Authors: André Amaral

Brazil’s Forest Restoration Opportunity: Why Global Investors Should Take Note

New Orbitas report shows why Brazil is the next frontier for high-return, nature-based investments

A recent study published in the Journal of Forest Business Research and featured by Carbon Pulse found that limited favorable investment conditions in many developing nations are restricting the global potential for forest restoration. However, it also identified seven key factors that could support private investment in restoration. When these factors are present, they lower risks and increase the return for investors looking to support large-scale reforestation. According to the article, a group of upper-middle income countries, including Brazil, accounted for more than 60% of the land with favorable investable conditions.

Room to Grow

The latest Orbitas report—Room to Grow: The Economic Case for Forest Restoration in Brazil—engages directly with the discussion about forest restoration in developing nations. The Orbitas report’s findings strongly align with the Journal of Forest Business Research study’s conclusion that private capital is essential to scaling restoration and explore innovative pathways to bring it in. It is important to emphasize the importance of blended finance, which combines public, philanthropic, and private resources to mitigate risks and mobilize more money at scale. The Orbitas report also provides recommendations for key stakeholders including investors, companies, standards and value chain operators, project developers and Brazil’s government to further increase restoration’s potential in Brazil.

In Room to Grow, Orbitas examines how sparing land from agriculture can open up significant room for forest restoration in Brazil without threatening food security. It also highlights how revenue streams from timber, carbon credits, and other ecosystem services can make restoration economically viable and profitable for investors.

Orbitas modeling indicates that, over the next 30 years, large-scale forest restoration of degraded pastureland in Brazil can generate up to USD 141 billion in value for investors, while creating more than 350,000 full-time jobs annually. Under the right conditions, forests and biodiversity can be restored across nearly 60 million hectares (Mha) — an area the size of France (including France’s overseas territories).

Why Brazil Stands Out

The Journal of Forest Business Research study highlighted seven factors that increase the likelihood of successful private investment in forest restoration. Brazil is particularly well positioned on nearly all of them:

1. Higher Tree Growth Rates

Brazil’s natural conditions offer extraordinary potential for rapid tree growth. According to Orbitas modeling, a large share of Brazil’s land area—has high or medium natural regeneration potential—meaning that trees and other native vegetation can recover with minimal to no human intervention. This means forests can recover faster, improving the economic case for restoration by reducing the time needed to realize benefits, whether through sustainable timber harvests or carbon credit generation.

2. Growing Domestic Demand for Wood Products

Brazil’s forest products sector is booming. Domestic demand for wood products, including pulp, paper, and construction timber, has historically been rising steadily. This trend boosts the viability of commercial reforestation. As shifting domestic and global consumer preferences are expected to increasingly favor sustainable products, the opportunity for products sourced from restoration is poised to grow even further.

3. Better Market Access

Market access is crucial to making restoration profitable. Room to Grow reviews both mature and nascent mechanisms for restoration projects to show how they can capitalize on the benefits created by restoring spared agricultural land. These are propelled by three investment drivers: domestic policy, environmental markets, and corporate action. 

Today, carbon credits and sustainable wood products are the most mature market access mechanisms for restoration projects. However, Orbitas modeling shows a strong potential for newer mechanisms such as green bonds, the regulated carbon market, biodiversity credits, and supply chain mitigation to provide additional monetization pathways for these projects. Examples of each mechanism at work in Brazil are detailed in the case study appendix of the report.

4. Lower Land and Implementation Costs

Landowners are expected to be financially incentivized to spare part of their agricultural land for restoration due to rising agricultural yields and increasingly attractive returns from restoration – through the mechanisms discussed above. The report’s modeling shows the financial benefit of restoration developers renting this land from its existing owners, eliminating the significant upfront land purchasing cost. The cost of seedlings and restoration inputs can also be lowered, especially when using effective natural restoration planting techniques being implemented in Brazil. 

As Brazil makes progress toward its ambitious restoration goals, stakeholders should also  expect economies of scale to reduce project costs significantly. Orbitas modeling also includes proprietary, real-world restoration project cost data to validate the economic viability of restoring around 60 Mha over the next 30 years.

5. Larger Scale of Land Parcels

Brazil’s rural land holdings are often large in scale, especially in agricultural frontiers. This is important because restoration becomes more cost-effective at scale, where per-hectare implementation costs can be reduced. Brazil remains a hotspot for institutional interest in farmland assets, and this scale can be an asset for restoration as well.

6. Improving Property Rights

While Brazil still faces challenges with land tenure and enforcement, the situation is improving. Government efforts to digitize land registries and enforce the Forest Code are creating greater clarity and security for investors. In addition, conservation and restoration-focused government initiatives, such as the Jurisdictional REDD+ System in the state of Pará, are bringing increased regulatory security and clarity for project developers.

7. Lower Country Risk (Relative to Peers)

Though Brazil is not without political and economic volatility, it compares favorably with other emerging markets. As noted recently by prominent Brazilian newspaper O Estado de São Paulo, top global financial institutions such as JPMorgan and Bank of America are doubling down on investments in emerging markets, and Brazil is frequently highlighted as a top contender. Morgan Stanley, for example, recently labeled Brazil a “favorite” due to its favorable economic conditions, political outlook, and relatively low asset prices.

The Time is Now

With international interest growing and domestic potential ready to be unlocked, Brazil is poised to become a global leader in forest restoration. The country’s ecological richness, economic fundamentals, and growing demand for sustainable development all point to a restoration boom—but only if Brazil’s public and private sectors act swiftly.

In Room to Grow, Orbitas discusses all the points mentioned above in more detail and makes the full case for the economic potential of restoration in Brazil. This economic opportunity is driven by four major forces—policy, agricultural yields, profits, and scale. These forces, acting in tandem today, are poised to shape the future of the Brazilian bioeconomy by making reforestation highly profitable, jumpstarting new economic opportunities, and simultaneously delivering sustainable jobs, economic growth, and nature conservation.