receivables carried out by agentsin the agribusiness production chain. The credit rights to which
this security is linked must be held in custody (held by a financial
institution) and registered on the stock exchange.
Receivables Certificates (CR)• CRs are credit securities issued by a securitisation company that
represent a promise of payment in cash from a business on its credit
rights. It is an opportunity for industries to access better guarantee andrisk structures through securitisation.4• The structure represents an alternative to the Receivables Certificatesspecific to the Real Estate (CRI) and Agriculture (CRA) sectors. It
promotes greater access to the capital market for a variety of sectorsthat lack legal similarity to pre-established CRI and CRA. Greater useof this instrument is expected, especially within infrastructure andsanitation projects looking for competitive rates.
• The benefits provided are mainly in terms of operational costs as the
structuring process is cheaper and requires fewer service providers,compared to more traditional financing models, in especial those whichcollects funding via FIDCs (explained below). The absence of any fiscal
benefit – unlike CRAs and CRIs – may alienate individual investors,
but the possibility of better rates can attract other audiences. Still, as
investment funds regulations limit portfolio exposure to a single issuer
or asset type , this can represent a bottleneck in the distribution of CRs
and needs to be further addressed.
Credit Rights• The Securities Commission allows revolving structures for situations
in which the crop cycle, harvesting, and marketing of products andagricultural inputs linked to the CRA do not allow credit rights with
timeframes compatible with the maturity of the CRA.7 The abovementioned case is based on the idea that the securitised financing
model is one of the pathways for companies to gain access to thecapital market, without resorting to an Initial Public Offering (IPO) for
raising funds or borrowing from a bank.
Rural Product Note (CPR)• CPR is a credit instrument, registered on the stock exchange,
representing a promise of future delivery of agricultural products.8 It canbe issued by rural producers or associations, including cooperatives.
• It can be used as an underlying asset for ABS and issued in two
different modalities: physical, where settlement takes place throughdelivery of the product by the issuer; and financial, when the payment
is made through cash settlement on the due date.
Credit Rights Investment Fund (FIDC)• The legal framework for investment in receivables allowed the creationof FIDCs, a structured debt instrument backed by a pool of underlying
assets, of which at least 50% are credit rights from service provision or
financial, industrial, commercial, and real-estate activities.9
Agribusiness Investment Fund (FIAgro)• FIAgro is a type of fund instrument dedicated to investing inagribusiness assets such as credit rights and securities shared from
CRAs and FIDCs.10• The purpose of this fund is to increase financial resources raisingaccess for agriculture and livestock beyond institutional investors. The
fund can be turned to liquid investments in the agribusiness sector, as
well as for private equity investment vehicles in limited companies.
Agribusiness Credit Letters (LCA)• LCA is a fixed income instrument to support agricultural credit in
the country.11 The securities are issued by financial entities with theaim of raising financial resources for loans, in this case within the
agriculture sector.
• LCAs are available in three modalities: prefixed (with interest defined
before purchase); post-fixed with redemption (linked to the interbank
deposit rate variation); and post-fixed without redemption (also linked
to the interbank deposit rate). They do not have an administration fee
nor any other form of income taxation.

• Credit rights are an essential part of securitisation instruments. They are
acquired by the securitisation company to back the issuance of securities
placed to investors, whose payment is primarily conditional on the receipt
of funds from those credit rights. Other assets, rights, and guarantees canalso back the issuance of securitisations.

Real Estate Credit Letters (LCI)• Credit rights are defined by the Brazilian Securities Commission (CVM)
as securities that represents credit originated from operations in any
economic segment.5• It is available in the post-fixed modality (linked to the interbank
deposit rate variation). Like its peer in the agriculture sector, it has no
administration fee and is free of income tax and other forms of taxation.

• LCI is a fixed income instrument issued by financial entities to source
funds for loans across the real estate sector, as it uses real estate
credits as collateral.12

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative3

1. Overview of Brazil’s sustainable finance market

The green label represents
35% of the thematic market in
Brazil, with cumulative volumesof USD11.6bn. BRF SA priced
the first deal, a EUR500m deal
in 2015, and the market has steadily grown
to 102 deals from 58 issuers. 2017 was animportant year with USD2.7bn issued, andexcept for the atypical 2018, the following years
continued the momentum.
The private sector dominates the country’s
issuer type profile, with non-financial corporates
contributing the largest share (76%), followed bydevelopment banks (10%), financial corporates(9%), and government-backed entities (4%). So far,green asset-backed structures were only issued
by private corporate entities and corresponds to
7% of the amount issued in the country.
The predominance of green deals was
superseded by the emergence of thesustainability-linked structure in mid-2019
through both loans and bonds. Three loans from
Alunorte, Votorantim Cimentos, and LDC Sucos
were completed, together worth USD268m. In
2020, social, sustainability, and sustainabilitylinked bonds debuted in the Brazilian market.
Iguá SA priced two sustainability bonds(BRL621m/USD120m and BRL260m/USD50.3m)
with the green portions obtaining Climate Bonds
Certification under the Water Infrastructure
criteria, followed by Suzano’s USD1.3bn SLB and
Banco ABC Brasil’s USD99.5m social bond.
Sustainability bonds contributed
9.8% to the Brazilian GSS+
market, with USD3.2bn divided
among 16 deals. Between 2020
and 2021, this market quadrupledfrom USD418m to USD1.6bn. 2022 was a strong
year for the label, with USD1.2bn priced within thefirst three quarters. Most deals (56%) came fromnon-financial corporates, followed by financial
entities (37%). ABS deals represented 1% with two
CRAs (Tanac’s USD37.3m and the not-for-profit
Taboa’s USD195k), and development banks sharethe same percentage with one USD50m bondfrom the Minas Gerais Development Bank (BDMG).

2021: a record year for Brazil’s GSS+ market

USD Billions

At the end of the third quarter of 2022 (Q3 2022),
cumulative labelled debt originating from
Brazil had reached USD32.6bn. Green, social,sustainability, sustainability-linked bonds andloans (SLBs and SLLs) and transition bonds(collectively, GSS+) from Brazil constituted 22.7%of the LAC market. Brazil is the second largest
source of GSS+ debt in the region behind Chile,which has experienced exponential growth since2019, largely due to the issuance of 25 GSS+
sovereign bonds which have contributed 77%of the country’s thematic debt market. Brazil
leads the LAC market in sustainability-linked andtransition instruments, with a 60.7% share.

