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Go Green with GBO: Latin American companies seek sustainability investments

Regenera América is developing nine Latin American projects, seven in Brazil and two in Mexico, for USD 23 million

The Earth exceeded seven of the nine planetary boundaries used to quantify human impact for the first time in 2024. The Stockholm Resilience Centre’s September 2023 analysis describes a “sick patient” and pollution exceeding “safe for humanity.” This is due to global warming, freshwater system alterations, microplastics, and toxic chemicals.

The study emphasises the need for broad environmental protection and restoration, especially in biodiversity-rich countries like Latin America. To build and promote sustainability projects, massive public and private capital investments are needed. Establishing such projects is difficult.

Corporations have allocated more funding to production line improvements and marketing than to green projects including energy transition, circular economy, and biome recovery.

Challenge Of Procuring Investment

Climate change is generally not a priority for the commercial sector. A March 2023 EY study found that only a third of managers at 400 leading Latin American firms consider climate warming a problem. This is despite PwC’s 2023 projection that at least 55% of the world’s GDP is subject to material hazards due to moderate or high nature dependency.

The planet’s evolution affects many economic sectors, from agriculture and tourism to fashion and pharmaceuticals. Everyone benefits from investing in flora and fauna conservation.

“Things from the point of view of ecosystem regeneration are going slower than we would like,” says Santiago Espinosa de los Monteros Harispuru, co-founder of Toroto, a Mexican company that develops and manages restoration projects like carbon sequestration and biodiversity preservation.

“We lack resources to address the climate crisis twice. We won’t have enough resources to face it once,” he said, while adding, “We lack the infrastructure to restore and conserve many ecosystems. Design and place the [important] supply chain properly. The work is ongoing.”

Carbon Credits

Toroto and Pachama are strategic partners of the Argentine online marketplace MercadoLibre. Regenerate America in its sustainability programme. The technology corporation invested USD 2 million in a new project to rehabilitate 570 hectares of the Campeche Corridor of the Mayan Jungle, Central America’s largest tropical forest, in the Yucatán Peninsula at the end of September 2023.

In addition, Regenera América is developing nine Latin American projects, seven in Brazil and two in Mexico, for USD 23 million. In a small room at the Papalote Children’s Museum in Mexico City, officials of the three companies were interviewed by EL PAÍS after the press release. They were also inaugurating an exhibition on recycling.

According to Guadalupe Marín, regional manager of Sustainability at MercadoLibre, the logistics industry faces challenges such as fossil fuel dependence, limited biodegradable packaging materials, and a lack of electric vehicles to support online sales.

In general, she exposed a latent failure of sustainable innovation, which is crucial to company sustainability.

“The idea of man being separate from nature has brought us here,” the official said.

The specialist gave her industry peers a roadmap, stating “First, companies must decarbonise and find solutions to run their businesses at a lower environmental cost and emissions cost. However, the global situation is dire and we need innovation.”

“All companies will have to resort to [carbon compensation plans] for what cannot be reduced,” Marin commented.

Pollution can be offset by carbon credit exchanges. Unlike the European Union, Latin America does not require enterprises that exceed greenhouse gas emission restrictions to buy these devices to offset their carbon footprint.

Reforestation and species preservation will collect carbon in the Campeche Corridor, which links surviving protected sections of the Mayan Forest. Simply put, buying future carbon credits is like investing in conservation programmes to reduce human impact.

Carbon finance markets are an actual path. However, Marín reiterated that this may not be sufficient for both us and the environment. She said this endeavour, which runs parallel to a future credit market, attempts to rehabilitate and protect biomes so they don’t decline.

Brazilian carbon credit issuers are among the largest. Its Amazon wealth and natural diversity contribute to this. Mexico is gaining ground.

Mandatory carbon markets are needed, but another approach can raise funds for conservation initiatives. Green bonds are debt products that pay returns to holders and help issuers fund sustainability projects. They are commonly mistaken for carbon credits.

Mexican bottler and distributor Coca-Cola FEMSA allocated USD 664.87 million from a 2020 international bond to “finance or refinance eligible green projects in three main categories: the circular economy, water management and climate action” through 2022. The corporation reported this in a written response to EL PAÍS enquiry.

The corporation has licenses to use 28 million cubic metres of water per year for its bottling plants, which occasionally operate in drought-stricken areas. In 2021, the beverage giant issued 9.4 billion pesos in local sustainability bonds, or USD 540 million, to address accusations that its activities occasionally harm.

“With the bonds, which are linked to sustainability, we committed to achieving a water use ratio of 1.36 litres per litre of beverage produced by 2024 and 1.26 by 2026. End 2022, the ratio was 1.46 litres, a Coca-Cola water efficiency benchmark,” the business said.

This trend is growing. The Mexican Stock Exchange said that 44% of long-term debt placements in 2022 were inspired by green bonds from enterprises, financial institutions, and the government. Growing numbers often lead to the hunt for technology that lowers costs and lessens operations’ environmental impact.

Kamay Ventures, a corporate venture capital fund, invests in firms that leverage innovation to overcome industrial bottlenecks including delivery and water waste. Coca-Cola, Grupo Arcor, and Bimbo Bakeries are its key investors. The firm targets seed-stage firms with undeveloped business plans that need cash.

Antonio Peña, managing partner of Kamay, stated that venture capital funds evaluate the sustainability of companies they consider investing in, regardless of their concentration on food, finance, or climate technologies.

“Basically [these companies] are bringing technology to existing industries from time immemorial, to improve processes and find new solutions,” the official stated further.

Entrepreneurs are using AI to locate healthier ingredients and inhibit germs, fungi, and flies from evolving in food. Logistics, deforestation, and emissions are similar. Kamay has an Ecuadorian start-up that delivers emissions-free drones and an Argentine firm that tracks agricultural crop water use to optimise utilisation.

“All Latin American venture capital funds are increasingly considering solutions’ sustainability. In seed capital, we prioritise measuring social awareness and optimising investments while considering the climate,” Pena said.

“I’m an investor but was born an entrepreneur. We (venture capital funds) are sometimes slower than entrepreneurs. But resources are coming. Beyond good intentions, there’s a commitment to invest in these start-ups,” he concluded.

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