Sponsored by Fundo Vale and conducted by KPTL in partnership with Impacta Finanças Sustentáveis and with the support of Climate Ventures, the report sheds light on the need for financial capital to participate more in the climate transition process
Photo: Vagno Fernandes
According to a new study by KPTL, sponsored by Fundo Vale, only 10% of venture capital investments in Brazil are directed toward the forest and climate areas. Most investment is still concentrated in sectors such as energy, transportation and agriculture, which currently have more consolidated and predictable markets. Carried out in partnership with Impacta Finanças and supported by Climate Ventures, the study was based on a broad survey of primary and secondary information, involving the participation of various players from the financial and impact ecosystems.
The report is divided into three main chapters. The first two contextualize the global and domestic scenes, and the third one analyzes Brazil’s sectoral position on the climate agenda. The publication concludes by analyzing the role of venture capital managers within these contexts.
Access the full report here.
Challenges and opportunities
According to the report, venture capital players focusing on the forest and climate agenda in Brazil have faced several challenges. Pipeline generation is difficult, and some investment funds have struggled to allocate raised capital to high-potential businesses. A shortage of public funding for forest sector innovation and a still-maturing regulatory environment further complicate matters. Project risks and the need for significant initial capital injections also strain the venture capital market’s typical model.
On the other hand, the opportunities are promising. Brazil has a global competitive advantage in the climate transition, with enormous potential for businesses based on the bioeconomy and sustainable solutions.
The carbon market, in particular, has emerged as an important lever, making reforestation and restoration projects viable through advance funding sources. In addition, innovative technologies such as blockchain, data intelligence and traceability have the potential to increase the scalability and credibility of forest businesses, making them more attractive to venture capital investors and opening up space for a new cycle of growth in the sector.
The role of fund managers
The report highlights the strategic role of venture capital managers in the sector, who are working in areas such as fostering innovation, mitigating risks and structuring value chains. Despite the challenges, they can boost the growth of sustainable businesses through strategies such as blended finance and active strategic support. In addition to financial support, they can connect startups to strategic partners, promote technological innovation and integrate businesses into sustainable production chains.
“The study reveals the vast untapped potential for venture capital on the forest and climate agenda. To boost the bioeconomy and environmental recovery in Brazil, it is essential to adopt more effective strategies to connect investors to impact businesses and unlock the flow of capital. Structuring mechanisms that reduce risks and strengthen the pipeline of startups is crucial to transform this situation. Through greater engagement, venture capital can play a decisive role in driving the bioeconomy and the climate transition, amplifying positive impact,” said Gustavo Luz, Fundo Vale’s director.
“We have the challenge of financing and fostering the climate transition in Brazil through the forest and climate agenda, taking advantage of the country’s huge potential and privilege in this area. We believe that strengthening social and environmental impact businesses and mobilizing new investors are essential ways of doing this. However, achieving this goal requires unprecedented joint action involving different actors, resources and mandates,” said Isabella Zicarelli, an analyst at Fundo Vale.
“The study contextualizes the situation and guides and directs us on how venture capital can position itself and join forces in this area. It translates this potential into concrete opportunities, encouraging the participation of new players,” added Nathalia Cipoleta, another Fundo Vale analyst, who helped review the study alongside Zicarelli.