14

Transition

12

SLB

10

Sustainability

8Social

6

Green

4
2
0
2015

2016

2017

2018

2019

2020

2021

2022

Source: Climate Bonds Initiative 2022

The social label represents
2% of the local GSS+ market,
through nine deals. Similar tothe sustainability label, 2022
was a record year for social
deals, with USD692m issued by the end of
Q3. The two previous years had accumulated
USD107m and USD25.9m respectively. Financial
institutions contributed 91% to total issuancevolumes, the remaining 9% coming from ABS
deals (two CRIs).
As of Q3 2022, thesustainability-linked format
represented the largest share ofthematic deals originating from
Brazil (50.6%), with USD16.5bn of volume across
SLBs and SLLs. In 2021, the rapidly growing label
multiplied from USD1.8bn to an impressive USD
10.4bn. In 2022, the market slowed, with USD4.2bn
issued by the end of Q3 2022.
There were 60 sustainability-linked deals in the local
market by the end of Q3 2022. Bonds represent alittle more than half, with 33 deals (USD11.5bn);
the remaining 27 deals are loans (USD5bn).
Corporate deals dominate this market segment.
91% of the amount issued came from nonfinancial institutions, while 9% was from financial
corporate institutions (namely Simpar and B3).
Furthermore, sustainability-linked asset-backed
securities made an entrance to the market, in
2021, through two JBS S.A. CRAs worth USD
95.7m and USD 114.5m. They were followed byDori Alimentos’ USD42.6m CRA. Together, thesethree deals represent 1% of the amount issued insustainability-linked deals in the
country.
Brazil is the only country in
the LAC region from whichtransition bonds haveoriginated. The three non-financial corporatetransition bonds were issued between 2019 andBrazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

2020 and represent 2% of the Brazilian GSS+
market. Marfrig’s USD500m bond earmarked
proceeds for sustainable livestock while twoconsecutive deals from Eneva (USD102.3m
and USD66.5m) supported energy efficiency.
Although the use‐of‐proceeds transition label
has the smallest share of the GSS+ market byfar, transitioning high-emitting sectors of theeconomy will be essential to achieve net-zerogoals, and there are numerous opportunities
for Brazil to grow transition finance. Most of thisis in the form SLBs rather than use‐of‐proceeds
instruments. Climate Bonds recognizes that,given their forward-looking targets, SLBs are
inherently about transition, and represent an
excellent opportunity for companies to accesssustainable finance to support the achievementof their net-zero (and potentially other) targets.
With further guidelines and metrics for credible
sectorial transitions being developed, theexpectation is for the market to evolve andissuance to scale up.

Thematic ABS market in Brazil
ABS deals represent a small share of the Brazilian
GSS+ market (3.5%), but present a unique
opportunity to scale up investments in smaller
projects via securitisation. ABS have been
widely used in sectors such as agriculture andbioenergy. Non-labelled ABS deals in Brazil havegrown over the past years with CRAs increasingfrom BRL12bn (USD 2.3bn) in 2019 to BRL25bn(USD 4.9bn) in 2021.13 Climate Bonds has
identified huge potential to scale up the use ofthematic ABS instruments in Brazil.
The labelled securitisation market debuted in2016 with Suzano Papel e Celulose’s USD295m
green CRA to finance low-carbon agriculture andforestry. After three dormant years, 2019 saw arevival with two new, albeit small, deals. Burger
King partnered with H2 Energy on a USD4.5m
CRI to finance distributed solar energy supplying
4In 2020, after the launch of Climate Bonds’
Bioenergy (2019) and Agriculture (2020)
Criteria, the market gained traction with fourgreen CRAs issued by FS Bioenergia, Rizoma
Agro, Bioenergética Aroeira and SLC Agrícola,
totalling USD166m.14,15 This same year,
Taboa, a not-for-profit organization, issued a
USD195k sustainability CRA through Gaia Agro
Securitizadora to finance family farming withincocoa bean value chain.
2021 was a record year with significant
benchmarks. Among the 11 green deals issued
in the year, Órigo Energy, through Albion Capitalsecuritisation, launched the first green FIDC.
Proceeds from the USD32.9m deal were earmarked
for the construction of 12 solar farms. The firstsocial ABS was issued by Magik JC, throughGaia Securitizadora: a USD2.8m CRI financing

GSS+ ABS deals originating from Brazil
4.5
4.0

SLB

Sustainability

3.5

Social

Green

3.0
2.5
2.0
1.5
USD Billions

its restaurants, while Forest Company do Brasil
issued a USD9.6m CRA to fund forestry projects
and assets. For the initial few years, forestry andrenewable energy were the only sectors funded
via GSS+ ABS in Brazil.

1.0
0.5
0
2016

2018

2020

2021

2022

Source: Climate Bonds Initiative 2022

social housing. Finally, JBS issued the first two
sustainability-linked CRAs through securitisationcompany Virgo, worth USD96m and USD115m.

2022 was a slower year, with four GSS+ ABS deals
worth a combined USD251m, slightly more thanhalf of the total amount issued in 2021.

