The Business Opportunities for Brazilian Biodiversity

What are the #Business OPPORTUNITIES for #Brazilian #Biodiversity? A 15 tweets thread 🧵👇 pic.twitter.com/WP4AKyJMf8

— tagomago | Mauro Rebelo (@tagomago_me) July 24, 2023

From nature comes everything. The solutions to problems that life has encountered over the last four billion years are encoded in the DNA of species. However, transforming this into a viable product requires (a lot of) scientists, (quite some) time and (a lot of) money. Discount rates are high and the net present value of biodiversity in the forest is often considered zero.

There are several areas that are not currently or have yet to become biodiversity businesses. These include: land conservation (which could change with the new code of economical activities), harvesting (due to its low added value and high entry barrier), and extracts, tinctures, and resins (low technology, low added value and entry barrier).

However, markets exist in the sectors of agriculture, fashion, cosmetics and pharmaceuticals. The latter two have similar demands: performance is king! Safety, stories, novelty, exclusivity, productivity, access, and volume are all key factors. However, being Brazilian is not a requirement, and the competition is global!

The pharmaceutical sector has a well-defined, validated and fair business model. Sub-licensing evaluates opportunity by peak drug sales and anticipates revenue and royalties for bioprospecting. Future contracts finance the development, the risks of which are mapped out in stages. It may not be perfect, but it’s very good.

Cosmetics, on the other hand, lack a defined business model for discovery. This sector uses small quantities in many products and evaluates based on supplied volume, not commercialized volume. Investments bioprospecting are small and not systematic.

Yet, the greatest opportunity lies in regenerative cosmetics, particularly in the longevity market. This is because the pharmaceutical regulatory framework is not prepared for preventative drugs. Once this sector realizes this, investment will be accelerated due to the enormous incentives.

Brazil has three international biodiversity business opportunities that stray slightly from traditional thinking. They are large, digital, low technical risk and have reduced time to market:

1. Business Models: Despite the Biodiversity Law, the imbalance between actors in the value creation chain (businessmen, communities, academia, consumers) stifles innovation. Blockchain enables new governance models and incentives in these complex scenarios.
2. Derivatives Backed by Biodiversity: Carbon offsets (CO2) are paving the way. For forest (not rural) properties to be next, we need to integrate NFTs with off-chain land titles. This will lead to all types of ETFs backed by tangible and intangible biodiversity. The technology is there. It’s doable today!
3. Knowledge: Prospecting biodiversity has always been like finding a needle in a haystack. But today’s biotechnology allows us to digitalize, automate, and scale information production, e.g., DNA sequencing, and convert it into knowledge, e.g., AI. DNA marketplaces are flourishing.

Brazilian biodiversity is not necessarily special as the ‘operating system’ of life is the same for all life and redundancy is high. More biodiversity may equate to more noise than signal. And higher costs, not lower, to find the needle in the haystack. Our competitive differentiators are…

…the Amazon brand! Everyone recognizes the Amazon and associates it with Brazil (not Peru or Colombia). We need to nurture (instead of burn and cut down) this brand and create others for the Atlantic Forest, the Cerrado, and the Caatinga, increasing our business opportunities!

Additionally, we have an ecosystem of innovation. We are better positioned than other mega-diverse (like Colombia and Indonesia) countries to identify, develop, produce and commercialize high-tech products. We have legal frameworks, scientists, and produce 10% of the world’s biodiversity knowledge. All that’s left is to take action!

“Investing in biodiversity is buying low to sell high”

Francine Leal

Biodiversity is the most asymmetrical business opportunity, with the highest percentage of multiples, for Brazil in the 21st century. Seizing it depends on a greater risk tolerance and lower time preference.

The forest is worth more standing than fallen. This statement, often heard and repeated, should be treated as a hypothesis to be validated. Current evidence suggests a potential yet immature market. The forest’s value is evident, but we must strive to capitalize on it effectively.

Based on a thread of tweets I made in 2021, in portuguese, for a talk at SEBRAE Global Experience.