October 18, 2024
Tiago Gomes plays the role of a psychologist, a diplomat, a scientist and an investor, but most of all he is a climate activist. He believes in collective action for the good of our planet, especially as he can see the effects of deforestation and climate change so clearly in his native Brazil. However, not everyone thinks the way he does. Most companies need motivation, namely money, to consider the environment in their business model. So, when Gomes talked with Fabio Alperowitch, the founder of asset firm Fama Re.Capital, who was designing the concept of a fund that invested in the largest emitters to nudge them along the path to decarbonization, Gomes was all in. Gomes joined the firm and helped launch the Latam Climate Turnaround Fund.
The Fund launched in 2023 with the mission to invest in public stocks centered in Latin America. Typically, the focus is on companies directly or indirectly exposed to agriculture, as 75% of Brazil’s emissions stem from that sector. Once partnered with a company, the Fund works to create value-driven decarbonization plans that are supported by the latest science and are also financially feasible. The decrease of large emitters’ carbon output and subsequent increase in value creates systemic changes in the economy that trickle over to other large companies, as well as small holders.
This process only works because Gomes can speak the language of CEOs. Fifteen years ago, no one was thinking about the environment and decarbonizing. But the Rockefeller Foundation coining the term “impact investing” was a turning point for Gomes. He majored in business and entered the finance field with the goal to use those instruments for a bigger purpose. Looking back, he is glad he initially went the conventional route, because business gives him a lens that allows him to be pragmatic when looking at capital deployment for projects. Major corporations are a stakeholder in the environmental issue, and that means green investors like Gomes need to understand financial markets and how to minimize risk in order to get CEOs on board with decarbonization.
The decarbonization transition is one that requires trust. The companies Gomes works with need to see him as an ally, because other investors have over promised and underdelivered before. Having gotten his start in private equity, Gomes has seen that firsthand. Before joining Fama, he worked for a private equity firm that invested in companies in the growth stage that in some measure supported climate solutions. Yet, private equity firms try to raise funds as fast as possible, deploy capital as fast as possible and make a return on their investment as fast as possible. Even though that process might take years, it is still short-term thinking that does not solve the root issue: companies’ business models are not made with the environment in mind. Gomes and his team instead try to understand every company with whom they work to create the best strategy possible. That means engaging with owners and key executives, “building relationships, constructing a plan and implementing that…to capture long-term value creation.”
A company the Turnaround Fund invests in, SLC Agrícola, is one of the largest soybean producers in the world, with 700,000 hectares of land spanning all the tropical biomes in Brazil. As expected for an agricultural company, they are highly exposed to climate risk, utilizing many conventional practices such as tilling soil and applying herbicides, pesticides and fertilizers. The Climate Turnaround Fund is helping them transition faster to more regenerative practices focused on soil health. Not only should this result in sequestering more carbon, but it will also create higher productivity and lower costs for the company as their reliance on chemicals decreases.
The time-intensive approach for a single company can have big impacts. As Gomes puts it, “If we can create the financial incentives to nudge corporate and financial actors to act towards decarbonization, it’s easier to convince the rest of society to act in a certain way.”
While the process of systematically changing the economy is hard work, Gomes has no regrets. With his job, he can always look at himself and say, “I’m so proud of myself and what I’m doing.” Along with the intrinsic validation, his job also has given him the ability to “understand different individuals around the table” and connect multiple stakeholders, a necessary step for solving an issue plaguing all of us.
Gomes always has had a passion for environmental issues, but he advises others who share his passion to gain the skills to back the passion up. His ability to be good at what he does hinges on his understanding of the science behind the strategy, the changes in regulations that occur and the extent of the problem and whether capital deployment could help scale the solution. We don’t need more discussions–we need more action. Thus, Gomes advises, “Have the purpose, but also have the pragmatism to embrace that purpose.”
Gomes identifies as a climate activist first and an investor second, but his work entails both of those things and more. He must understand financial markets, build relationships with CEOs, speak publicly at conferences to share the benefits of his team’s work, and understand different perspectives in order to bring all the stakeholders together to create a climate solution that will not fade within a generation.
Gomes is giving his all to make the investments now that our world will need for the future. He has always been dedicated to the environment, but now having a 10-month-old son only motivates him further. Gomes recently planned a first trip with his son, and, after much thought, settled on the Pantanal, a beautiful native forest in western Brazil. Gomes’ reasoning, as he stated it, was that, “When he’s my age, that place might not exist anymore.” That is the outcome Gomes is working so hard to prevent.
Tiago Gomes, co-founder of the Latam Climate Turnaround Fund
Author: Tara Yakaboski