Green bonds
Securitisation
VehicleIssuer nameAmountissuedIssuance
date

Local
instrument

External
review type

External
reviewer

Use ofproceeds

EcoagroSuzano Papel e
Celulose ABS

BRL 1,000.0m

Nov-16

CRA

SPO

NINT

Agriculture andForestry

True Securitizadora

H2 Energy

BRL 18.6m

Sep-19CRI

SPO

Resultante

Solar Energyn/aForest Company do
Brasil Participacoes SA

BRL 39.4m

Sep-19

CRA

SPO

NINT

Forestry

VórtixFS Bioenergia

BRL 210.3m

Jul-20

CRA

SPO

NINT

Bioenergy

EcoagroRizoma AgroBRL 25.0m

Aug-20

CRA

Certification

Bureau Veritas

Agriculture

ISEC Securitizadora

Bioenergetica Aroeira

BRL 150.0m

Dec-20

CRA

SPO

NINT

Bioenergy

ISEC Securitizadora

SLC Agricola

BRL 480.0m

Dec-20CRA

SPO

Resultante

Agriculture

True Securitizadora

The Origo Energy

BRL 80.1m

Feb-21

CRI

Certification

Bureau Veritas

Solar Energy

EcoagroUsina Rio Amambai

BRL 60.0m

Feb-21

CRA

SPO

NINT

Bioenergy

Gaia Securitizadora

Produzindo Certo

BRL 63.3m

Feb-21

CRA

Certification

Bureau Veritas

Agriculture

EcoagroColombo
AgroIndústria

BRL 358.4m

Mar-21

CRA

SPO

NINT

Bioenergy

Albion Capital

The Origo Energy

BRL 184.0m

Apr-21

FIDC

Certification

Bureau Veritas

Solar Energy

EcoagroFerrari Agroindustria

BRL 80.0m

Apr-21

CRA

SPO

NINT

Bioenergy

EcoagroFazenda da Toca

BRL 25.0m

May-21

CRA

SPO

NINT

Agriculture andForestry

Gaia Securitizadora

Solinftec

BRL 140.0m

May-21

CRA

Certification

NINT

Agriculture

True Securitizadora

Athon Energia S.A.

BRL 82.0m

Aug-21

CRI

Certification

NINT

Solar Energy

EcoagroUmgrauemeio

BRL 8.0m

Sep-21CRA

SPO

Bureau Veritas

Agriculture

Virgo

RZK Energia

BRL 56.0m

Dec-21

CRI

SPO

NINT

Solar Energy

EcoagroFS Bioenergia

BRL 375.0m

May-22

CRA

Certification

Sustainalytics

Bioenergy

EcoagroFS Bioenergia

BRL 375.0m

May-22

CRA

Certification

Sustainalytics

Bioenergy

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative5

VirgoRZK Energia

BRL 56.0m

Dec-21CRI

SPO

EcoagroFS Bioenergia

BRL 375.0m

May-22

CRA

Certification

Bioenergy

EcoagroFS Bioenergia

BRL 375.0m

May-22

CRA

Certification

Bioenergy

Securitisation
VehicleIssuer nameAmountissuedIssuance
date

Local
instrument

External
review type

External
reviewer

Use of proceeds

Gaia Securitizadora

Magik JC Empreendimentos ImobiliáriosLtda.

BRL 14.8 m

Sep-21

CRI

None/
undisclosed

None/undisclosed

Affordable
infrastructure

True Securitizadora

Direcional
Engenharia S.A.

BRL 300.0 m

Jun-22

CRI

SPO

NINT

Affordable
infrastructure andEquality

NINT

Solar Energy

Social bonds

Sustainability bonds
Gaia Securitizadora

Tabôa

BRL 1.0 m

Dec-20CRA

SPO

WayCarbon

Microfinance, foodsecurity, and landuse

EcoagroTanac

BRL 195.0 m

Sep-21CRA

SPO

BureauVeritas

Education, foodsecurity, and landuse

Sustainability-linked bonds
Virgo Companhia deSecuritizaçãoJBS S.A.

BRL 522.8 m

Dec-21CRA

SPO

ISS ESGLivestock

Virgo Companhia deSecuritizaçãoJBS S.A.

BRL 626.0 m

Dec-21CRA

SPO

ISS ESGLivestockOpea Capital

Dori Alimentos S.A.

BRL 200.0 m

Apr-22CRA

SPO

Resultante

Water efficiency
and wastemanagement

Brazil’s green
securitisation
marketBrazil green finance market per local instrument

3.0

The green label leads Brazil’s
sustainable securitisation
market, with 70% of the volumes (USD868m). Thisniche market also represents 7% of Brazil’s total
green market, with CRAs, CRIs, and FIDCs the mostfrequently issued instruments. There are not yet
green securitised debentures in the country.

FDIC

Loan

Debenture

CRI

CRA

International Bonds

2015

2016

2.5

2.0

15.

1.0

USD Billions

CRAs currently account for 91% of Brazil’s green
ABS volumes and finance agriculture, forestry,and biofuel production, while CRIs and FIDC
represent the remaining share and mainly financesolar energy. By late 2022, green securitisations
had only financed renewable energy and landuse, but there is potential for diversification.
Other sectors, such as buildings and transport,
could also be funded via securitised instruments.
Furthermore, other securitisation instruments
available in Brazil, such as CPRs (Rural ProductBills) and CRs, could be mobilised.

Financial Letters

0.5

0
2017

2018

2019

2020

2021

2022

Source: Climate Bonds Initiative 2022

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

6

Shorter tenors dominate

Ecoagro leads the green securitised market
Virgo 1%
True Securitizadora 4%

10-20Y 6%

Vortix 5%
Albion Capital 4%

ISEC
Securitizadora
15%

Up to 5Y
26%

Ecoagro
67%

5-10Y
58%

Undisclosed 10%

Gaia Securitizadora 4%

Source: Climate Bonds Initiative

More than half (58%) of green ABS volume has
tenors ranging between five to ten years. The
three deals with the longest term – ten to 20
years – are the FIDC from Órigo Energy and thetwo CRIs issued by H2 Energy (Burger King) andÓrigo Energy; all had proceeds earmarked forsolar projects.
All the green securitisations were issued in BRL,
although recent regulatory changes permit
the issuance of USD-denominated CRAs. The
primary green securitisation vehicle in the
country is Ecoagro, with 67% of the market share.
The company has issued ten green CRAs tofinance bioenergy, agriculture, and forestry. Gaia
Securitizadora, the third largest in the country,
has also issued three green CRAs to financesustainable agriculture, all Certified under the
Climate Bonds Standard.

Source: Climate Bonds Initiative

All green ABS deals in Brazil obtained an external
review, following market best practice.

SPOs are the most common
review type

The Second-Party Opinion (SPO) is the preferred
type of external review. NINT was responsiblefor 83% of SPOs by volume. Other providers
include Bureau Veritas and Resultante. Most of theverification as part of Climate Bonds’ Certification
scheme were provided by Sustainalytics (59%),
followed by Bureau Veritas (25%) and NINT (16%).

