Pooled Finance: Brazil's Opportunity to Finance Subnational Sustainable Infrastructure

This policy brief, prepared by the Climate Bonds Initiative and supported by the Inter-American Development Bank, examines the potential for Brazilian subnational consortia to use Pooled Finance Mechanisms (PFMs) to fund sustainable infrastructure. It identifies significant regulatory and financial barriers facing Brazilian municipalities and proposes updates to the legal framework and the adoption of blended finance models to attract private and international capital for climate-resilient projects.

• Brazil has a substantial green investment opportunity estimated at USD 1.3 trillion across sectors including energy efficiency, buildings, water and waste management, and climate-smart transportation. This pipeline is seen as a way to address the country's historical infrastructure gap and meet its Nationally Determined Contributions (NDCs).
• Brazilian municipalities face severe financial constraints, with approximately 35% unable to generate enough revenue to cover basic administrative activities and 47% spending only 3% of total revenue on welfare investments, including infrastructure. Additionally, 68.2% of cities are small-sized, making them more vulnerable to population decrease and revenue cuts.
• Subnational consortia are a viable solution for aggregating municipalities to overcome limited creditworthiness and technical capacity. Currently, there are 491 such consortia in Brazil, covering 73% of municipalities, though only 24.2% of these address general infrastructure projects, as over half are focused on public health services.
• The current legal framework limits the autonomous fundraising capacity of public consortia. While Law 11,107/2005 allows for the creation of consortia, credit operations are subject to Federal Senate limits and the Law for Fiscal Responsibility (Law 101/00), which requires federal government authorization and guarantees for subnational loans.
• The document recommends several regulatory updates to enable pooled finance, including amending Law 11,107/2005 to better define autonomous fundraising and loosening the Law of Fiscal Responsibility. It also suggests establishing clearer governance rules regarding voting weights, quorums, and the compulsory nature of decisions.
• International models of pooled finance, such as 'Club deals' in France, Local Government Funding Agencies (LGFAs) in Nordic countries, and Bond Banks in the US and Canada, provide templates for Brazil. Specifically, blended finance mechanisms used in India (Tamil Nadu Urban Development Fund) and the Philippines (Philippine Water Revolving Fund) are highlighted as ways to integrate public and private capital to support smaller, financially weaker municipalities.

APA

Ambrosano, J., Souza, L., Brakarz, B., & Callau, V. (2021). Pooled Finance: Brazil's Opportunity to Finance Subnational Sustainable Infrastructure. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Pooled-Finance-Brazils-Opportunity-to-Finance-Subnational-Sustainable-Infrastructure.pdf

Chicago

Ambrosano, Julia, Leisa Souza, Barbara Brakarz, and Vanessa Callau. Pooled Finance: Brazil's Opportunity to Finance Subnational Sustainable Infrastructure. Climate Bonds Initiative, 2021. https://www.climatebonds.net/files/documents/publications/Pooled-Finance-Brazils-Opportunity-to-Finance-Subnational-Sustainable-Infrastructure.pdf.

Wikipedia

{{cite report |last1=Ambrosano |first1=Julia |last2=Souza |first2=Leisa |last3=Brakarz |first3=Barbara |last4=Callau |first4=Vanessa |title=Pooled Finance: Brazil's Opportunity to Finance Subnational Sustainable Infrastructure |publisher=Climate Bonds Initiative |date=February 2021 |url=https://www.climatebonds.net/files/documents/publications/Pooled-Finance-Brazils-Opportunity-to-Finance-Subnational-Sustainable-Infrastructure.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ambrosano2021pooled, author = {Ambrosano, Julia and Souza, Leisa and Brakarz, Barbara and Callau, Vanessa}, title = {{Pooled Finance: Brazil's Opportunity to Finance Subnational Sustainable Infrastructure}}, institution = {Climate Bonds Initiative}, year = {2021}, month = feb, url = {https://www.climatebonds.net/files/documents/publications/Pooled-Finance-Brazils-Opportunity-to-Finance-Subnational-Sustainable-Infrastructure.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }