March 25, 2020

BMV Case – Forest credits: a token to save the environment

Is it possible for a rural producer today to earn more money by keeping the native forest on his property than putting it down?

Yes, it is possible.

And this is exactly what happens through the forest credit, a financial asset that secures environmental assets and allows the producer to be remunerated not only for preservation, but also for the adoption of sustainable methods.

In practice, it is a compensation mechanism. At one end are landowners with native forest. In the other, companies interested in obtaining environmental certification and zeroing their “carbon footprint”, financing the maintenance of the forest.

The sponsor of the initiative is the Brazil Mata Viva (BMV) program, a network of companies, rural producers and scientists, managed by IMEI Consultoria Ambiental.

How it works

Before any commercial exchange, there is a strict procedure, which provides guarantees for all parties involved:

  1. Owners who have native forest and adhere to the BMV organize themselves in associations, and formulate a plan for the conservation and sustainability of their production chain.
  2. The lands are inventoried, in a process certified by researchers from the Universidade Estadual Paulista (Unesp), using a methodology recognized by the United Nations.
  3. The work is verified and validated by an international entity, the German Tüv Rheinland, accredited by the UN.
  4. The potential value of environmental assets is calculated.
  5. Forest credits are registered on a secure platform with blockchain technology. Only then are they available for purchase.

Forest credits are tokens

The mechanism is similar to that of Initial Exchange Offerings (IEO), financing processes widely used in the creation of new cryptocurrencies and mediated by virtual brokers (exchanges). In an IEO, a developer presents a project and sells parts of it to funders, in the form of small actions, tokens.

In the case of Brasil Mata Viva, tokens are receipts for forest credits, and the project to be funded is not the creation of a new cryptocurrency, but the preservation of the environment.

And they are not carbon credits

Forest credits are different from the famous carbon credits. In the mechanism created by the Kyoto Protocol in 1997, a carbon credit can be issued in several ways. It may be equivalent to an area of ​​preserved forest, but it may also concern a company that for a year polluted a little less and decided to sell its “pollution quota” to another, which has exceeded itself.

In Brasil Mata Viva, there is only one way to issue a forest credit: preserving native vegetation, water resources and biodiversity.

Another difference is that forest credits can be freely traded, contributed to companies, investment funds or pledged, and can be valued like any other asset, obeying the relationship between supply and demand – which gives the investor the possibility financial return.

A safe methodology

All such transactions need to be marked and duly audited. The technology prevents fraud, such as the repeated sale of the same token.

And those who purchase forest credits still receive a certificate with the corresponding list of properties benefited and their geographical coordinates, for occasional verification.

Financing the forest is for everyone

The Brasil Mata Viva program has been around for 13 years. The purpose, from the beginning, was to create a new economic model for environmental preservation, replicable and with sustainable bases. A coherent and effective response to the systemic destruction of nature.

Until now, however, access to forest credits has been available exclusively to previously approved partners. This changes with the partnership signed between Brasil Mata Viva and Wuzu, which since its foundation has aimed at democratizing investments in digital assets.

Wuzu created the new platform that allows the offer and purchase of forest credits. The new model makes it easier for small and medium-sized companies, and even individuals, to invest in assets, through an easy, agile and reliable access system.

A worldwide effort

Today, in addition to large companies, governments have also joined forest credits. The state of Amapá has certified areas of native forest to offer in the market. Other states have similar legislation. And the investor who adheres to this new form of preservation can still get tax benefits.

Environmental preservation was one of the main themes of this year’s edition of the World Economic Forum, in January. At least 20 events that took place in Davos, Switzerland, were linked to the theme. Research released by the Forum organization itself has shown that climate change is now the main concern of the Davos community.

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