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

Certification
31%

SPO
69%

Source: Climate Bonds Initiative7

2. Brazil’s securitisation market in expansion

The first sector in Brazil to benefit from these
instruments was real estate, instituting CRIs andestablishing legal security for investors (see page3).16 Since then, most receivables certificateshave originated from entities operating in the realestate sector, with recent expansion into othersectors, most notably agribusiness where CRAs
are being used as an alternative to bank lending.
In 2021, the total volume of corporate debt
securities issued in the Brazilian capital market
reached USD147.4bn (BRL752bn), the largest
annual amount to date.17 ABS (CRI, CRA, and FIDC)
account for the second largest share of the Brazilian
corporate debt market (following debentures),and their share is growing. Notably, the agriculture
sector is mobilising these instruments to increase its

The overall Brazilian debt capital market
60

2019

2020

2021

2022-Q3

50
40
30
20
USD Billions

Securitisation is one of the most traditional
types of debt funding in Brazil. It has emerged
as one of the most relevant alternatives forsmaller entities looking for financing options at
potentially lower costs in the debt market. The
growth of securitisation deals also increased thediversification of external financing options forcompanies and investment portfolios for theirinvestors. These structures stimulate competition
between sources of funds and suppliers. They
provide companies with broader access tocapital markets, reduce costs from banking
intermediaries and tax burdens, and allow small
projects or SMEs (small and medium-sizedenterprises) to enter the debt market and attract
a broader range of investors.

100Debenture

CRA

CRI

FIDC
Source: : Boletim Econômico CVM, 2022

external funding opportunities, creating accessible
investment options and bringing economic
dynamism to the industry.
Furthermore, given recent changes in theregulation of CRs, a broader source of securitised
investment for various sectors of the Brazilian
economy is now included, described on page 3.18
This development opens new opportunities andalternatives for non-real estate and agribusinesscompanies seeking financing via FIDCs, notingthat CRs are less expensive and require fewer
service providers. The use of CRs is expected to
grow substantially among banking, sanitation,
infrastructure, and education companies.

CRs have the potential to further attract longterm institutional investments because they do
not provide an exclusive fiscal benefit for retailinvestors. Unlike CRAs and CRIs that because ofthis feature have a higher level of engagementwith a non-sophisticated investor base. CRs
could also attract more foreign investment due
to their similarity to international securitisation
instruments. Finally, the possibility of a tax
exemption for non-residents in purchasing
corporate debt could make this instrument evenmore appealing to these buyers.19

Securitisation structures to finance Brazilian Agriculture
Agribusiness is the source of 27.5% of Brazilian
GDP, requiring very substantial funding
volume.20 77% of the sector comprises small
producers, for whom it can be difficult toaccess mainstream financing.21

CRAs can offer stakeholders an alternative sourceof financing off their balance sheets and at equal
or lower interest rates compared to traditionalsources, including banking lending sourced by
the federal government.

Although agriculture is traditionally primarily
funded by public capital through credit lines
supported by Plano Safra, capital markets
can offer an alternative source of funding,especially given prevailing market conditions
and associated inflation‐driven increases in
production costs.

Interestingly, CRAs can be structured as both
‘corporate’ and ‘dispersed’. Within the former, thedebt capital is directly invested into the issuing
company/debt owner (e.g., trading, chemical,
seed, and resale companies; cooperatives andproducer associations), which will eventuallyfinance agricultural producers. In the latter,
investments are made directly into a credit
portfolio aggregating multiple borrowers (e.g.,
producers) who transfer their risks directly toinvestors through an intermediary, such as a
producer’s association.

The federal government legislated to leverage
private investments in the sector in 2020.22 Thisnot only broadens guarantee mechanisms
but also allows competitive interest rates forcapital market agriculture deals.
CRAs are being used as a debt facility tofinance corporate operations, working capital,
and flow agreements within the sector to
supplement and diversify financing sources.

While corporate CRAs account for 90% of thestructured agribusiness debt, the remaining
10% are dispersed instruments, which showsthat CRAs still have an untapped potential toprovide financing at scale to small producers.23

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

Likewise, within the local sustainablesecuritisation market, corporate CRAs havebeen the favoured structure (see page 6).
Fostering securitisation to finance small-scale
agriculture could help producers to outsource
financing and leverage the sector’s economic
growth and development.
Brazilian agriculture offers vast opportunity forclimate-related investments and a significant
role in growing the green securitisation
market.24 Identifying green assets according tointernational green standards helps investors
to understand the sustainable practices
already employed by local producers. Finally,
considering the growing volume of vanilla
CRAs (see above) and the type of projects andassets being funded, there is considerably
potential to attract larger pools of investors to
help grow local sustainable agriculture andbring further investments to smaller projects.

8

3. The appetite for securitisation
Compiled by Renato Buranello,
Phillipe Käfer, and Barbara Breda,
VBSO Advogados
Securitisation has made an essential contribution
to the development of the agribusiness sector,
as well as other sectors of the Brazilian economy,
enabling companies to raise financing whilepromising greater profitability for investors.
Securitisation originated in the mid-1970s in
the United States and involves transforming aless liquid asset into a marketable security. A
securitisation takes cash flows linked to specificassets or pools of assets, and packages them tosell on in the capital market.
The operation is based on three fundamental
pillars: (i) the transferor, that is, the creditor
to whom the accounts receivable are due;(ii) the securitisation company, an institutionthat will convert these accounts receivable into
securities that can be traded in the capital market;
and (iii) the investor, who will take its stakes andeffectively buy the securities for the economic yield.
The securitisation company operates as theintermediary between the creditor and investor,
guaranteeing the convergence of their interests.
It reinforces the capacity of the securitisation
mechanism in mobilising wealth, mitigating risks,and financial disintermediation.

From a legal standpoint, it is possible to define
securitisation as a structure composed of a set of
legal transactions – or indirect legal transactions– that involve the assignment and segregation ofassets of a company or an investment fund issuing
securities guaranteed by these segregated assets.
Consequently, these securities are structured tobe sold to investors whose funds will pay for theassigned assets. The assets are disconnectedfrom the originator’s equity by transferring
ownership, and later by the issuance of therepresentative securities. Securitisation isessentially a set of contracts aimed at issuing
securities guaranteed by a specific asset, usuallysegregated from the beneficiary’s equity, throughan independent entity known as a special
purpose vehicle (SPV).
Securitisation mechanisms underwent extensive
legislative changes in 2022, with emphasis on
Law n. 14,430/22 (also known as the Brazilian
Securitisation Framework), which resulted
from the conversion of Provisional Measuren. 1,103 – the fundamental legal frameworkfor securitisation in Brazil – and the Brazilian
Securities and Exchange Commission Resolution
n. 60, of December 23, 2021 – that has brought
specific regulatory rules to this mechanism.25

