Bioeconomy: what does it have to do with banks and fintechs?

Although it is not a new term, since the Febraban Tech 2023 event in June, the “bioeconomy” has become the hot topic. The main financial sector technology and innovation event in Latin America confirmed that although the concept of the bioeconomy might seem far removed from the segment, there are numerous opportunities for banks and fintechs to work on projects and in businesses that positively impact biodiversity.

As we will see in this article, by promoting and improving the bioeconomy, financial institutions can go far beyond their ESG (Environmental, Social, and Governance) commitments, bolstering the economic landscape and facilitating access to the financial system for communities and companies that work to protect nature.

 

What is the bioeconomy?

 

Bioeconomy is a field of knowledge that studies biological systems and natural resources in conjunction with the use of new technologies, with the goal of creating more sustainable products and services.

 

It is a new economic development model that has arisen to solve one of the most urgent problems of production today: protecting biodiversity and regenerating biomes, reducing inequality and waste, and protecting scarce natural resources.

According to data from the Organisation for Economic Co-operation and Development (OECD), the bioeconomy already generates around 2 trillion euros in the global market and creates approximately 22 million jobs worldwide.

In Brazil, the study "Identification of Opportunities and the Potential Impact of the Bioeconomy on Decarbonization ," organized by the Brazilian Bioinnovation Association, indicates that the sector could generate annual industrial revenue of US$284 billion by 2050.

 

How does the bioeconomy impact the economic scenario?

 

How can the bioeconomy really have a positive influence on the economic environment? To better explain the logic, the information from the aforementioned OECD study estimates that 10% of natural resources that exist today will be gone in XNUMX years if there are no efforts to stop biodiversity loss.

In other words, natural resources are now considered economic assets with many business opportunities, more than ever before . Thus, by quantifying the economic value of biodiversity, it is possible to propose public policies that promote its conservation, creating a development model that generates social and economic benefits.

According to what was emphasized by representatives of the Brazilian financial sector during the Innovation and Investment Forum in the Amazonian Bioeconomy , "making the bioeconomy an important part of the national GDP is possible, but there is still much to be done before then."

In this sense, some Latin American countries already have quite advanced bioeconomy initiatives . Colombia , for example, plans to attract investment to become a hub for sustainable business in the region. To this end, it has already begun mapping more than 300 companies that could be attracted to develop sustainable businesses in the country, in addition to identifying 60 new concrete opportunities for sustainable investment.

The Amazon Journey Platform , led by the Certi Foundation and supported by Brazilian private banks , aims to train up to 3 talents and stimulate the creation of 200 startups in the Amazon over three years, to boost the bioeconomy in the region.

 

Read also | Financial education: what is the role of banking and the payments market in promoting it?

 

What is the role of banks in the bioeconomy?

 

Financial institutions perform a fundamental role in the bioeconomy, as they can act on two fronts:

• Improving financing and investment in projects related to the sustainable economy. Banks and fintechs are essential in accelerating activities that involve the use of natural resources, for example agribusiness and fishing.
• Working to reach adequate sustainability commitments proposed by domestic and international entities. One of those entities is the Global Gfanz Alliance, which requires that financial institutions reduce their emissions by up to 50% by 2030, while also blocking financing coal-burning projects.

Another point of attention in the association between the financial system and the bioeconomy is the extent to which user satisfaction is positively affected when banks integrate social and environmental responsibility actions into their business strategy.

In Brazil, the study "Brazilians' Awareness of the Importance of Sustainability ," released by Febraban, indicates that 92% of respondents believe that companies' ESG practices influence their opinion of brands, and that 77% would like stricter legislation regarding sustainability. However, only 17% mention banks among the companies that have most adopted such practices.

 

Green loans: loans associated with the bioeconomy

 

Advancing the idea to support sustainability-related project financing, green loans have proven to be an excellent avenue for banks and fintechs seeking to contribute to the bioeconomy agenda.

Green credit is a type of loan that offers more attractive financial conditions to companies that demonstrate improvements in their sustainability indicators , through the adoption of technologies and production models focused on economic, social, and environmental sustainability.

In Brazil, this type of credit has been gaining ground in recent years. The National Bank for Economic and Social Development (BNDES), for example, indicated that 68% of its credit portfolio in the second half of 2022 was linked to projects supporting the green economy and social development. It's worth noting that green credit is also offered by other Brazilian banks, both public and private.

To learn more about green credit, you can check out this video from the National Confederation of Industry (CNI):

 

The relationship of the bioeconomy and financial inclusion

 

Leaders of the main banks in Brazil discussed the bioeconomy at Febraban Tech 2023 from two points of view: (XNUMX) impactful activities in favor of sustainability (such as the reduction of carbon emissions), and (XNUMX) investor perception of environmental activities as economic assets.

Also highlighted was the importance of broadening the debate on sustainability, taking into account that, when we talk about "a better world," this agenda involves the inclusion of people in the financial system , expanding access to credit, and reducing poverty.

“The financial system must think about actions in conjunction with governments in order to create true financial inclusion,” said Maria Rita Serrano, President of Caixa Econômica Federal, during the opening panel of Febraban Tech XNUMX. You can watch the entire presentation below:

 

The study "How can the bioeconomy combat poverty in the Amazon?" , by the Escolhas Institute, has already shown, for example, how investment in horticulture and forest restoration can be a strategy to combat poverty , promoting an economic transition to bioeconomy production chains at the expense of those that destroy the forest.

Therefore, the inclusion of people in situations of social vulnerability in the bioeconomy production chain must also be supported by financial inclusion in Latin America . Access to financial services and products has enormous potential to empower communities, giving them control over their finances and offering opportunities to improve their lives.

 

The bioeconomy and banking system: what you saw in this article

 

• The bioeconomy studies biological systems and natural resources in conjunction with the use of new technologies, with the goal of creating more sustainable products and services.
• The model seeks to reduce inequality, waste, and the scarcity of natural resources.
• More than ever, natural resources are considered to be economic assets with countless business opportunities.
• Financial institutions perform a fundamental role in the bioeconomy, as they have the ability to work on two fronts: improving financing and investing in sustainable projects, and working towards suitable sustainability commitments.
• A green loan is a type of loan that proposes more attractive financial conditions for companies that show improvement in their sustainability indexes. It is an excellent way for banks and fintechs seeking to contribute to the bioeconomy agenda to be involved.
• The sustainability discussion has been increasing, because when we talk about “a better world,” that agenda involves the inclusion of people in the financial system, expanding access to credit, and decreasing misery.

 

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