Global Forest Bond

Two thirds of Brazil´s area is covered by native biomes, ranging from two of the largest tropical rainforests, grasslands, savannas, mangroves, and wetlands. Those areas provide invaluable services to all of humankind, such as carbon capture and storage, biodiversity protection, water cycle regulation and more.

Despite the undeniable value of those biomes, they generate no revenue for the communities around them or the country as a whole. This creates a pressure for the destruction of the biomes and increase in farmland.

In Brazil alone that’s more than 5.6 million km² of land biomes at risk due to lack of financial incentive or integration to the economical system. This also reflects on the people that live around those biomes: more than 20 million Brazilian live in the Amazon region, which has the lowest HDI and income in the country. Providing those people with payment for the environmental services the biomes in which they live offer to the world can at the same time tackle huge environmental challenges, as well as pressing social ones.

Biodiversity and natural biome loss are not exclusive to Brazil. Our
solution can be used in many developing countries, mainly in southeast
Asia and sub-Saharan Africa.

Our solution for the payment for environmental services has innovations in two fronts: a financial market one and a technological one.

On the financial market side, we innovate in treating the preservation of biomes as an agricultural activity, with "yearly harvests" of environmental services as an output. This allows us to use the same financial instruments that agribusiness companies in Brazil use, but to pay for the preservation of areas of native flora and fauna. With this, we can take advantage of a robust institutional framework that includes contracts, regulations, and transactions trough the São Paulo stocks exchange (B3).

On the technology front, we have partnered with KPMG, a Big-4 auditing firm that operates a nationwide platform for auditing crops. We adapted their platform in order to assess environmental services, with the robust backoffice already in place that makes it possible for us to ensure the buyers of the rights to the environmental services that all the information on the state of the biomes is trustworthy and up to date. We provide metadate to show that pictures and measures were taken inside the audited area and in a set date and time, avoiding fraud and double counting.

The main beneficiaries of a scalable solution for the payment for environmental services can be divided into three groups:

i. Farmers and landowners

ii. Indigenous and traditional communities

iii. Governments

Brazil has strict land-use laws, which means that about half of the preserved biomes in the country are in private lands (i). This includes from the small-scale subsistence farmer to large landowners. For this group, mandatory preservation areas are seen as strict liabilities: they limit production, generate no income and farmers can face charges even if other parties invade their lands to steal wood or burn it.

Having an extra revenue stream linked directly to the conservation efforts would make landowners more inclined to have a larger portion of their lands as conservation areas, as well as making it possible for them to invest in the adequate protection of the biomes in their properties.

This is especially challenging for small farmers, since most environmental services projects depend on large scale and with huge upfront payment for certification. We believe are developing a technology-based solution that will decrease the cost of issuance and democratize the access to the environmental services market in Brazil and the world.

There is no talking conservation without considering indigenous and traditional communities (ii). In Brazil, their reserves hold a significant part of native forests, but most lack access to basic goods and services, such as water, sanitation, education, and healthcare. Having a revenue stream camming from the environmental services they already provide is the best way for this communities to invest in the much-needed infrastructure that will allow them to prosper. This is also truth in many countries around the globe, where native populations are central to conservation efforts and need to be compensated as such to avoid pressure from ill-indented actors.

Our solution can also interest national and local level governments
(iii) since public parks and preserves are also major preservation
areas. With this revenue from their environmental assets, governments
can finance conservation efforts, as well as the formation of new parks.

Eduardo Marson was the CEO of Airbus group in Brazil and led helicopter manufacturing subsidiary Helibras. He´s currently on the board of directors of São Paulo state development bank. His experience as C-level executive in high technology and high-complexity businesses is among the largest in Brazil and the world. He also has great experience with corporate governance, which will be important as the startup grows and attracts investors.

Wilson Tomanik worked in the São Paulo Institute for Agricultural Economy and envisioned treating the conservation of biomes as an agricultural activity. He provides the team with deep knowledge of the needs of farmers and agribusiness supply chains.

I (Artur Ferreira) have a background in environmental finances and
environmental economics, having consulted for private and public
entities on projects in water, sanitation and waste management. I´m also
the Autor of "Neither Negationist Nor Apocalypse: environmental
economics from a Brazilian perspective", and always try to bring the
economic theory behind our product design decisions.

We believe that our founding team has a very complementary skillset
and has been able to deliver a very robust startup with an equally
robust product, thanks also to our partners in development (KPMG) and
environmental consultants (Jataí Capital e Conservação).

We believe that the scale of challenge we are trying to tackle, to include all native biomes in the economic system, is a huge one, and its solution will depend on joint action of many of the best minds and access to large pools of resources of all kinds: financial, political, technical and much more.

Solve seems like a perfect catalyst for this kinds of change.

Being selected by solve can expose us internationally and help strengthen the trust in our methodology for assessing environmental services, as well as our technological platform. This can also help us attract the capital we need to boost our growth in the next years.

The global network of partners that Solve provides can help us further develop our solutions with science-based inputs and discussions.

We expect that being selected for MIT Solve can open doors to companies that are possible buyers of forest preservation bonds.

