Proposal of financial instrument to combat climate change

Abstract

Climate Change is increasingly being considered in public and private institutions’ strategies. It can negatively affect people’s lives and businesses, but also create opportunities. In the state of Minas Gerais, the Environmental State Foundation (FEAM)) has developed a tool that measures municipalities’ climate change vulnerability, linking factors of exposure and sensitivity to damages, as well as adaptation capacity. In this study, a fund was designed aiming to operationalize Payment for Environmental Services as a mechanism to remunerate landowners in municipalities that have extreme climate vulnerability, with the objective of collecting financial resources from companies interested in investing in sustainability and allocating the balance of this transaction to these municipalities. In return, companies would generate carbon credits that can be sold in the market, creating revenue, improving corporate reputation and increasing social and environmental impact of their businesses.