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PTSustainable finance requires evidence: seeking real impact
The transition to a low-carbon economy depends on access to capital and the ability to convert it into projects with measurable results. The critical link is the construction of monitoring, reporting, and verification (MRV) practices and instruments that produce reliable, measurable, and auditable evidence of climate and socio-environmental impact. Without this informational infrastructure, financial institutions have difficulty proving the integrity of portfolios and final beneficiaries are unable to demonstrate additionality and impact, which limits the flow of credit and makes origination more expensive.
For financial institutions, MRV is both risk management and commercial strategy, as it conditions access to funding sources and the quality of origination. The sector needs to track the allocation of resources, report results, compare performance to baselines and targets, and document processes that ensure compliance with safeguards. In Brazil, the requirement for formal policies to address socio-environmental and climate risks and impacts reinforces this agenda and requires that data governance be an organic part of business planning, not an appendix of compliance. In this context, the Banco Central do Brasil’s Social, Environmental, and Climate Responsibility Policy, established by the National Monetary Council, works as a minimum level of internal organization and transparency and guides the implementation of actions aimed at the effectiveness of these practices.
On the implementers’ side, the challenge is different, but complementary. Converting guidelines into everyday practices entails measuring baselines, monitoring simple and materially relevant indicators, recording costs and co-benefits, and, when necessary, submitting information to independent verification. For small and medium-sized companies, this is usually faced with cash and technical capacity constraints. The consequence is known: promising projects are unable to prove their impact merit, becoming less bankable. The solution is to reduce the cost of compliance with protocols proportional to the risk, innovative ways of producing evidence, such as the application of remote sensing technologies, and the adoption of guidelines with a clear scope and measurement methods.
Because markets require comparability and traceability, taxonomies and eligibility standards offer a common grammar for borrowers and lenders. In the Brazilian case, the effort to build local criteria aligned with climate and socio-environmental objectives creates predictability for issuers and originators, reduces information asymmetries, and helps distinguish real impact. Without MRV, however, any taxonomy of sustainable activities remains incomplete and ineffective, as eligibility depends on verifiable and auditable data over time.
On the demand for credit side, companies often lack the technical capacity and budget to adapt to the requirements of proof and production of information. In land use sectors, for example, of high relevance for the transition in the Brazilian case, the dispersion of producers increases the complexity of monitoring practices and results. Innovative programs, such as Eco Invest Brasil, face this tension. In the 2nd auction, focused on the recovery of degraded areas, the design sought to balance socio-environmental compliance and MRV requirements with attractiveness for financial institutions and final beneficiaries. The central guideline was to calibrate robustness and feasibility: standards that pay attention to rigor and minimum guarantee of integrity and, at the same time, feasible for private agents to operate at scale, both financial institutions as operators of the program and the productive sector, as final beneficiaries of the resources.
Internationally, consolidated references help to anchor practices. Standards such as those of the IFC recommend that the level of monitoring be proportionate to the risk and that, in projects with greater impact, performance information be verified by external experts. This simple guideline guides a scalable architecture: minimal, reliable data for low-risk operations; denser audit trails when risks and impacts require it. Applied with discretion, it avoids both the “impossible test” that paralyzes projects and the complacency that weakens wallets and reputations.
Some operational principles emerge from this analysis. First, MRV should be planned from origination, not post-financing. This includes defining objective indicators, feasible measurement methods and reporting schedules compatible with production cycles. Second, proportionality is key: verification requirements and costs must scale with the risk, size, and complexity of the project. Third, digitization, automation, standardization, and adoption of innovative technologies reduce transaction costs and facilitate audits, especially when primary data is collected in the course of the process. Fourth, capacity building is part of the financial product: without training and technical assistance, the capability gap will continue to block the transformation of capital into real impact.
In summary, MRV is not an end in itself, but it is the mechanism that converts goals into evidence and evidence into confidence. It is this trust, embodied in verifiable data, that unlocks sustainable credit at scale, aligns incentives between lenders and implementers, ultimately producing results that can be measured, learned, and improved over time.
Solutions to climate finance challenges
In the design of financial instruments and public policies, WayCarbon supports clients in the formulation of credit lines, innovative financial products, and mechanisms that seek additionality based on sectoral diagnostics and climate risk analysis, defining eligibility criteria, performance targets, and triggers linked to measurable indicators.
In addition, we contribute to the development of operational information flows with MRV protocols proportional to risk and compatible with national and international standards, ensuring alignment with requirements aimed at sustainability frameworks.
In terms of policies, we support the modeling of incentive structures and conditionalities, designing governance arrangements and training actors in the construction of instruments and routines appropriate to the challenges of the Brazilian institutional context. The focus is on reducing compliance costs and enabling operability, producing frameworks that connect origination, monitoring, and verification in feasible routines for public and private agents.
