BCB proposed standards that define the sustainability criteria applicable to the granting of rural credit and the characterization of enterprises with restrictions on access to rural credit due to legal or non-legal provisions related to socio-environmental issues. This consultation constitutes the first initiative that is part of the BCB Agenda on sustainable finance (launched last year) and the comment period for this consultation closes on April 23, 2021.
The proposal clarifies that the application of sustainability criteria will result in the following categorization of projects:
- Projects that cannot be financed with rural credit, due to the existence of legal provisions that prevent granting of financing.
- Projects that may be financed with rural credit, with a signal to financial institutions that the operation represents socio-environmental risk; these projects shall not be classified as sustainable operations.
- Projects that may receive the classification of sustainable operation, due to compliance with socio-environmental sustainability parameters, such as low-carbon agriculture, water supply, or use of renewable energy generated on the property.
These criteria will be part of the Rural Credit and Proagro (Sicor) Operations System and will help financial institutions improve their socio-environmental risk assessment processes. The information related to sustainable operations may be used by other financial institutions, certifiers of sustainable credit securities, rating agencies specialized in ESG criteria, and contracted service providers to audit the adherence of ventures to socio-environmental requirements, to allow the issuance of green bonds. In addition, agricultural policy makers might also use the information to grant additional incentives to sustainable rural enterprises.
Related Links (in Portuguese)
Comment Due Date: April 23, 2021
Keywords: Americas, Brazil, Banking, Sustainable Finance, Rural Credit, Credit Risk, ESG, BCB
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