consolidation of capital markets as the primarysource of funding for various sectors of theBrazilian economy. The Brazilian Securitisation
Framework contributes to this by establishingrules for the securitisation of credit rights andthe issuance of the CR. It creates the legal
definition of securitisation transactions withbroad applicability in accordance with what has
been previously established by international
regulations on the subject.
The Framework also replicates CRI and CRA
standards, and it expands the variety of
securitised assets beyond the real estate andagribusiness sectors. CRs have wider applicability
among sectors, which is determined by the useof proceeds description in the securitisation term
and the indication of the backed credit rights.
Furthermore, a recent regulation for public
offerings simplified the process for issuing deals
under the CVM instruction n. 476, such as CRs,
CRIs and CRAs.26 It brought a more systemic
approach by including an automatic registration
mechanism for deals destined to institutional
investors and revoking provisions that used
to hamper some negotiations. Therefore, thisinnovation provided a cheaper and faster process
to companies issuing credit rights.

The growing need for diversified financing
and agile capital injection followed theRecievables Securitisation
Securitised security

Transfer of receivables or credit rights

SECURITISATIONCOMPANY

CreditDebt capital
Debt payment

Security payment

SPE

Debt payment

INVESTORS

Receivables payment

Offtaker

Receivables payment

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative9

4. How to structure a securitisation
Compiled by Marlana Zanatta,
Paula Peirão, and Bianca Souza Soares,
VERT Securitizadora
FIDCs, CRAs, CRIs, and debentures are the mostcommon ABS in Brazil. CRs joined this list mostrecently. These instruments can be labelled as
GSS+ following best market practice, such as therelevant Green Bond or Social Bond Principles
developed by the International Capital Market
Association (ICMA), or the Climate Bonds
Standard and Certification Scheme.27 However,
it is important to understand the step-by-stepprocess of structuring these securities, regardlessof the financial instrument, to better grasp theopportunities they present to issuers.
The choice of instrument depends on thecharacteristics of the credit originator, assetsbacking the operation, investor appetite, market
maturity, macroeconomic scenario, and othervariables. Each issuer should consider these topics,
identify the best path, and in partnership with thesecuritisation company (sometimes also calledsponsor or mistakenly the issuer) select the mostappropriate instrument. To illustrate this, an entitywith receivables linked to rural producers could issue
CRAs backed by agribusiness transactions. However,an FIDC could be strategically more interesting.
How? In Brazil, FIDC is a traditional instrument
and, therefore, better known by investors and wellconsolidated in the market, while CRAs were notestablished in regulation until 2018.28 Prior to that,issuance of the instrument was based on the CRI
regulation (see page 3). Therefore, a conservative
investor may feel more confident buying a FIDC
share rather than a CRA. On the other hand, thestructure of an FIDC requires multiple service
providers and therefore greater structuring costs
compared to CRAs. Finally, FIDCs are only intended
for professional and qualified investors, while the
CRAs can be purchased by any type of investor.

Labelling GSS+
Obtaining an external review can strengthen
the credibility of a GSS+ bond. There are several
types of review, among which the SPO is themost popular.
All types of external review have the same advantage:
providing greater transparency and security toinvestors that the product in which they are investing
complies with the criteria and objectives set out in the
documentation. The difference between the typesof review is in the assessment processes. Certification,for example has higher evaluation parameters,
requiring more documentation than other options.
A thematic label can be applied by an issuer
regardless of whether the framework has
been externally reviewed. However, investors,
assignors, and issuers prefer the additionaltransparency a review provides.

How can you label securitisation?
Structuring a GSS+ securitisation is similar to a vanilla operation. There are five steps:
2. The type of financing: in the caseof securitisation, the best instrument for
raising funds is defined according to thenature of the credit and considering the
product that best suits the needs of thecompany and the appetite of investors;
it could be a debenture, CRA, CRI, CR,
Fiagro or FIDC.
1. The capital need and the use ofproceeds: the eligibility criteria for theunderlying assets are defined; assets
or projects are selected, and resource
management is planned.

3. The structure: different financing
methods or structures can be combined,
depending on the characteristics of theasset/project and macroeconomic factors.
The securitisation company structuringservice prepares the documentation: due
diligence reports, cash flow projections
and evaluations, financial accounts,
historical reports, potential social impactof the project and, where necessary, isalso responsible for ensuring that thetransaction is in line with the labeling
criteria or objectives specified in the

4. The issuance:
involves all parties
that supported thestructuring andexecution of thetransaction: issuer,
structurers, external
reviewers, legal
advisors, auditors,
and coordinators.

Debenture
FIDC
FiagroCRI
CR
CRA

documentation. In addition,
the securitisation company
is responsible for convertingthe company’s assets into
securities and acting as
an intermediary in thetransaction between theassignor and the investor.

5. The disclosure: annual reporting
confirms the allocation of proceeds toenvironmental projects/assets and the
management of unallocated resources.
To comply with best market practice,issuers should also disclose the impactsof the financed projects throughappropriate metrics and methodologies.

23

Types of External Review
Second Party Opinion: The institution must
be independent from the issuer or present
appropriate procedures, such as information
barriers, to guarantee the independence of
the SPO. This typically involves an assessmentof alignment against the ICMA Green Bond
Principles (GBP). It may include an assessmentof the issuer’s scope, objectives, strategy,
policy or processes related to sustainability,
and an assessment of the environmental
characteristics of the project type.

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

Certification: theenvironmental credibility ofresources can be confirmed
through a certificate issued
by qualified and accredited
third-party companies (Climate Bonds being
the most common and well known). These
companies analyse and verify the consistencyof the certification criteria. They are typicallyaligned with the ICMA GBP.

10

5. Case studies
Securitisation instruments bearing the green,social, or sustainability labels are debt securities
backed by cash flows from underlying green
or social assets; or have proceeds earmarked
for eligible green or social activities (or both).
The proceeds of sustainability-linked structures
are typically general purpose, but the coupon

payments are linked to the achievement of
the sustainability performance targets (SPTs)
specified in key performance indicators (KPIs)
described in the financing framework. Below areselected examples of thematic securitised deals
issued in the Brazilian debt market.

