Front line: an employee inspects logs at a sawmill within the Amazon rainforest in Pará state
Front line: an employee inspects logs at a sawmill within the Amazon rainforest in Pará state © Nelson Almeida/AFP via Getty Images

When Brazilian president Jair Bolsonaro committed to ending illegal deforestation in the Amazon by 2030, the sceptics had a field day.

Some noted that his pledge, made at a US-sponsored climate summit last month, was an old one: first made by his predecessor Dilma Rousseff in 2015 (and derided even then for its lack of ambition). Others joked that Bolsonaro would achieve the target by completing the destruction of the entire rainforest by 2029. Critics pointed out that, despite promising to double resources for the enforcement of environmental laws, Bolsonaro approved a budget for 2021 which slashed enforcement funding by more than a third.

“We debated internally whether Bolsonaro’s letter to Biden [in which he stated the commitment before the summit announcement] even merited a response, since there is such deep scepticism that he intends to do anything differently to achieve the 2030 zero illegal deforestation target,” says one leading institutional investor in Brazil.

This scepticism is understandable: deforestation of the Amazon has surged to its highest level in more than a decade under Bolsonaro; protections for indigenous peoples have been eroded; and illegal loggers and ranchers are among the president’s staunchest supporters.

Mixed message: President Jair Bolsonaro promised to double resources for enforcing environmental laws, but went on to slash funding
Mixed message: President Jair Bolsonaro promised to double resources for enforcing environmental laws, but went on to slash funding © Evaristo Sa/AFP via Getty Images

But lost in the brouhaha was another government promise: that Brazil would achieve net zero carbon emissions by 2050, 10 years earlier than previously planned.

That pledge had been suggested in an open letter to Bolsonaro from the CEOs of around 30 leading Brazilian companies — and it is an indication of the growing power of the business lobby to influence government environmental policy.

Sylvia Coutinho, country head of UBS Brazil, the local arm of the Swiss banking group, describes 2020 as a “turning point” for Brazilian corporates. “It is very clear to all the CEOs that I interact with, across a broad spectrum of industries, that ESG [environmental, social and governance investing] matters and has become a mainstream agenda item that they need to address,” she says.

“There’s a real commercial and reputational concern among Brazilian business” about the environment, adds Annelise Vendramini, co-ordinator of the sustainable finance programme at São Paulo’s FGV-EAESP business school.

Small investors in Brazil, whose numbers have surged as lower interest rates made the stock market more attractive, have also started to demand that their money is channelled towards companies that score well on ESG criteria.

Carlos Takahashi, president of asset manager BlackRock Brazil, says more than 30 per cent of the inflows from Brazilian investors in the first quarter of this year were destined for the company’s ESG exchange traded funds. “This is a good thermometer and . . . confirms that we have investors in Brazil also interested in ESG products”, he says.

XP, Brazil’s largest equities brokerage, recently surveyed 30,000 of its clients and more than 70 per cent were interested in allocating money to ESG-friendly companies, according to Marta Pinheiro, XP’s executive director for ESG and business development. “I believe that ESG is a big business opportunity for Brazil,” she says.

Social concerns

Although, internationally, the “E” aspect is the one Brazil is usually scrutinised under, in the domestic market many investors have been more interested in the “S”. Like others around the world, Brazilian companies have work to do in improving relations with local communities, and a history of racism against the black population makes diversity initiatives highly relevant.

Despite accounting for over half of the country’s 210m population, black or mixed-race Brazilians occupy less than 5 per cent of executive positions and 5 per cent of seats on company boards — and this representation has barely improved in the past decade.

A Black Lives Matter march in São Paulo. Black or mixed-race people are drastically under-represented at executive level in Brazilian businesses
A Black Lives Matter march in São Paulo. Black or mixed-race people are drastically under-represented at executive level in Brazilian businesses © Nelson Almeida/AFP via Getty Images

However, ESG measurement in Brazil is still in its infancy and does not yet employ the detailed criteria being adopted in Europe — the de facto global standard-setter. “This is a challenge also in Brazil, for sure, to have a more clear identification on what is really a sustainable investment,” Takahashi says.

Fabio Alperowitch, who co-founded Fama Investimentos, one of Brazil’s first ESG funds, in 1993, is also worried about this lack of rigour in measuring ESG performance, and the lack of investor knowledge. “A lot of investors in Brazil don’t understand ESG,” he says. “Some of them think it’s about excluding arms companies.” Amid the confusion, Alperowitch says, some companies are trumpeting “green” investments which are not quite what they may seem.

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As one example, he cites Via, a Brazilian retailer, which last month issued a “sustainability-linked bond” to raise up to R$1bn ($180m). The company’s announcement says that the proceeds will be used to lengthen debt maturities and fund regular operations. “In return, they are making a commitment to raise the proportion of renewable electricity they consume,” Alperowitch says. “But electricity is not the major environmental issue facing a retailer. Packaging would be more relevant.”

Via says it has set a target linked to the bond of boosting its use of renewable energy from 30 per cent to 90 per cent by 2025. Separately, it plans to set a target for reducing carbon emissions by the end of this year and will cut overall energy consumption and increase recycling initiatives.


Some Brazilian companies already meet international criteria for environmental performance and sustainability.

Natura &Co, the cosmetics group which also owns Body Shop and Avon, secured group certification as the world’s biggest B-Corp, or environmentally and socially sustainable firm, last year. Retailer Magazine Luiza has blazed a trail on social criteria with its diversity programmes for black employees. Car hire firm Localiza won a best ESG award from research company Institutional Investor. And pulp and paper company Suzano last year became the first emerging market corporate borrower to issue debt that included a financial penalty for missing a carbon emissions target.

ESG leaders: cosmetics group Natura . . .
ESG leaders: cosmetics group Natura &Co . . . © Nelson Almeida/AFP via Getty
. . . and car hire firm Localiza
. . . and car hire firm Localiza © Reuters

Even so, the difficulty for investors wanting to screen companies on ESG criteria is that the Corporate Sustainability Index (ISE) offered by B3, Brazil’s sole exchange operator, includes some of these paragons but also takes in state-controlled oil company Petrobras and meat companies Marfrig and BRF.

B3 also runs a “Carbon Efficient” Index (ICO2) which includes Petrobras and the scandal-plagued meat company JBS. As the world’s largest meatpacker, JBS has been dubbed an “Amazon destroyer” by environmentalists for failing to ensure its supply chain is free from cattle raised on deforested land.

Ana Buchaim, B3’s director of sustainability, declines to comment on the inclusion of specific companies but says the ISE “is not an index of exclusion” and was designed to nudge Brazilian companies to improve their performance, rather than to shame them.

“We have a robust methodology,” she says. “But the index is not a certification, it is a benchmark. Big public companies want to show their commitment to ESG, they see it as a source of competitive advantage.”

Fama’s Alperowitch says: “It’s one thing to make ESG promises but quite another to deliver on them. I would love to see proper regulation.”

Still, with international investors stepping up their scrutiny of Brazil’s ESG record, and the threats of investor or consumer boycotts increasing, pressure on the country’s leading companies is growing. Their CEOs are hoping that Bolsonaro’s apparent conversion to the cause of protecting the Amazon proves to be lasting.

“Each country is a brand,” says FGV’s Vendramini. “You don’t just export your product, you also export the brand of your country. And if the government is acting against something in your brand, that’s a concern.”

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