Opinion – Marcos de Vasconcellos: Everyone wants to be an ESG, but they ignore the lack of forest

Six months after the Brazilian government committed to reforest a territory equivalent to the whole of Uruguay (or twice Portugal) by 2030, we are approaching a “seedling blackout”.

The goal of reforesting 18 million hectares by 2030, signed at COP26, in November last year, adds to the high demand from companies and funds for green areas to negotiate carbon credits. And the prognosis is that there will be a lack of forest.

In 2015, in the Paris Agreement, the Dilma Rousseff government set the goal of reforesting 12 million hectares in 15 years. Four years later, the government of Jair Bolsonaro upped the ante and made the promise of 18 million hectares.

But not only the public sector lives the green promises. In times of ESG (when investments should favor companies with good environmental, social and corporate governance), private sector players are chasing reforestation projects to offset or trade carbon credits.

The biggest recent example in Brazil is re.green, a company that brings together names like João Moreira Salles and Arminio Fraga. Announced last month, the company raised almost R$ 390 million to buy land, reforest and sell carbon credits and certified wood. They say they have a goal of reforesting 1 million hectares.

This is an almost obligatory rising market, as the ESG agenda depends on offsetting carbon credits. And it’s profitable. Do you know how much Elon Musk’s Tesla made from the sale of carbon credits in the first quarter of this year? Almost R$ 3.5 billion. It is 20% of the company’s total revenue.

In Tesla’s case, it earns credits for producing electric cars and sells them to “traditional” car factories such as GM and Chrysler.

In Brazil, the golden dream of producing carbon credits lives in green areas. And at this point it is necessary to put the ball on the ground before continuing the game of megalomaniac numbers of reforestation. There are three ways to reforest: through natural regeneration, direct sowing or planting seedlings of native species. And, for large areas, it is normal to use a “mix” of the three ways.

And the truth is that there is a lack of native plant nurseries to supply the demand created with the goals of companies and governments. Rodrigo Ciriello, director of the Futuro Florestal consultancy, is one of the creators of the association (Nativas Brasil) to bring together the nurseries.

Today, the installed capacity for seedling production in Brazil does not reach 100 million seedlings per year, he explains. And half of this production is already “demanded”, that is, committed. There are 50 million seedlings left per year, if we use all the capacity of the existing nurseries.

Although Brazil reforests “only” 9 million hectares by 2030 and 30% of the work is done with seedlings, this results in 337,500 hectares per year. According to Embrapa’s indications, at least 1,100 plants per hectare are needed. Therefore, the annual demand becomes 371.21 million seedlings. Far above our current capacity.

This is just the tip of the iceberg, explains Bruno Mariani, CEO of Symbiosis Investimentos. “There’s a lack of change, a lack of money, a lack of will, a lack of technology”, he says. The production of native species for timber or carbon credit production is long-term (at least 20 years for a return) and depends on large investments in research and development (R&D).

Without the scientific basis to increase predictability, this type of project carries risks that are too high to attract the necessary money.

Talking to those who effectively work in reforestation, the impression is that the ESG wave, when talking about reforestation, forgets the main thing: to match reality.

For the investor who wants to know who is really looking to improve their environmental governance, the tip is to check how much money is being directed to R&D, going beyond “green advertising”.