Authors: Peter Elwin, Nick Robins, John Willis, Giorgio Cozzolino

This report sets out four steps Brazil could take to change direction, including issuing an innovative Deforestation-Linked Sovereign Bond tying interest payments to its success in reducing deforestation.

The report updates and builds on the award-winning paper ‘The Sovereign Transition to Sustainability’. It provides sovereign investors with an updated case study of Brazil demonstrating how to incorporate the state of a country’s natural capital into the assessment of the financial strength of its sovereign bonds. Credit ratings are currently missing this aspect.

Nature underpins Brazil’s economic strength. The report provides a summary of Brazil’s sovereign health and sets out a roadmap for enhancing it, showing the opportunities for sovereign investors to benefit from this green recovery. The authors recommend an innovative Deforestation-Linked Sovereign Bond, linking coupon payments to Brazil’s success in reducing deforestation. They set out the priority actions that investors can take to promote Brazil’s sovereign health and reduce systemic risk to their portfolios across asset classes.

This report was produced jointly by Planet Tracker and the Grantham Research Institute.

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