Project detail - Suzano S.A.

Who is our customer

Suzano S.A. is an integrated forestry, pulp and paper company. Founded in Brazil approximately 100 years ago, it has established itself as a global reference in the development of products made entirely from planted eucalyptus forests and one of the largest vertically integrated producers of eucalyptus pulp and paper in Latin America. Suzano currently manages 2.6 million hectares of forests, consisting of 1.6 million hectares of productive eucalyptus plantations and 1.0 million ha in set-asides for conservation. Suzano operates 11 mills (8 pulp facilities and 6 paper mills, of which 3 are integrated) throughout 5 Brazilian States.

What is our funding objective?

FMO is participating with USD 40 million in the B tranche of an existing A/B syndicated loan transaction arranged and signed in 2022 by International Finance Corporation (IFC). The proceeds of the loan will be used for the construction of Cerrado Project, a greenfield pulp mill, including the development of eucalyptus plantations to be consumed by the mill, in Ribas do Rio Pardo, state of Mato Grosso do Sul.

Why do we fund this investment?

The project is expected to generate economy-wide effects and to have positive environmental effects. The loan will support climate change mitigation by investing in sustainably managed plantations that will sequester carbon and by increasing the use of renewable energy sources through the export of 180 megawatts to the power grid. Once operational, the new plant will create around 3,000 indirect and direct jobs, boosting the social and economic development in a region in which 28% of people live below the poverty line. At the market level, the project will help strengthen the competitiveness of Brazil's pulp and paper sector by incentivizing other players to replicate zero fossil fuel technology and other designs that optimize energy and resource efficiency. The transaction has the FMO Green Label based on the Climate Mitigation factors: (i) the plantations will obtain relevant sustainability certification, (ii) the mill design is based on Best Available Techniques to improve resource efficiency and (iii) the mill will generate 180 MW of surplus energy stemming from a second-generation biogas recovery boiler and biomass boiler, which will be exported to the national grid. In addition, in line with the Company’s Wood Supply Policy, there will be no new conversion of natural habitat for eucalyptus plantations sourcing the project and there will be no conversion of native vegetation for establishing eucalyptus plantations.

What is the Environmental and Social categorization rationale?

Under the A/B syndicated loan structure, the Arranger (IFC) acts as the lender of record vis-à-vis the customer and is responsible for leading the ESG approach and for conducting E&S due diligence. FMO accepts the transaction based on our assessment of the Arranger’s due diligence and ability to meet their processes and requirements. Per FMO’s Sustainability Policy, the E&S category for this project is classified as A. The following information is derived from IFC’s disclosure website (https://disclosures.ifc.org/project-detail/ESRS/45987/suzano-climate), please consult their disclosure page for additional investment and E&S information. This is a Category A project according to IFC’s Policy on E&S Sustainability because it may cause significant adverse E&S risks and impacts that may be diverse and irreversible. The main risks associated with this project are (i) population influx; (ii) occupational health and safety risks; (iii) hazardous material transportation and storage; (iv) water and air emissions; (v) potential impacts on natural habitat and biodiversity; (vi) land acquisition; (vii) labor compliance by contractors. While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards: PS 1 - Assessment and Management of Environmental and Social Risks and Impacts PS 2 - Labor and Working Conditions PS 3 - Resource Efficiency and Pollution Prevention PS 4 - Community Health, Safety and Security PS 5 - Land Acquisition and Involuntary Resettlement PS 6 - Biodiversity Conservation and Sustainable Management of Living Natural Resources