Tackling the climate crisis and meeting the UN’s Sustainable Development Goals by 2030 cannot be done by governments and NGOs alone; private sector investment is necessary. Bringing large companies like mining organisations into the fold must be part of that process.

The reality is that a green and sustainable economy is not possible without mining and the critical metals needed for solar and batteries. Mining companies are intertwined with the communities in which they work, giving them a unique opportunity to operate more sustainably and help lift up rural communities.

One such company is Vale, one of the largest mining companies in the world and largest corporations in Brazil. Beyond mining, the company also works in logistics, from railways, ports, and terminals to infrastructure, energy, and steel making. Their work is broad and global, and now also includes a sustainability agenda.

Born out of company-wide commitments such as ‘respect our planet and communities’ and ‘act with integrity’, the company established a foundation called Fundo Vale in 2009. Fundo Vale aims to boost a fairer and more inclusive economy through social and environmental impact businesses. One of these initiatives is supporting Vale in its commitment to reforest 100,000 hectares and protect an additional 400,000 hectares beyond Vale’s operations by 2030.

This reforestation project is supported by Palladium together with a group of partners, which recently completed its second year of work. The key has been an innovative impact investment approach whereby Fundo Value invests in local companies that are already restoring the land.

“We began by searching the market for someone who could support us in mapping the businesses and organising a portfolio with impact investment opportunities,” says Patrícia Daros, Fundo Vale´s Operations Director. “This brought us to Palladium, which also helped us build a business plan for the initiative,”.

For Daros, far beyond fulfilling Vale's reforestation commitment, she believes that the initiative is a platform that will induce the development of an ecosystem of positive social and environmental impact businesses linked to forest recovery in Brazil. “And for this, we brought partners that contribute complementary knowledge and visions towards collective impact.”

From Incubation to Restoration

In 2021, Fundo Vale had a target of reforesting 5,000 hectares of land; 5 times more than the 2020 target of 1,000 hectares. “Many on the team were convinced it was impossible, but on December 31st, they hit the target,” says Eduardo Tugendhat, Palladium Acting Managing Partner for Inclusive Growth. “It’s a drop in the bucket of what needs to be done, but it’s proof that there are new ways of accomplishing these goals that we can keep growing and scaling.”

According to Tugendhat, the cost of reforestation is astronomical and difficult to tackle. “So, we simplified, acting as a strategic impact investor in companies that come up with innovative ways of using degraded lands.”

This blended finance approach, he says, would give Vale an opportunity to put seed money in impact businesses that are creatively and sustainably reforesting the land. “And if it works, then they can help scale the businesses up and even start generating returns on their investment,” adds Tugendhat. In 2020, Fundo Vale ‘incubated’ two agroforestry projects, Belterra and Caapora, to test the concept and explore how feasible it would be to restore 100,000 hectares of land.

Despite the pandemic, which destabilised the operations of their plantations, it worked, and the two projects restored 1,053 hectares of land across six Brazilian states.

Building off that success, in 2021, the team established strategic partnerships with three additional agroforestry start-ups across Brazil; Bionergia, Inocas, and Regenera. Each company brings a different approach to the table, whether through commercial forestry, raising dairy cattle sustainably alongside native palm trees, working with smallholder farmers, or partnering with one property owner, they all are commercially viable businesses that are reforesting the areas in which they work.

Beyond reforestation, these business models also promote biodiversity, sequester carbon, support sustainable land use and increase community income what Gustavo Luz, Head of Fundo Vale calls – impact carbon thesis. “We pursued additional impacts on landscape recompositing and increased income for communities beyond only carbon sequestration in our investment thesis,” he describes.

So Far, the Approach is Working

Over the past three years, the five start-ups collectively have delivered 7,231 hectares of agroforestry, with silvipastoral systems (where trees are grown on the same land where livestock graze) and successional agroforests, while providing 1,000 families with increased incomes and job opportunities. In addition, over 37 native species have been used in the economic restoration models, helping to revitalise the biodiversity and health of these precious tropical ecosystems.

Açaí, cocoa, macaúba, banana, mango, and pineapple will be sold in food, animal nutrition, fuel and cosmetics markets. African mahogany and several other native Brazilian species have timber potential. The crops are diverse and offer lucrative opportunities for the local farmers.

The project is also ensuring that every investment is scrupulously assessed against impact and sustainability standards. Measuring impact is one of the non-negotiable components for both Palladium and Fundo Vale. “We’re working with partners that are responsible for assessing the true impact of the work, verifying the number of native species planted, amount of work and income generated, and how much carbon is sequestered,” says Maria Otavia Crepaldi, Palladium Forest Restoration and Land Use Program Manager.

“We also have close partnerships with leading, in-country companies that support the targets through different approaches, such as socio-environmental safeguards, positive impact framework, financial assessment, and business acceleration programs, providing further confidence across multiple angles,” adds Crepaldi.

With a successful year behind them, the partners are shifting into the next phase of the project; supporting the internal growth of the first five start-ups and expanding on the current roster of companies working within Fundo Vale, adding new innovative teams and approaches to the mix to reach the 2030 target.

“We want to build the portfolio of start-ups we’re working with across 2022 and 2023 so that we can hit our goal of 100,000 hectares,” says Crepaldi. “We’ve shown proof of concept, that this approach works, and we’re confident we will achieve the goal ahead of 2030.”

This is Only the Start

Luz adds that Fundo Vale is hopeful that by 2030, and with the 500,000 hectares and other projects under their belt, they will be able to catalyse further forest impact investments and continue to contribute to Brazil’s Sustainable Development Goals through a mature forest business ecosystem and a low carbon bioeconomy.

Fundo Vale’s work sets an example for other private sector companies, including those who’ve contributed most to biodiversity loss and environmental degradation. It offers up proof that creating sustainable and positive impact within the communities in which they work is possible.

For more information, contact info@thepalladiumgroup.com.