In Brazil, land use and agriculture account for 75% of the country’s greenhouse gas emissions. These sectors also drive biodiversity loss, fueled by economic inequality and limited opportunities for local communities. Catalytic capital, or investments that accept disproportionate risk and/or concessionary returns, is pivotal in reshaping these challenges by offering solutions that prioritize social equity and ecological regeneration. One such example is fama re.capital and their Fama Gaia Socio-Bioeconomy Fund, which works to finance sustainable land-use activities while uplifting Brazil’s smallholder farmers and indigenous communities.
The Problem: A fragile ecosystem and the capital gap
Brazil’s vast landscapes are under immense pressure. Project Drawdown estimates that 11% of GHG emissions originate from deforestation and the most threatened ecosystem is the eastern side of the Brazilian Amazon primarily due to cattle and soybean production. A study supported by the Institute for Society, Population, and Nature revealed that between 1985 and 2022, deforestation and climate change led to a 15% reduction in water flow in the rivers of the Cerrado, with significant implications for the agricultural sector, which represents approximately 24% of Brazil’s GDP.
These ecosystems are interconnected and interdependent. For example, the Cerrado region is the birth of many of the hydroaquatic resources of Brazil. If the Cerrado dries up due to deforestation, the Amazonia and Pantanal regions will face increased fire risk. There is a near perfect equilibrium that protects Brazilian biomes that needs to be respected.
Smallholder farmers and indigenous communities, who serve as stewards of these ecosystems, experience severe income inequality and often lack viable economic alternatives to destructive activities such as deforestation, logging, and monoculture farming.
These communities also struggle to access financing that may support regenerative and sustainable agriculture businesses. Traditional bank lending criteria do not qualify these communities for loans as they require extensive documentation, guarantees, higher rates, and larger loan sizes to justify their due diligence. For example, the interest on a bank loan in 2024 applied to a comparable borrower may range from 30-35% per annum, and microcredit rates are also unaffordable for smallholder farmers. Often, these farmers will not even approach traditional banks for fear of rejection.
́The forest is worth more standing than lying down. But we need support. If my child is starving and I need to cut down a tree, I will. But I don’t want to. If I have resources and support, I can do both: take care of the forest and have income to take care of my Family. ́ – Smallholder farmer from Acre
Without access to affordable credit, many are forced into extractive activities that are destructive of the natural ecosystems, and will resort to clearing the forest for cattle, logging, mining, and monocultures.
The Solution: Fama Gaia Socio-Bioeconomy Fund
São Paulo-based Fama re.capital launched the Fama Gaia Socio-Bioeconomy Fund to change this narrative. By providing affordable, accessible loans to remote communities, the fund empowers smallholder farmers to adopt regenerative land-use practices. Unlike traditional banks, which often charge annual interest rates of 30%, Fama Gaia offers loans at much more affordable rates—between 12-16%—while using localized credit assessments tailored to the unique circumstances of the borrowers. This interest rate is very affordable considering that it is calculated as a 3.5% spread above the Selic rate, Brazilian Bank’s overnight rate. Furthermore its loans start at around 200,000 reais (about 40,000 USD).
This ensures that the financing provided promotes long-term ecosystem health and community resilience, positively impacting income generation as well.
The fund operates in all six of Brazil’s macro-biomes (Amazonia, Atlantic Forest, Caatinga, Cerrado, Pantanal, Pampa) – as well as the coastal areas and mangrove forests as these ecosystems are all interconnected and interdependent. This respects the natural balance that exists between all the biomes in Brazil.
Catalytic Capital: Why it was needed
Fama Gaia’s model represents an innovative approach, but as a new and unproven structure, it faced challenges in attracting traditional investment. That’s where Meraki Impact, a Brazilian family office based in the Netherlands focused on planetary regeneration, stepped in. In June 2024, Meraki provided catalytic capital to seed Fama Gaia’s initiative. Meraki was one of the first investors to seed the fund to help them validate their thesis. This investment was crucial for getting the fund off the ground, as it puts the assumption of the high-risk profile of small-business private credit in remote Amazon regions in check for impact and conventional investors alike.
Type of catalytic capital: low-interest rate, seeding, and signaling. By accepting a lower return expectation of 12%—compared to higher returns typically demanded in the region—Meraki’s catalytic capital unlocked the potential for Fama Gaia to demonstrate its impact. More importantly, this investment provided a critical signal to other investors, substantiating the fund’s model and drawing additional interest from the broader impact investing community.
The Impact: Fostering regenerative agriculture and social equity
Meraki’s investment in Fama Gaia has already begun to generate significant impact. It provided much-needed financing to farmers at a crucial time during harvest season and increased the fund’s visibility, attracting more investors and partnerships. Fama re.capital praises Meraki for their ability to move quickly and their deep understanding of regenerative agriculture, which ensured that resources were deployed effectively in Brazil’s remote regions.
The long-term impact of this catalytic investment is far-reaching. By providing smallholder farmers with affordable credit, Fama Gaia is reducing deforestation, protecting biodiversity, and fostering sustainable land management practices. This, in turn, supports the long-term regeneration of Brazil’s ecosystems, ensuring a more equitable and sustainable future for its communities.
Catalytic capital at work
The partnership between Fama re.capital and Meraki Impact illustrates the power of catalytic capital to unlock innovative solutions for some of the world’s most pressing environmental and social challenges. By bridging the financing gap for underserved communities, catalytic investments like these ensure that vulnerable ecosystems are protected, while local farmers can prosper through sustainable practices. Current projects supported by Fama Re.capital include:
- Conexsus: Multi-biome agroforestry. In partnership with Conexsus and Belterra, the investment promotes socio-bioeconomy in six Brazilian biomes, boosting bio-businesses and extractivism that conserve and regenerate the environment. Over 6,000 families benefit, involving the regeneration of more than 2,000 hectares through agroforestry.
- Taboa: Cacau Cabruca in Bahia. In partnership with Tabôa, this investment promotes, in addition to credit, technical assistance to family farmers involved in sustainable cocoa cabruca production in Bahia. The 1st CRA provided credit to 184 producers and, in one year, their income grew by an average of 40%.
- Amazonbai: Açaí in the Amazon. The fund also invested in Amazonbai, a cooperative founded by the Traditional Communities Association of Bailique – ACTB. Today, 141 cooperatives promote forest preservation in the Amazon biome, through sustainable açaí harvesting and management.
- CCampo: Cassava and fruits in the Amazon. Fama Gaia Socio-Bioeconomy Fund also invested in CCampo, a cooperative in Santarém, Pará. Today, 161 smallholder farmers promote ecosystem conservation through sustainable agricultural practices, positively benefiting food security in the region.
For all invested projects, the fund monitors and reports three main impact key performance indicators: the number of people directly and indirectly impacted; allocated portfolio biome distribution; and the difference between average Fund interest rates and the equivalent rate reported by the Brazilian Central Bank. These indicators align the fund incentives to the main impact goals, such as reaching the largest number of people with the available capital, investing in all biomes and relevant ecosystems, as well as providing credit at favorable conditions.
This article was authored by Dario Parziale, managing director at Toniic. The investment by Meraki Impact in the Fama Gaia Socio-Bioeconomy Fund was selected among the catalytic capital investments in the open-source Transaction Database powered by Toniic thanks to the generous support of the Catalytic Capital Consortium (C3.) The database highlights deployment trends in catalytic capital, and analyzes investment terms and investor types at the transaction level.
