Social pressures, market forces and elected leaders influence corporate decisions on environmental, social and governance (ESG) issues. Journalist Stephanie Tondo examines the state of ESG in Brazil and the potential impacts of its upcoming presidential election.
In a couple of months, Brazilians will choose their next president for a four-year term and the world’s attention is focused on what elections the environment and for policies to combat climate change globally. Newspapers such as The Washington Post and Domani have already that the Brazilians will be between the current president Jair Bolsonaro and the Amazon. But judging by his government so far, experts warn that of the current ead of tate represent
s a setback all aspects of nvironmental, ocial, and overnance (ESG) investments in the country.
This year’s Brazilian presidential elections will be between Bolsonarothe largest representative of the extreme right wing and a vocal opponent of environmental and social causesand former resident Luiz Inácio Lula da Silva leader of the Workers Party (PT), was arrested as part of in 2018, which prevented him from participating in the presidential elections of that year. conducted by the ederal olice of Brazil to combat corruption and money laundering, in dozens of arrests of politicians across the country.
The first round of elections will take place on October 2. If none of the candidates reach a majority of valid votes, there will be a second round of voting on October 30.
But to what extent do the principles and ideology of country’s resident influence ESG investments? Some argue that the initiative for transitioning to a green economy will come from corporations, due to market demand. In an interview ProMarket, Chicago Booth professor Robert H. Gertner pointed out that in the US, for example, companies social and environmental policies primarily changes in social norms.
“It’s much more demand from society, customers and investors. If you think about the US, the ESG agenda is moving forward with little regulation. From boards of investors to pension funds, people are really paying attention to the environment”
On the other hand, Gertner admited that consumers and investors tend to be inconsistent. In moments of crisis, investments in can be put aside.
“It’s not clear if there’s enough investor pressure to shift returns in prices. People wear two hats. They support green initiatives, but when the price of oil goes up, they can increase investments in market, rather than thinking a great incentive for reducing the use of fossil fuels”
Fábio Alperowich, the founder of the Brazilian investment fund FAMA, which focuses on ESG companies, believes that on market demand.
“We have arrived at a situation where it isn’t enough for individuals and companies to do their part. We need regulation combined with public policies” he told ProMarket.
Alperowich that Bolsonaro would generate a negative expectation for investments in ESG in Brazil.
“In recent years we have had a huge setback in the ESG agenda. Brazil looks bad in every aspect eforestation ittle regard for the environment here were now the deaths of Bruno and Dom in the Amazon. The handling of the pandemic was horrendous. There is a very negative perception
Setback in Environmental Policies
British journalist Dom Phillips and indigenous specialist Bruno Pereira were shot dead and their bodies burned and buried an expedition in an Amazon region known for conflicts involving drug trafficking and illegal logging and mining. had native people in the region about this situation.
Non-governmental organizations believe that the deaths were the disregard for environmental inspection and dismantling of public agencies such as the Brazilian Institute for the Environment and Natural Resources (Ibama) and the Indigenous National Foundation (Funai). These federal institutions responsible for ensuring compliance with laws and the rights of native people.
In May 2020, a video of a meeting between President and his ministers was released in which the minister of the nvironment, Ricardo Salles, of the opportunity brought by the pandemic to divert media attention, which would make it possible to “run the cattle” into the Amazon orest. He meant that agribusiness to use environmental protection lands to expand their business. His speech was not criticized by any of the authorities present at the meeting.
In a speech to agribusiness in January this year, Bolsonaro also celebrated the environmental fines on rural properties, he considered support that . Environmental fines are one of the instruments used to prevent agribusiness from deforesting areas of environmental protection. The reduction in fines shows that environmental protection agencies are not performing their function, and that agribusiness will not face obstacles to producing in areas of the Amazon rainforest.
With almost half of its territory covered by the Amazon rainforest and one of the least carbon-intensive energy sectors in the world, Brazil had for many years to lead the way a more sustainable global economy. During the last four years, however, the country has been moving in the opposite direction, breaking records in deforestation.
In Legal Amazon— area that amounts to 59 of territory and eight states—deforestation reached 1,120 square kilometers in June 2022, according to the Brazilian National Institute for Space Research (Inpe). This is the highest level for the month of June since 2016, the first year of the research. The deforested area in that month alone is almost the size of the city of Rio de Janeiro or almost twice the city of Chicago. This the third consecutive year of record deforestation in Brazil.
Greenwashing as a Policy
One of the biggest challenges when it comes to sustainability is greenwashingboth by companies and governments. In June, after suffering harsh criticism from the international community for his disregard for the Amazon, Bolsonaro signed a decree that created regulated carbon market in Brazil. Despite seeming to be a positive measure, the decree interrupted the of a carbon market bill that had been discussed in Congress for more than a year. The bill was authored by ongressman Marcelo Ramos, who opposes Bolsonaro.
“The bill was maturing in a democratic way, but it was trampled by a presidential decree that says nothing. The fact that there is a carbon decree is theoretically positive, but I see it differently. This was done for electoral purposes and to tell the United States and Europe that the president was doing something”
Bolsonaro’s decree definitions the concepts of “carbon credit” and “methane credit” but it does not provide objective measures for the implementation of . The bill, on the other hand, created a cap-and-trade market, in which some sectors would have mandatory targets for reducing greenhouse gas emissions.
President Must Lead by Example
Although much of the discussion
s about ESG, social and governance are also important. And especially in these matters, the president’s image can have positive or negative impact s Brazilian , particularly when it comes to investments coming from abroad.
Regarding diversity, Bolsonaro has repeatedly opposed measures to encourage the hiring of women and Black people by public and private companies.
In 2015, when he was still a congressman, Bolsonaro argued that women should receive lower wages because they get pregnant and are absent from work during maternity leave. In 2021, accused one of the country’s most important businesswomen, Luiza Trajano, of being a socialistafter , Magazine Luiza, launched a trainee program Black .
Despite Bolsonaro’s , Brazilian diversity consultant Ana Minuto, CEO of Minuto Consultoria, believes that transformation in labor market will happen capitalism: ompanies that do not invest in diversity and the well-being of their workers will lose their market share and will be left behind.
“Most companies are all white they don’t know the Black population. And Black people, half of the Brazilian population, trust these companies. ESG will impact these businesses.
But society does not only on companies and . The tate needs to create affirmative policies to make changes happen”
Minuto points out that while most CEOs have already understood the importance of diversity for companies, many of the challenges implementing these measures lie with the managers who do the hiring. he words and actions of a president who has little regard for minority rights.
“This moment brought the real vision that we are a racist, sexist and homophobic country, and that we have to act on this problem. This historic moment brought a lot to the surface, which is painful, but made us understand that we can’t keep sweeping the dust under the carpet”
In terms of governance, despite the fact that there have been several allegations of corruption against Bolsonaro and his family since the beginning of his government, it is Lula , due to his conviction in Operation. “Governance is importantand a lot of it is about actually making sure that you have a system that maximizes shareholders returns. And ethics can play a role in the perception of a country’s ability of making sure that companies are acting in a way that leads to greatest returns to its shareholders”
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