CRA Solinftec - Green
Solinftec is an agricultural
technology company that
deploys automation services
for sustainable crop production.
The company developed aone-of-a-kind platform combining artificial
intelligence, algorithms, and hardware thatallows the real-time connection of machineryand equipment to coordinate production andreduce input and fuel intake. This technology
also includes a direct link with weather
stations. The company guides clients on
effectively applying agrochemicals to avoid
over-use and spill-over.

Issuer: Solinfitec

Underwriter: Itaú BBA

Securitisation vehicle: Gaia Securitizadora

Legal advice: VBSO Advogados

Instrument type: CRA

Solinftec raised approximately USD27m(BRL140m) through Gaia Securitizadora’s CRA
to finance its activities and meet growing
capital market demands. The deal was backed
by Solinftec’s Agribusiness Credit Rights
Certificates (CDCA) originated from contracts
with clients. The proceeds were earmarked for
operational expenses and smart solutions toincrease agriculture production and promote
environmental preservation.

Underlying assets: Agribusiness Credit
Rights Certificates (CDCA) from contracts
between Solinftec and its clients, who hire thecompany’s smart automated solution.
Use of proceeds: Sustainable agriculture
External reviewer: NINT
External review type: Climate Bonds
Certification

Climate Bonds
Certification

Solinftec

RECEIVABLES

Gaia
Securitizadora

GREEN
CRA

Investors

NINT

EXTERNAL REVIEW

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

11

CRA Produzindo Certo – Green

Issuer: Produzindo Certo

In March 2021, Gaia
Securitizadora, in partnershipwith Traive Finance, issued thefirst dispersed green CRA from
Produzindo Certo, a company
that provides environmental and social
solutions for agrifood companies, producers
and their supply chain. The USD12m(BRL63.3m) deal was backed by 17 CPRs issued
by small rural producers. This innovative
aggregation mechanism enabled small rural
producers to access large investors directly.

Securitisation vehicle: Gaia Securitizadora

In addition to having their financial andproductivity obligations monitored, the 17
producers have to qualify the environmental
aspects of their crops by meeting Climate
Bonds’ Criteria as well as Produzindo Certo
requirements. They are responsible forpreserving and restoring environmentallysensitive areas, while Produzindo Certo
monitors them and provides environmental
advisory services.

Instrument type: CRA
Underlying assets: 17 CPRs from small rural
producers
Use of proceeds: Sustainable agriculture
External reviewer: Bureau Veritas
External review type: Climate Bonds
Certification
Legal advice: VBSO Advogados

Climate Bonds
Certification

Rural
CPRs
Producers

Produzindo RECEIVABLES
Certo

Gaia Impacto
Securitizadora

GREEN
CRA

TraiveFinance

Bureau Veritas

Investors

EXTERNAL REVIEWCRI Órigo Energia – GreenÓrigo Energia is one of
the largest Brazilian energy
companies operating distributed
generation solar farms in Brazil,
active in the states of Minas Gerais, São Paulo,and Pernambuco.

Underlying assets: Property lease agreements
and fiduciary sale of equipment, quotas, andsurface rights

Issuer: Órigo Energia

External review type: Climate Bonds
Certification

Securitisation vehicle: True Securitizadora

Use of proceeds: Solar energy generation
External reviewer: Bureau Veritas

Underwriter: Itaú BBA

Instrument type: CRI

In February 2021, True Securitizadora issued a
two-tranche USD14.7m (BRL80m) green-labelled
CRI on behalf of Órigo Energia to finance thedevelopment of four photovoltaic solar energy
generation facilities in Latin America, mainlyin Brazil. The ten-year green ABS tranches hadinteresting features for both originator andinvestors, such as a longer-than-average maturity
and an 18-month grace period for repayment.
Furthermore, the subordinated debt structureoffered de-risking for senior investors.

Climate Bonds
Certification

ÓrigoEnergia

LEASE AGREEMENTS

True
Securitizadora

GREEN
CRI

Investors

Bureau Veritas
EXTERNAL REVIEW

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

12

FIDC Órigo Energia – GreenÓrigo Energia raised USD32.9m(BRL184m) through a Green
FIDC. Albion Capital structured
the innovative instrument with amaturity term of 12 years. The proceeds were
invested in the construction of 12 solar farms
in the Brazilian state of Minas Gerais, where thecompany holds most of its operations, adding
30MW of generation capacity.

The deal was Certified against the Climate Bonds
Solar Criteria and had initially received a secondparty opinion from Bureau Veritas.
Issuer: Órigo Energia

Underlying assets: Contracts of future
receivables from Órigo Energia
Use of proceeds: Solar energy generation
External reviewer: Bureau Veritas

Securitisation vehicle: Albion Capital

External review type: Climate Bonds
Certification

Instrument type: FIDC

Climate Bonds
Certification

ÓrigoEnergia

AlbionCaptial

CONTRACTS OF FUTURE
RECIVEABLES

GREEN
FIDC

Investors

Bureau Veritas
EXTERNAL REVIEWCRI Direcional Engenharia – Social
Direcional Engenharia is a
Brazilian real estate company
that aims to provide accessible
and affordable sustainablehousing. In June 2022, Direcional issued a
USD59.4m (BRL300m) social CRI through True
Securitizadora. The ten-year securitisation
was backed by Direcional’s debentures,
which financed the construction of social
housing for families with a monthly income of
approximately USD800.

Direcional
Engenharia

DIRECIONAL’S
DEBENTURES

Issuer: Direcional Engenharia
Securitisation vehicle: True Securitizadora
Instrument type: CRI

The operation was 1.2x oversubscribed,
reached institutional and retail investors, andfollowed ICMA’s Social Bond Principles whileobtaining an SPO from NINT.

Underlying assets: Debentures from Direcional
Use of proceeds: Social Housing
External reviewer: NINT
External review type: Second-Party Opinion

True
Securitizadora

SOCIAL
CRI

Investors

NINT

EXTERNAL REVIEW

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

13

CRA Tabôa – Sustainability
Tabôa Fortalecimento
Comunitário is a not-forprofit organisation that aims tostrengthen local communities by
supporting community initiatives
and socioeconomic enterprises in Bahia.
In October 2020, Gaia Securitizadora issued asustainability‐labelled securitisation backed
by contracts from Tabôa to finance family
farmers, totalling USD195,000 (BRL1m).
The proceeds are being used to (re)financeactivities and projects undertaken by thosesmall producers until 2025.

