Impact “tokens”: How Brazil’s Gaia wants to expand market access

RIO DE JANEIRO, BRAZIL – While the menu of investments with an ESG footprint has been growing, access to impact products – intended to generate a positive socio-environmental impact – is still a niche.

On the one hand, many structured businesses that need credit are not yet large enough to venture into the capital markets by issuing shares, given all the costs and complexity involved.

On the other hand, investment options, when available, are still far from retailers’ budgets, distributed in restricted offerings or in operations with higher average ticket sizes.

In a partnership with fintech Liqi, securitization company Gaia Impacto is using technology to overcome these two issues and democratize access to products that combine return and impact.

The idea is to ‘tokenize’ financial securities, transforming issues such as CRIs (Real Estate Receivables Certificates) and CRAs (Agribusiness Receivables Certificates) into digital assets through blockchain, the same technology behind cryptocurrencies.

The first transactions with impact tokens are expected to hit the market in the coming months.

The technology and trading will be conducted on the platform started by Liqi, a tokenizer founded this year by Daniel Coquieri, a recognized entrepreneur in Brazil’s cryptoasset and blockchain sector. He founded BitcoinTrade, which quickly became one of the largest exchanges of the currency in Brazil and was sold to Argentina’s Ripio in 2020.

At the forefront

Tokenization is a major trend in the financial market: from works of art to soccer players’ club contracts to carbon credits, it has emerged as a way to give broad access to illiquid products or those hitherto restricted to a small universe of investors.

In practice, through smart contracts and blockchain, tokens guarantee the ownership of the asset and the settlement of payments, eliminating the need for multiple intermediaries that ultimately make the process very expensive.

As in the case of cryptocurrencies, there is also the possibility of trading the assets in the secondary market, 24 hours a day, 7 days a week, with real-time pricing.

But like all innovations, it still needs to overcome two obstacles: investor awareness and regulatory scrutiny.

Liqi has already launched tokens that represent credit rights on the transactions of players trained at soccer club Cruzeiro in Belo Horizonte, Minas Gerais – in an operation that handled R$1.4 million (US$268,000) and attracted over 1,500 investors. And it plans to launch two more similar soccer club tokens this month.

But the tokenization of securities, regulated by the CVM (Brazilian Securities and Exchange Commission), is still uncharted territory.

“There are no regulations yet, it is something that is being built. And we want to participate in this construction,” Gaia’s CEO João Paulo Pacífico says.

Gaia is designing a number of operations that were part of its pipeline to put them in token format, and intends to launch the first one in the coming weeks.

The format is still being studied: at first, it may be a private offering for a few investors, to test mechanisms and controls. But the plan is to grow and go public, in collaboration with regulators to make the market progress, Pacífico says.

Today, the CVM already has a regulatory “sandbox”, which allows temporary flexibility to innovations, for blockchain and tokenization. It is up to companies to try to fit their projects within the scope covered by the regulator.

Activist CEO

Under Pacífico, who calls himself an activist CEO and a “conscious capitalist” – “not a communist, as they say,” he jokes – Gaia has structured several iconic operations in the still incipient impact investment market in recent years.

Among them, a pioneering issuance of R$5 million in debentures to finance the renovation of low-income housing by Vivenda, back in 2018, and a R$1 million CRA to finance small cocoa producers in the South of Bahia this year. It is also behind the public offering of R$17.5 million for family farming cooperatives of settlers of the Landless Workers Movement (MST).

“The fact is that these issues are hard work. To perform a R$1 million operation, I need to work hard and still do it pro bono,” he says.

Traditional in the receivables securitization market, particularly in agribusiness and real estate, the company underwent a change this year to embrace its socio-environmental impact approach once and for all.

The more traditional issues – always with a concern for sustainability – came under the umbrella of Planeta Securitizadora, while the Gaia brand became Gaia Impacto.

“We have three focuses at Gaia: social inequality, climate emergency, and people’s happiness. And our mission is that, beyond risk and return, we want impact to enter people’s accounts,” Pacífico says. “Not subsidiary, cosmetic impact. Real, deep impact.”

LatAm Markets: Live Signals → — real-time movers, turnover leaders and FX across Latin America.