Carried out by Din4amo with support from Fundo Vale, study shows social and environmental business’ tax generating potential
In order to understand the potential impact of public authorities’ participation in blended finance structures (a mechanism that combines public and private resources to make sustainable development projects viable), Din4mo analyzed three cases of social and environmental impact initiatives. The analysis concluded that these investments have the potential to generate tax revenue of between three and six times the value of catalytic capital invested.
One of the cases analyzed in the study is Belterra, a positive social and environmental impact business created using resources from Fundo Vale, which is implementing agroforestry systems in partnership with small and medium farmers. The company raised R$17 million by issuing agribusiness receivables certificates, and Fundo Vale also contributed R$10 million of additional capital. This operation resulted in R$2.97 in taxes for every R$1 of capital invested, demonstrating the multiplier effect of impact investments.
“This study presents robust evidence of how public investments via blended finance structures are an exceptional strategy for converging and leveraging public policies and private projects that generate major social and environmental impacts. The fiscal multipliers of the studied projects demonstrate that in addition to generating impacts, it is possible to strengthen government cash flow with the positive fiscal flows that emerge from these operations,” explains Marco Gorini, CEO of Din4amo.
In addition to demonstrating the positive impact on the public finances and the generation of social and environmental impact, the study highlights the importance of public sector encouragement and support, by providing concessional capital and facilitating, regulating and stimulating the acquisition of products and services offered by these initiatives.
“Operations structured via blended finance have the capacity to generate significant economic benefits, boosting the financial markets and various production and consumption chains. For this reason, they have great potential to raise tax revenue for the public authorities,” says Camila Mazzer, who was responsible for the study’s tax analysis.
“We know that governments have a strategic role to play in supporting sustainable development initiatives, but this study goes further, highlighting the considerable potential tax return that investments of this kind can generate, in addition to their direct positive impact. I believe that this publication will be extremely important in encouraging public funders to participate in blended finance mechanisms,” says Gustavo Luz, the executive director of Fundo Vale, one of the organizations that supported Din4amo in carrying out the study.
The study “Blended Finance Operations, Impacts on the Tax Chain and the Importance of Public Financing” can be accessed on the Go!Blended Journey platform, a collaborative initiative that aims to connect and train strategic leaders in finance, entrepreneurship and innovation to work with blended finance models. The journey includes the development of studies, videos and other informative materials, as well as workshops, technical seminars and lectures by domestic and international experts. The central objective of the journey is to mobilize capital for a more inclusive, equitable and regenerative economy.