Issuer: Tabôa Fortalecimento Comunitário
Securitisation vehicle: Gaia Securitizadora
Instrument type: CRA
Underlying assets: Contracts from Tabôa
Use of proceeds: Finance and refinance small
producers’ activities
External reviewer: WayCarbon

The social and green UoP included sustainable
management of living natural resources andland use, agroecological/organic agriculture,
agroforestry systems (SAFs), food security andsustainable food systems, and socioeconomic
empowerment – including women, young
people, settlers, and quilombolas. The
issuance followed ICMA’s Sustainability Bond
Guidelines and received a second-party
opinion from WayCarbon.

External review type: Second-Party Opinion

Tabôa
Contracts between Tabôa
Fortalecimento and family farmers
Comunitário

Gaia
Securitizadora

SUSTAINABILITY
CRA

Investors

WayCarbon

EXTERNAL REVIEWCRA JBS S.A. – SLB
JBS is a Brazilian multinational
meat processing company andthe largest protein producer inthe world. The company operates
in 15 countries over 400 production units andhas commercial offices on five continents.
In recent years, land-use change activities
increased due to global food production andmarket pressure on agriculture and livestockcompanies, leading JBS to develop its 2030
net zero strategy.

Issuer: JBS S.A.
Securitisation vehicle: Virgo Companhia deSecuritização
Instrument type: CRA
Underlying assets: Debentures from JBS
External reviewer: ISS ESG
External review type: Second-Party Opinion
KPIs: Cattle origin control
SPT: 100% of Brazilian cattle from direct
suppliers registered by 2025.
In December 2021, the company priced two
CRA tranches worth USD210m (BRL1.15bn)
linked to the group’s target of registering all its

JBS S.A.

JBS’ DEBENTURES

Virgo
Companhia deSecuritização

direct cattle suppliers in the JBS Transparent
Livestock Platform to monitor deforestation
activities. Although the KPI chosen is relevant
to deforestation issues and overarching ESG
goals, the deal is not linked to GHG emissions
reductions and, therefore, not Paris-aligned.
Moreover, while JBS’ SLB framework doesrefer to its 2030 target to reduce Scope 1 & 2
emissions by 30%, Climate Bonds recognisesthat Scope 3 emissions represent some 91%of the entity’s total emission footprint.29
Climate Bonds encourages JBS to raise thelevel of ambition and materiality in future
SLB issuance in order to demonstrate clearly
to investors and other stakeholders its
commitment to aligning with a 1.5 degreealigned pathway.

SLB
CRA

Investors

ISS ESGEXTERNAL REVIEW

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative14

6. The growing role of GSS+ securitisation
Currently, all economies
around the world are beingpressured by the postCOVID-19 recovery, energy
price shock, and resultant highinflation. Traditional financial
institutions increasingly concentrate their credit
portfolios on large companies to avoid credit
risk, forcing the market to seek alternatives
to finance smaller activities. Meanwhile, debt
originating from the private sector remains asmall proportion of the overall Brazilian debt
market. According to the Brazilian Central
Bank, public sector debt is equivalent to 88%
of the country’s GDP, while private sector debt
represents only 47%, including the lion’s shareof private banking participation.30 Securitised
instruments can contribute to the diversity andgrowth of an inclusive and broad-based debt
capital market in Brazil by facilitating increased
corporate participation.

GSS+

Financial entities, in turn, play a prominent rolein the local economy and are also large issuersof two types of securitised instruments, LCA and
LCI. The rising Brazilian interest rate enhances
the appeal of these financial debt instruments.
For instance, LCA and LCI portfolios of financial
entities grew 38% and 25% respectively between
2021 and 2022.31 Securitisation, in the case offinancial entities, can contribute to expandedcredit lines and increased lending capacity bydecoupling from the balance sheet.

GSS+ instruments can help to attract a larger
pool of investors to grow the local capital market,
contribute to the costs of averting climate changerisks, and potentially reduce transition costs/
risks.32 Estimates suggest that 8% of the Brazilian
financial system’s credit portfolio is exposedto transition risks, 70% of which comes fromcattle, freight transport, and steel activities. The
financial institutions exposed to the greatest risk
are the smaller ones, such as credit cooperatives
which are primarily responsible for providing
credit to agribusinesses.33

Finally, Brazil is positioned to lead this market.
The country has the largest financial sector andcapital market in LAC, and plays a major role in
the GSS+ universe as the region’s second-largest
market. The Brazilian GSS+ ABS market is thepioneer in Latin America. This exposure canbe leveraged to grow the market and further
finance sectors already reached by securitisation
and benefit new ones, given the most recent
legislative updates (see page 9).

Fostering small-scale sustainable projects
and assets that could be financed throughsecuritised instruments across the Brazilian
market can contribute to safeguarding thecountry’s economy against future economic
distress caused by climate change. Whilethe international and domestic contexts arechallenging, sustainable investments can support
a green recovery and fund important sectors forresilient growth.
GSS+ securitisation could also sharpen thecompetitive position of the Brazilian market
by expanding the availability of credit andfunding options. It could be the tool of choice
to grow the local capital market by providing
robust conditions to support the aggregation ofprojects that may otherwise lack resources. This
could further attract institutional investors insupport of the country’s economic and climate
resilience targets.

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative15

7. Recommendations for leveraging sustainablesecuritisation in Brazil
The Brazilian securitisation market can be
attractive to both investors and issuers by offeringa lower cost of capital to the latter and longer
maturities, larger ticket sizes, and risk exposure to
the former. The country boasts a comprehensive
regulatory framework that supports an arrayof instruments. Regulations can be applied
either to specific sectors (i.e., CRAs and CRIs) or
multiple (i.e., FIDCs and CRs); they can have amore complex structure (i.e., FIDCs) or simplified;offer tax exemption to individual investors(i.e., CRAs and CRIs); and even exchange rate
fluctuation protection (i.e., CRs and CRAs). The
GSS+ securitisation market in Brazil has a uniquepotential to attract institutional investments at
scale towards smaller climate-aligned projects.
Climate Bonds identifies three actions to boost
the GSS+ securitisation market in Brazil.