Our first innovation is on treating the preservation of biomes as an agricultural activity, which results in annual "harvests" of environmental services. This allows us to take advantage of the robust institutional framework of the agribusiness sector in Brazil, bringing to the table legal certainty, good contracts and access publicly traded financial instruments in Brazil, such as rural product notes (CPR) and agribusiness receivables (CRA).

This new approach to the problem of creating revenue from preserved biomes will help integrate the ecosystem services with the activity of the companies that want to offset their impact thought contracts and instruments they already use. Nature is easily integrated as an input that companies tap into for their production, internalizing externalities and having a one-stop shop for environmental needs.

The second innovation is in adopting state-of-the art auditing technology, developed in partnership with KPMG, to assess and communicate the contribution that every individual piece of land provides: carbon capture, carbon storage, water cycle, endangered species and more.

Nowadays, most projects that try to generate revenue from preservation rely on experienced consultants and renowned specialists, making them expensive and only accessible to players with large scale projects.

Our platform will change the main vector of the trust in this environmental services market to the technology that helps the gathering of the information. This will make it so that local technicians and automated tools such as drones can have everything that is necessary to issue a world-class bond at a fraction of the current cost.

We aim at serving at least 1% of private-owned protected areas in Brazil in the next 5 years. This means around 2 million hectares (5 million acres) of native lands being protected and generating revenue for landowners of all sizes and backgrounds.

This will also mean about 20.000 jobs created in and around the protected areas, integrating the economy of regions with very high carbon stock and biodiversity hotspots with the preservation of nature. This jobs will range from monitoring and auditing to recovering biomes. Our technological platform will allow these to be performed by locals, enabled by the high-end assurance a tool developed in partnership with KPMG.

We are measuring the area of biomes issuing forest preservation bonds each year. Since we operate a platform that measures a number of environmental services, we also have metrics such as tonnes of CO²eq captured, tonnes of CO² stocks protected, number of endangered species sighted in protected areas and others.

Those metrics are aligned with SDGs, mainly 15-life on land and 13-climate action, but also affecting 14-life bellow water, 12-responsible consumption and 6-clean water very closely.

Nowadays, areas with protected native biomes are reffered to as "unproductive", despite their role in providing essential ecossystem services, including carbon capture and storage, water cycle managemens, polinization and biodiversity protecntion, among many others.

This happens because those areas generate no revenue, they are completelly excluded from the economy. As such, there is pressure for their conversion to farmland or other uses.

We believe that it is possible to buid models that provide landowners and traditional comunities with revenue from protecting native biomes and create jobs for those comunities around preserved areas, turning nature from a burden into the basis of local economies and development.

Using our forest preservation bonds, we see a short-term change of allowing local comunities to have income generated by seeling the rights to the environtmental services they provide. In the long term, we aim at completelly integrating the biomes into the economy, so that they are seen as economically productive.

The first focus of our technolocical development is security. We have a partnership with leading auditing firm KPMG to develop an app that allows for the assessment and auditing of environmental services provided by native biomes and protected areas.

Our app uses state-of-the-art cryptography to assure the veracity of all field data collected. Every bit of data: photos, tree measurements, audio capture and much more cames with full metadata, including geolocation, timestamp and user information. This assures all market players (investors, buyers, etc) that our auditing happened in place and when we stated, avoiding all uncertainty and possibility of fraud.

This data is stored in KPMG servers and can be traced using blockchain to final products. This allows a company that is buying a forest preservation bond to insert a QRCode on their products, by the means of which their final costumers can access all data from the forest inventory and even rework all our calculations, including carbon stock and flux. The same holds true for NGOs and regulators.

A second focus of our technology is to greatly reduce the costs of issuing forest preservation bonds. We included authomatic tree measurements using the tablet´s inclination and camera, as well as integrated an API from PlantNet, world-leading plant recognition neural network, so that biologists and forest engineers have their field work efficiency improved. All areas are also measured using drone photos and lidar to create models that allow us to provide large-scale onsite measurements.

There are a number of perspectives that one should take into account when building diverse teams. As said before, the three founders came from diferent industries and with different perspectives. We also have age diversity among the founders (30s, 40s, and 50s).

That said, in such a small team, there are areas where we lack, such
as gender diversity, as we are all man. We are working on increasing
this by creating a board, which will help us improve our governance and
bring in new perspectives. Altought the board is not fully operational
yet, we have already decided that 2 of the 3 seats will be held by
woman, to further improve diversity of perspectives and help our
decisionmaking.

Our revenue cames form a success fee on the issuance of any forest preservation bonds. Our main strategy is B2B, aiming at companies that want to build evironmentally-friendly products by protecting biomes, as well as landowners and traditional commnities that want to turn their protected areas into a new revenue stream.

We see our growth trough partnerships with large players already working on the agribusiness financing, including trading companies and banks. As they already have a large commercial force trading agricultural commoditties, they may be intrumental to selling forest preservation as a new "product".

We have a business plan to reach financial sustainability by selling our services.

We have the first issuance of a forest preservation bond in early 2022, by which we received a U$ 40,000.00 fee. We will be self-sustaining if we are able to mantain this rate of payment in future issuances.