RCF named Structured Finance Deal of the Year

The Responsible Commodities Facility’s Green CRAs fund was named ‘Structured Finance Deal of the Year’ by IFLR (International Financial Law Review).

At a ceremony held in New York on 18 May 2023, the award was presented to RCF legal counsel Pinheiro Neto Advogados, TozziniFreire, Clifford Chance and structuring partner Opea (formally Planeta Securitizadora).

RCF founder and SIM Director, Mauricio Moura Costa, commented, “Our heartfelt congratulations to the team for this award. We are thrilled that the RCF’s Green CRAs have been recognised in this way. This was the first of a kind, and posed structuring challenges that required a top team to solve.”

Writing on its website, the IFLR wrote;

“The transaction also stands out for its green credentials. There are preconditions for farmers wishing to access the financing, requiring them to commit to zero deforestation of native vegetation, over and above their legal reserves, and prevent negative climate impacts and loss of habitat. An independent Environmental Committee will review and provide input into the environmental management of the facility. Given the greater easing of foreign investment laws in Brazil, this structure’s implications are potentially wide-ranging.”

Read the Judge’s comments in full on the IFLR website

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Eligibility Criteria for Cerrado Programme 1

The following eligibility criteria are required for participation in the Responsible Commodities Facility for Cerrado Programme 1 (see full description here):

Land use

The area of cultivation must not have had any deforestation and conversion of native vegetation since 1 Jan 2020*. Preference will be given to areas converted from abandoned pasture land to soy cultivation after 2008.

Forest Code Compliance

Farm land must be registered with the Cadastro Ambiental Rural (CAR). The farm must contain and maintain areas of native vegetation equivalent to those required for Legal Reserve and Areas of Permanent Protection (APPs) determined by the Forest code or have formally adhered to a Programme of Environmental Regularization (PRA) established by the state environmental agency**. The farm area must not overlap with public protected areas, indigenous lands and other traditional people and community lands (including ‘quilombolas territories’).

Land title

Farmers must have unquestionable right to use the land, be it as land title, land lease agreement, or another legally recognised form of land tenure (e.g., ‘posse’)

Legal Compliance

Farmers must demonstrate that they and their farms do not contravene any environmental or legal requirements, such as embargoes, environmental irregularities, contraventions of the labour legislation (including slave and child labour), non-compliance with the Soy Moratorium (if applicable), and internationally-accepted rules for the use of agrochemicals.

*Farmers occasionally request the conversion of small areas of native vegetation to conduct farm improvements (building storage areas, water reservoirs, etc.). Provided that these areas are small and not for the purpose of expansion of the agricultural area, RCF analyses and considers them eligible. In order to do so, RCF uses the concept of Minimal Level (of deforestation or conversion) as defined by the Accountability Framework Initiative Terms and Definitions, which states “To be considered consistent with no-deforestation or no-conversion commitments, minimal levels must generally meet the following conditions: Not exceed cumulative thresholds that are small both in absolute terms (e.g., no more than a few hectares) and relative to the area in question (e.g., no more than a small proportion of the site).”

**The RCF analyses Forest Code compliance by looking at single farms (defined as the area covered by a CAR) or bundles of individual CARs that, in combination, result in the desired area of native vegetation put under the protective status of the RCF.  This bundling should not be understood as a means of compliance with the Forest Code requirements and is not intended to release the farmer of the regularization process committed under the Forest Code rules (enrolment in the CAR, engagement in a PRA, etc.). In order to differentiate its metrics from those of the Forest Code, the RCF refers to areas of Excess Native Vegetation (ENV) as opposed to Excess Legal Reserve, to avoid confusion with areas legally categorised under the Forest Code.