When a company that recovers forests and has as partners Armínio Fraga, Guilherme Leal and the Moreira Salles family cannot obtain a letter of guarantee to release a loan that is already approved by BNDES, there is something wrong in the world of ESG.
This is what is happening with re.greenone of the pioneers in forest restoration in the country and which at the beginning of the year had a loan of R$ 187 million approved by BNDES, with a cost of 7% per year – a rate that would make us envious.
Four months have passed and the company has still not been able to withdraw the money because no bank approves the letter of guarantee, a guarantee required by BNDES for 100% of the loan.
re.green’s CFO, Ana Luiza Squadri, says that the institutions’ credit committees are even interested in the business, especially when one of the important partners presents the company to the banks’ CEOs. But the agenda bounces: no one approves the guarantee.
Ana Luiza says that she received a proposal, but the bank wanted 80% collateral. “Imagine me leaving 80% of the money sitting in the bank?”
One of the problems, in the banks’ view, is the fact that re.green is a startup whose revenue is based on the future sale of carbon credits. The company buys land today, reforests it and only then generates carbon credits, something that can take 7 years.
Recently, the largest carbon credit certifier in the world, Verra, requested corrections to the re.green project before certifying its credits.
But Ana Luiza says that this is not what hinders the banks’ approval, especially because many of them are partners in companies similar to re.green and know how the certification process works.
The problem may lie in the financing model approved by BNDES, as the development bank used an off-the-shelf product, without creating a specific design that would facilitate the guarantee, for example.
In the project approved by BNDES, the plan is to purchase 14,802 hectares of degraded areas in the Atlantic Forest and Amazon. In an area this size, more than 13 thousand football fields could fit. But banks place little value on reforested land, and as a result, the letter of guarantee becomes expensive.
The re.green project was the first approved under the Arco da Restauração program, from BNDES, with part of the resources coming from the Climate Fund, created with money from oil royalties.
The development bank’s goal is to allocate R$1 billion from this program for reforestation activities in the Amazon. But not even the first loan is getting off the ground.
The bank did not want to talk about the matter with Brazil Journal and limited itself to sending a note saying that it is “committed to strengthening credit instruments for the forest restoration agenda, seeking financial solutions for the specificities of the sector.”
But these solutions have not yet appeared. BNDES itself, when asked about the structure of the guarantees, sent a link with the description of guarantees for the institution’s standard loans.
“As re.green’s corporate structure is recent, we cannot use holding companies to provide guarantees and use the standard BNDES guarantee structure of guarantee plus physical guarantee,” says Ana Luiza. “With that, all I have left is the letter of guarantee.”
Another difficulty is that re.green’s investors are funds, which typically prohibit the establishment of guarantees. The current partners are Lanx Capital, Gávea Investimentos, BW (Brasil Warrant), Principia Capital and Dynamo.
Together with the startup’s founder, Bernardo Strassburg, these managers contributed R$385 million to re.green. Another investor is Guilherme Leal, one of the founders of Natura and founder of Dengo Chocolates. Guilherme bought convertible debentures.
“To provide resources for the growth of the sector, it is not possible to rely on the capacity of all the companies’ shareholders, because otherwise it becomes a continuous effort to raise funds. equity and leverage does not fulfill its purpose,” says the CFO.
“If the planted forest has value, why can’t it be a guarantee? If a shed or a degraded pasture can be used as a real guarantee, why couldn’t a forest be? Even more so with contracts offtakewhich guarantee prices and reduce risk.”
Currently, re.green already has 26 thousand hectares of land purchased in deforested regions. Of this total, 12.5 thousand are restorable. So far, the company has reforested only 870 hectares, but its goal is to recover 1 million hectares, which would require an investment of around R$10 billion.
Certainly, at some point the BNDES, banks and investors will find a way out of the impasse. But, as Cazuza said, time doesn’t stop.
re.green spent almost two years negotiating with BNDES to obtain the loan, and has already been trying to obtain a letter of guarantee for four months. Meanwhile, the planet heats up.
Josette Goulart
