Charting climate finance reform actions for Brazil

To align financial reforms with climate goals, Brazil must show commitment by strengthening and delivering on its Nationally Determined Contribution (NDC) while also embracing ambition through the integration of climate risk, transparency, and forward-looking investment in its financial system.

Fiscal authorities in Brazil must prepare for more frequent and severe climate-related shocks, as well as for large financing needs. Reform topics in this theme are intended make the sovereign balance sheet more resilient and robust to achieve climate goals.

Establishing the foundations of climate-smart growth in some areas and sectors may not consistently generate the returns required by private investors. Concessional finance, including guarantees and other de-risking mechanisms, as well as emissions pricing and taxation, can help bridge this gap.

While the climate transition presents significant opportunities for resilient economic growth, we must take care to ensure that vulnerable populations are not left behind. This may include transferring knowledge, skills, and technology at scale, and will depend on strong policy frameworks and adaptation strategies.

Brazil-owned investment platforms are an essential starting point for aligning stakeholders and building investment pipelines across sectors. To establish such platforms, Brazil must commit to ambitious but achievable transition pathways that are in line with national circumstances.

A significant portion of total climate finance needs will come from domestic savings. Key steps necessary to build and mobilize domestic savings include strong macroeconomic policies and financial-sector development.

The majority of financing for the climate transition will come from the private sector, but in many cases, private actors will need guidance, de-risking, and appropriate incentives from the Brazilian public sector to deliver at the necessary speed and scale. In particular, catalytic financial and policy mechanisms can help reduce the cost of capital where it is currently too high to achieve climate results.

Carbon markets remain an essential component of the Brazilian climate finance architecture, but unlocking their potential requires transparency and high-integrity standards across the value chain. Policies to achieve real emissions reductions, in line with national circumstances, can help build supply and demand for carbon credits.