Native forests restoration to substitute illegal tropical forests logging by Bratus Nat. Cap.

Please describe at length and in detail capacity to raise funds.

 

Bratus was founded in 2016 at Harvard Kennedy School MPA by Natalie Unterstell, in partnership with former The Nature Conservancy Director of Government Relations Gustavo Pinheiro and serial entrepreneur Estuardo Robles.

 

We pursued this project as an alternative to bring to scale our experiences in civil society and government through the private sector by deploying the missing links in a failed tropical forestry industry, still developed mostly through 19th century practices. Illegal logging is still the vast majority of the market and even modern slavery is still present in many tropical logging camps

 

Over the last 10 years, Natalie, Gustavo and Estuardo have raised over one hundred million dollars to multiple initiatives. It is a well proved fundraising team. But Bratus is not looking to raise funds in order to implement its initiative.

 

We are starting our operation based on an income generation, offering an effective solution for companies and entrepreneurs who are required by law to plant trees, usually as a colateral for some impact their business may be causing on the environment.

 

In our first month of operation we prospected enough demand to plant over 1 thousand hectares. And this was achieved with just two customers.

 

Brazil is a major market for tropical timber production and a great opportunity to make a real difference. Brazil’s INDC presents a commitment to restore 12 million hectares of Atlantic Forests and Amazon lands until 2030.

The pilot phase we planned to fund through a crowd fund campaign is being reviewed as the demand for forest planting on the corporate market is much bigger than anticipated. We have been facing a great opportunity and are reviewing our entire plan of action in order to upscale the pilot as instead of 20 hectares, we may have the chance to secure funding to grow thousands of hectares of biodiverse forests with native species, as a large scale proof of concept.

 

But even though there is an untaped market to explore at the corporate level, to really upscale the initiative to the level of ambition required to solve the climate crisis, we continue to envision the development of investment funds as the long term solution.

 

Private investment is an important source of funding and forestry investments generate safe long term return to investors willing to wait for high value trees to grow.

 

Once the models are running on the field and data is being generated to support return estimation, for each restoration model, species mix, soil and water regime, we will have the data needed to promote the fund to be launched. It may take up to 5 years to launch a large scale USD 2 billion forestry investment fund.

 

Our partner investment bankers predict USD 2 billion would be the initial demand, potentially spread in 4 emissions of USD 500 million each. Forestry investments have spread throughout the world as an alternative for portfolio diversification.

 

But while forestry investment is a well developed market in the US and Europe, even in Asia despite of the poor regulations, it is an almost inexistent formal market in Brazil, where private capital is invested in planted monocultures of foreign tree species for pulp and paper, and tropical timber market is mostly supplied by illegally harvested wood from native forests.

 

 A recent study release May 2016 by Instituto Escolhas, calculated that in order to Brazil to comply with its commitment of restoring 12 million hectares of forests until 2030, Brazil would need to invest up to 52 billion reais (15 billion dollars). 

 

Our initiative is one of the potential means to attract resources from private investors. 

 

Another aspect important to highlight is that the forestry planting market and frameworks in place in Brazil are very business friendly to operations as the ones we proposed. Our business model benefits from public policies from both the Environment Ministry and the Agriculture Ministry.

 

The potential to securitize forests already planted, access subsidized insurance, leverage public agricultural loans and other economic benefits provided by the Brazilian government boosts long term returns. 

 

 

 

Please describe the (referenced) use of this model in US, specifying company and state.

 

We are not sure what you meant by model. If you talking about the financial model, similar approaches are very common in the US, but not forestry investments have been directed to Brazil from the US market besides on the pulp and paper industry.

 

Similar approaches are taken for instance by companies like New Forests, from California, but their portfolios are in the US, Australia and Asia, and their funds are closed, generally absorbed by recurring customers in search for diversification.

 

As Brazil is an interesting investment market, despite the latest economic turbulences is still one of the high yield potential countries in the world. Brazil also has a very well developed investments local market with increasing demand for diversification.

 

 

 

 

 

Economic feasibility of mixed (native?) species plantations is questionable. There are a number of reasons why plantations tend to be of just one or limited number of species planted in distinct blocks. Please address.

 

There are a number of reasons why plantations tend to be of just one or limited number of species in each distinct block. Most of them are related to management and harvesting operations, harvesting consisting a high cost component.

 

But Brazil has tested successful restoration models with up to 6 species. The benefits of multi species plantations, mixed with biodiverse native restored forests is enormous. By having a total cycle of 50 years, comprising of harvests every 7 years, it is possible to obtain good results, by mixing (in different lines) different species, from fast growing 7 years light wood to pay for cash flow, to 49 years hard wood for fine veneer fabrication, thin slices of wood with a lot of added value. 

 

We may provide graphic information and spreadsheets with cost calculations to demonstrate how our management model for multi species planted forests are feasible it planned correctly from the beginning. All project has to be developed around the ability to access the trees in order to manage and harvest them at the lowest possible cost.

 

 

Costs should be clarified as US$ or BR$. 

 

This was corrected on the proposal. Fund size is estimated in 2 billion dollars.

 

Sao Paulo State has been hard hit by drought. Would be interesting for project proponents to address implications of climate change (e.g. shifting rainfall patterns) for plantation establishment & management strategy.

 

In fact rain patterns are changing in Brazil and São Paulo has been hit hard by drought. 

 

Many are the implications for all kinds of agriculture in such a changing climate. Multiple agriculture techniques have to be adopted in order to achieve success. No tilling planting is one of the most important and deserves a highlight as it is proving to retain moisture in the soil and allowing agriculture and forestry to return to areas previously degraded by decades of cattle ranching.

 

But while in some regions the climatic stress may impose the need to use artificial irrigation on the first two years until tree roots get deep enough to pump water by themselves from underground, it is important to understand the role trees have on bringing rain to Brazilian southeast.

 

Recent studies are proving that the rain that falls in São Paulo is actually pumped from the Atlantic Ocean inland by the Amazon Rainforest. The biotic pump effect the forest has brings tons of water through a recurring water cycle in the equatorial zone.

 

The lack of forest vegetation in São Paulo is also a contributor to break the forests pumping effect. Reduced evaporation capacity of deforested land implies on a reduction of moisture in the air, clouds and the volumes of water transported by clouds and as a consequence: a reduction on rain.

So the restoration of forests also benefits local and regional climate improvement, and restoring more land contributes to the normalization of the water cycle in regions today impacted by both climate extremes, drought during winter and floods during summer.