Brazil has significantly outpaced global trends in attracting international climate finance, with annual flows reaching US$5.1 billion in 2021-2022, an 84% surge compared to 2019-2020. This substantial increase, detailed in a new study by Climate Policy Initiative/PUC-RIO (CPI/PUC-RIO), underscores the nation's growing appeal for investments in its low-carbon transition, particularly within the energy sector. While global international climate finance grew by 28% over the same period, Brazil's accelerated growth highlights its unique position and the effectiveness of recent policy initiatives.
The energy sector emerged as the primary beneficiary, capturing 53% of the tracked international climate finance, amounting to US$2.6 billion annually. This represents a remarkable 165% increase from the US$1.6 billion recorded in 2019-2020, significantly exceeding the 53% global growth rate for energy finance. Within this sector, solar and wind power generation projects accounted for 80% of the allocated funds, reinforcing Brazil's commitment to expanding its already predominantly renewable electricity matrix. Joana Chiavari, research director at CPI/PUC-RIO, noted that "The Brazilian electrical matrix is already mostly composed of renewable sources, and we stand out globally for our ability to produce with low greenhouse gas emissions. The mobilization of international finance creates favorable conditions for attracting energy-intensive industrial investments for green manufacturing."
Western Europe was the leading source of these financial flows, contributing 50% (US$2.6 billion/year) of the total international climate finance to Brazil. France specifically stood out, providing 13% (US$674 million/year), with a significant portion mobilized by French bilateral development finance institutions and commercial financial institutions. Public sources constituted 58% (US$2.9 billion/year) of the overall finance, while private sources saw a more than fourfold increase from 2019-2020, mobilizing 42% (US$2.1 billion/year). This surge in private capital is partly attributed to the Brazilian government's proactive measures, including the Brazil Climate and Ecological Transformation Investment Platform (BIP) and the Eco Invest Brasil program. Chiavari emphasized that "Understanding the current status of climate finance is crucial to measuring the impact of these initiatives and increasing their effectiveness."
Despite the impressive growth in overall climate finance, a critical disparity persists in funding allocation. The Agriculture, Forestry, Other Land Use, and Fisheries (AFOLU) sector, which is responsible for nearly three-quarters of Brazil’s Greenhouse Gas (GHG) emissions, received only 11% of the international climate finance. The forestry subsector, in particular, attracted a mere US$119 million annually, representing just 2% of the tracked international finance in 2021-2022, indicating a significant untapped potential for investment in this high-impact area. Furthermore, while 80% of the finance was directed towards climate mitigation objectives, projects exclusively dedicated to climate adaptation received only 5% of the total, predominantly from public funding. This highlights a substantial opportunity for growth in international private finance for adaptation initiatives in Brazil.