1. Leverage the roleof securitisation in
the local market
Securitised instruments
are one of the mosttraditional sources of financing in the Brazilian
market. Nevertheless, recent developmentsin the regulatory framework can propel themarket to even greater prominence offering
greater transparency, accountability, andstandardisation. Key stakeholders including
securities commissions, capital markets
associations, and stock exchanges must amplify
this message and educate both issuers andinvestors to allow them to leverage securitisation.
Governments can foster securitised issuances
by facilitating the availability of data on financial
performance, and social and environmental
impacts of small projects that can eventually
underly securitised deals. Centralizing data
through digital solutions and standardisation canhelp project developers meet investors’ demandand increase the potential for securitised
structures. In Brazil, the platform Monitor deInvestimentos,34 launched in 2022, can be further
explored to centralize data on small projects
across multiple sectors of the economy.

2. Identifying
sustainable
portfolios

3. Accelerate
supportive policies
Policymakers play animportant role in the net-zero
agenda. The availabilityof market guidelines and data can attract
investment flows and enable the identificationof a pipeline of sustainable projects. While thegreen label currently represents the largest
share of the Brazilian securitisation market,
the expansion of social, sustainability, andsustainability-linked instruments is vital to ensure
a just transition. GSS+ deals can be leveraged byadopting fast-track mechanisms to facilitate theapproval of projects and securitised deals withsocial and environmental benefits.
Governments must act today to prevent higher
costs of transitioning at a later stage. They
can invest in research and development toincorporate climate into long-term pipeline
planning to support and guarantee thefuture bankability of assets/projects. Policies
such as green procurement prioritise green
development and support the growth ofthe private sector. Finally, in partnershipwith development financial institutions,
governments can work to absorb higher risksof sustainability-labelled deals by providing
guarantees, leveraging blended finance, creating
a GSS+ bond de-risking facility and engaging ininnovative demonstration transactions.

Identifying green and social
lending portfolios can help
leverage the Brazilian securitisation market.
Brazil has a massive untapped pipeline ofsmall-scale, sustainable projects and assets,
especially in agriculture, green buildings,
waste management, distributed renewableenergy, and urban mobility. The aggregation ofsmaller projects into GSS+ securitisations canunlock private capital to support these sectors.
Collaboration with securitisation companies isessential to build a robust pipeline of projects
in compliance with international guidance andbest practice.

Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative16

Endnotes
1. Federal Law n. 9,514/ 1997
2. Federal Law n. 11,076/2004
3. Federal Law n. 11,076/2004
4. Established by article 20 in Law n. 14,430/2022
5. CVM Resolution n. 60, from December 2021
6. CVM Resolution n.600, from August 2018 (revoked by CVM
Resolution n.60)
7. CVM Resolution n. 60, Art. 4.
8. Federal Law n. 8,929/1994
9. Federal Law n. 12,810/2013
10. Federal Law n. 14,130/2021.
11. Federal Law n. 11,076/2004
12. Federal Law n. 10,931/2004
13. UQBAR, 2022. Anuário CRA 2021. https://lp.uqbar.com.br/anuarios2022/cra.php
14. Climate Bonds Initiative, 2019 https://www.climatebonds.net/
standard/bioenergy
15. Climate Bonds Initiative, 2022 https://www.climatebonds.net/
standard/agriculture

Prepared by the
Climate Bonds Initiative

16. Federal Law n. 9,514/1997
17. Brazilian Central Bank, 2022 https://www.bcb.gov.br/publicacoes/
relatorioeconomiabancaria
18. Federal Law n. 14,430/2022
19. Provisional Measure n. 1,137/2022
20. Cepea, 2021 https://www.cepea.esalq.usp.br/br/pib-doagronegocio-brasileiro.aspx#:~:text=Considerando-se%20os%20
desempenhos%20parciais,%2C5%25%20registrados%20em%202021.
21. Agribusiness census 2017, IBGE 2021 https://censoagro2017.ibge.
gov.br/templates/censo_agro/resultadosagro/index.html
22. Federal Law 13,986/2020
23. Anuário Uqbar, 2022 https://lp.uqbar.com.br/anuarios2022/cra.php
24. Climate Bonds Initiative, 2020 https://www.climatebonds.net/
files/reports/brazil_agri_roadmap_english.pdf
25. Federal Law n. 14,430/2022
26. CVM Resolution n. 160, from July 2022
27. Climate Bonds Initiative, 2022 https://www.climatebonds.net/standard
28. The CRA was established by law in 2004, but its regulation by theCVM only occurred in 2018.

Contributions from
VBSO Advogados

29. JBS S.A., October 2021 https://api.mziq.com/mzfilemanager/
v2/d/043a77e1-0127-4502-bc5b-21427b991b22/f678b73f-f45a-4615ff8f-461e78d3884a?origin=1
30. Brazilian Central Bank, 2022 https://www.bcb.gov.br/publicacoes/
relatorioeconomiabancaria
31. B3, 2022 http://estatisticas.cetip.com.br/astec/series_v05/paginas/
lum_web_v05_series_introducao.asp?str_Modulo=Ativo&int_
Idioma=1&int_Titulo=6&int_NivelBD=2/
32. Climate Bonds Initiative, 2022 https://www.climatebonds.net/
files/reports/cbi_pricing_h1_2022_02g.pdf
33. Brazilian Central Bank, November 2022 https://www.bcb.gov.br/
content/publicacoes/ref/202210/RELESTAB202210-refPub.pdf
34. Ministry of Economy, 2022 https://investimentos.economia.gov.br/
monitor-investimentos/index.html

Contributions fromVERT Securitizadora

Supported by the
Gordon and Betty Moore Foundation

Authors: Julia Ambrosano and Sofia Borges
Collaborators: Leisa Souza, Sheila Alves, Phillipe Käfer,Barbara Breda, Renato Buranello, Marlana Zanatta,
Paula Peirão, and Bianca Souza Soares
Design: Godfrey Design and Joel Milstead

Climate Bonds Initiative © March 2023

Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment adviser. Any reference to a financial organisation or
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The Climate Bonds Initiative is not endorsing, recommending or advising on the financial merits or otherwise of any debt instrument or investment product and no information within this document should be taken as
such, nor should any information in this communication be relied upon in making any investment decision. Certification under the Climate Bond Standard only reflects the climate attributes of the use of proceeds of adesignated debt instrument. It does not reflect the credit worthiness of the designated debt instrument, nor its compliance with national or international laws. A decision to invest in anything is solely yours. The Climate
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Brazil sustainable securitisation State of the market Q3 2022 Climate Bonds Initiative

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