Private-equity-backed startup sets out to reforest the Amazon
- Re.green, backed by Brazilian private-equity firms and a family office, could benefit from a new carbon-trading system in Brazil
A startup seeking to regenerate forests in Brazil expects to benefit from the country’s efforts to create its own carbon-trading system.
Investors committed roughly $78 million to the company, Re.green Participações SA, earlier this year. Backers included Brazilian firms Lanx Capital, Gávea Investimentos and Dynamo Administração de Recursos as well as Brasil Warrant Gestão de Investimentos, which manages money for the Moreira Salles banking family.
Capital from the Series A round will finance Re.green’s reforestation projects in Brazil’s Amazon and Atlantic Forest regions, said Bernardo Strassburg and Thiago Picolo, Re.green’s co-chief executives.
The Rio de Janeiro-based company during the next 15 years or so aims to reforest 1 million hectares, or about 3,861 square miles, an area equal to nearly half the size of New Jersey, with trees that will capture 15 million metric tons of carbon dioxide per year once the projects are fully developed, they said. The bulk of Re.green’s revenue will come from selling carbon credits generated by the projects.
“Forest restoration traditionally has always been done on a small scale and thanks to the huge efforts of landowners and nonprofits," Mr. Picolo said. “We’ve thought it was time to complement those historic actions with a large-scale approach."
Emissions trading systems—in which polluters buy carbon credits to offset their greenhouse-gas output—already exist in the U.S., Canada, Europe, the U.K., China and South Korea. These so-called regulated markets coexist with a voluntary global system through which companies buy carbon credits from sellers such as renewable-energy operators, biofuel makers and reforestation-project developers.
Carbon-credit prices more than doubled in Europe and rose 70% in North America last year from a year earlier, according to Refinitiv, a provider of market data. By June, Refinitiv said prices in Europe were over €80, or about $79.58, per metric ton of carbon emissions.
The increases helped lift the total market value of regulated emissions trading systems to €760 billion, equivalent to $756.01 billion, last year, more than twice the €289 billion value for 2020, Refinitiv said. Meanwhile, consulting firm McKinsey & Co. has estimated that the voluntary carbon market alone could surpass $50 billion by 2030.
Re.green has acquired a nearly 1,000-hectare tract in the state of Bahia in northeastern Brazil to start a cluster of planned projects, according to Mr. Picolo. The company focuses on areas that have been converted into cow pastures but where the climate and geography favor carbon-capturing forests, he said.
Mr. Strassburg said that Re.green may acquire more properties for future projects or seek partnerships with landowners and government agencies. The company can use different restoration techniques, from helping a damaged forest regenerate itself to planting from scratch in cleared areas, he said. Mr. Strassburg also expects the company’s projects to benefit nearby communities, particularly the ones already reliant on forests, by creating jobs and bolstering local business such as tree nurseries.
“Another focus of Re.green are areas where there are many endangered species," Mr. Strassburg said.
Re.green is launching its Bahia project as Brazil begins setting up a regulated carbon market. A presidential decree in May created the National System for Reducing Greenhouse-Gas Emissions, as the new market is called. Among other things it also established regulatory bodies to develop standards for carbon credits, The Wall Street Journal has reported. By one estimate, the market could see trading by 2024.
New regulated carbon markets in Brazil and abroad will likely lift carbon-credit prices and give a boost to Re.green, Mr. Strassburg said. The company is also tapping the expanding global voluntary carbon market and plans to generate additional revenue from the sustainable production of tropical wood and other forest products such as nuts, he said.
Re.green also expects to gain credibility from the prominence of some of its backers in Brazil’s business community, Mr. Picolo said. Private-equity firm Gávea, for one, was co-founded by Armínio Fraga, a former president of Brazil’s central bank, while the Moreira Salles family is among those that control Itaú Unibanco Holding SA, the nation’s largest bank.
Mr. Picolo added that investors in Re.green have longer-term horizons than traditional private-equity backers, who typically aim to sell their investments within five to eight years.
“It’s patient, long-term capital that’s compatible with our types of projects," Mr. Picolo said. “That helps us shape the business."
This story has been published from a wire agency feed without modifications to the text
