As countries across Latin America accelerate their transition toward greener economies, fiscal policy is emerging as one of the most powerful levers to scale up Nature-based Solutions (NbS). Yet, the success of this transition hinges on the critical condition that it must be inclusive. Without careful design, even well-intentioned environmental policies risk inadvertently harming vulnerable communities. A recent case study from the UN Development Account (UNDA) project “Financing NbS for a Green and Inclusive Recovery in Latin America” offers a compelling example of how data-driven policymaking can help navigate this tension.
In Brazil, the project focused on the Rural Credit Scheme of the Safra Plan, the country’s most significant public finance instrument, with close to USD 100 billion mobilized annually, aiming to align fiscal incentives with conservation goals, while safeguarding the livelihoods of rural populations. However, a central challenge emerged when proposed eligibility criteria threatened to restrict access to credit for small-scale farmers operating in areas identified as high-risk for deforestation. While the intention was to curb environmental harm, a blanket application would have had far-reaching social consequences for the sustenance of local farming families.
To better inform the eligibility criteria, the project undertook a detailed technical study seeking to quantify the de facto environmental impact of these eligibility criteria. The estimations fundamentally reshaped the policy debate, finding that 91% of rural credit beneficiaries were responsible for only 4.6% of the deforestation area linked to rural credit flows. In other words, the vast majority of smallholders were not the primary drivers of deforestation. Therefore, cutting their funds would have yielded minimal environmental gain while causing significant social and economic hardship.
Leveraging this data, project partners, including the University of São Paulo (USP-FEALQ), engaged with policymakers to revise and operationalize the eligibility criteria in a way that decoupled vital social support from the negative externalities of larger-scale activities to promote a more just transition. Accordingly, the project adopted a more targeted approach: as maintaining access to credit for these groups in the short term, while incentivizing the gradual adoption of more sustainable practices, would deliver far more balanced outcomes. Looking ahead, the project’s Business Intelligence tool, developed as part of its policy toolkit, aims to provide policymakers with an ongoing evidence base to ensure that future regulatory decisions remain both environmentally effective and socially equitable.
This case study serves as a powerful reminder for the Green Fiscal Policy Network that inclusivity must be hardwired into green financial instruments. When we repurpose subsidies or implement new fiscal regulations, we must ensure they are designed with precision. Misaligned policies risk alienating the very communities whose participation is essential for long-term ecosystem restoration. Ultimately, the Brazil experience shows that the path to a green economy is paved with evidence-based and people-centered policy. By equipping policymakers with the tools to act on high-quality data that informs fiscal decisions, governments can protect biodiversity without compromising social equity. As we reach the conclusion of this UNDA project, the lesson is clear: for Nature-based Solutions to thrive, our fiscal frameworks must be as inclusive as they are ambitious.
About the authors
Sara Rocha Ferreira Alves, Intern at the United Nations Environment Program, Economic and Fiscal Policy Unit
Kesia Braga, Project Coordinator at the United Nations Environment Program, Partnership for Action on Green Economy (PAGE) Brazil, Economic and Fiscal Policy Unit
Minhyuk Hong, Associate Expert at the United Nations Environment Program, Economic and Fiscal Policy Unit
