Environmental Framework

The Nature Conservancy’s Environmental Framework was created to guide lenders and investors in the Brazilian beef value chain to successfully develop finance mechanisms that catalyze sustainable intensification of cattle ranching in Brazil. This would limit the degradation of natural habitats and help mitigate climate change, bringing positive impacts to both the Amazon and the Cerrado biomes.

Rapid scaling of lending and investments in sustainable intensification is critical to help Brazilian ranchers transition to more sustainable cattle production models. TNC’s Environmental Framework offers practical guidance to help lenders and investors design and implement the new, innovative financial mechanisms needed to support this move.

Anna Lucia Horta - Business and Investment Officer, TNC Brasil 

The Environmental Framework offers clear guidance to develop financial mechanisms targeting sustainable intensification of cattle ranching across the Brazilian Amazon and Cerrado biomes.

Since the 1970s, the expansion of the Brazilian cattle herd has been heavily concentrated in the Amazon and parts of the Cerrado. The Cerrado accounts for nearly 55% of Brazil’s beef production, while the Amazon holds around 40% of the Brazilian cattle herd, according to Embrapa, the Brazilian agricultural research corporation. Historically, ranching has been the largest driver of conversion in Brazil, being directly linked to over 90% of deforestation in the Amazon and 70% in the Cerrado (MapBiomas, 2019). In both biomes, cattle ranching is often the first economic activity in recently-converted areas. Fortunately, it is possible to meet the growing global demand for beef with no further conversion of natural habitat to pasture.  

Beef production in the Amazon and the Cerrado is characterized by low productivity, but the potential for intensification is huge. By applying good agricultural practices to increase productivity - including production systems that integrate cropping and forests - production levels could increase from three- to five-fold while maintaining grazing as the predominant production model, with no extended periods of confinement. Even a moderate increase in productivity would allow the Brazilian beef industry to meet projected increases in global demand with no new loss of natural habitat, while freeing up pastureland for alternative uses, particularly crops and integrated systems.

Under the Environmental Framework guidelines, any cattle ranching intensification project must meet some fundamental criteria to be considered sustainable and eligible for financing. It must project a significant increase in productivity; the herd must be raised primarily on grazed pastures, with confinement limited to the last 15% of the animal’s life; ranching must be limited to existing pastures, with no conversion of native vegetation; and the project should apply a known set of agricultural practices for sustainable intensification (see the Full Report for more details). Financing sustainable intensification supports a transition to Deforestation- and Conversion-Free (DCF) production.

The Nature Conservancy engaged with different stakeholders across the beef value chain in the Amazon and the Cerrado to develop a framework that would help lenders and investors interested in creating or adapting finance mechanisms with the goal of avoiding further deforestation or conversion of natural habitat. These stakeholders included:

The Environmental Framework guides lenders and investors to incorporate the following core requirements into their deforestation- and conversion-free finance mechanisms:

• Legal compliance across all properties (for example, environmental laws, labor legislation, no overlapping with conservation units, and the requirements under the Beef on Track protocol endorsed by the Federal Prosecutor);

• Reference date for no conversion: January 2018

In the Amazon biome, ranchers raising cattle on land legally cleared between October 2009 and January 2018 must also demonstrate compliance with the market re-entry requirements under the voluntary Public Cattle Agreement (Compromisso Público da Pecuária), regardless of to whom they sell their cattle.

Beyond these core requirements, including additional elements in finance mechanisms can generate even greater positive environmental impacts. The additional elements are:

1. Applying requirements across all properties owned or operated by the borrower; 
2. Using spatial prioritization to steer resources to high priority regions; 
3. Recommending the use of Good Practices; 
4. Reducing emissions per kilo of beef production;
5. Managing land conflicts; 
6. Implementing the IFC Performance Standards; 
7. Requiring good supplier sourcing practices.

For a thorough description of each of the core requirements and additional elements listed above, please see the full report.

With input from market actors on key factors for viable sustainable intensification, TNC analyzed economic, edaphoclimatic, and production data to classify the suitability of municipalities in the Amazon and Cerrado.

The result was a prioritized list of municipalities for steering finance: Maximum, High, Average, Low, and Minimum suitability for sustainable intensification of cattle ranching.

For the list of municipalities and additional information, please see the dashboard below:

The Nature Conservancy has developed a GHG emissions calculator which allows users to estimate net emissions resulting from the adoption of sustainable intensification at the farm level. When assessing potential borrowers or investments, this tool can be used to compare the carbon impacts between business-as-usual practices and implementing sustainable cattle ranching intensification.

The carbon calculator considers multiple variables such as the property location (municipality), total pasture area and area specifically to be intensified, pasture condition (how degraded it is), stocking rate (both current and projected), herd size and composition, and other zootechnical factors. The results include estimates of GHG emissions from different sources (such as soil, enteric fermentation, excrement, application of fertilizers and limestone, and pasture recovery).

The carbon calculator will soon be publically availaible.

A frequent question when discussing the proposed requirements or adapting existing financial mechanisms is how to properly monitor for compliance. The Nature Conservancy suggests a five-step monitoring approach, as depicted below:

You can access the monitoring protocol in the Full Report.

Brazil is well positioned to take advantage of the world’s growing demand for meat. But the role of Brazilian beef production in the continued deforestation and conversion of natural habitat in the Amazon and the Cerrado not only threatens the survival of both biomes, but jeopardizes the country’s chance to capture growing global market demand.

Sustainable intensification of cattle ranching in Brazil offers a significant opportunity to increase production, meet the needs of relevant markets, improve farmers’ income, free up areas for growing soy and other crops, conserve native vegetation, restore pastures and soil and contribute to global efforts to control greenhouse gas emissions. To help Brazilian ranchers in this transition, a rapid scaling of both lending and investment is required. The Nature Conservancy’s Environmental Framework offers a practical guide to help lenders and investors design and implement the new, innovative financial mechanisms needed to support this move.

The development of this Environmental Framework was made possible by the time and knowledge of countless individuals and organizations. The Nature Conservancy thanks the many meatpackers, domestic and international banks, environmental groups, ranchers and input companies who participated in the stakeholder engagement process, providing invaluable insights that made the Framework more agile and pragmatic while remaining consistent with our environmental goals.

This project is funded by the Gordon and Betty Moore Foundation.