Brazil Green Finance Initiative (BGFI): First meeting of the year: What's in store for 2020?

On the BGFI 2020 agenda: Pricing sovereign and corporate risk, international market trends in green finance and release of the new Agriculture Criteria.

 

São Paulo sets the scene 

International investors and executive members of the Brazil Green Finance Initiative (BGFI) representing over USD 73,92 billion in assets under management gathered last week at Zurich Brasil headquarters in So Paulo to discuss international market trends, regulation for insurance companies, investment allocation in Brazil and the Brazilian Susstainable Agriculture pipeline.

One of the highlights of the meeting was brought by our special guests, Mr. Knut Kjaer and Mr. Ulf Erlandsson. Mr. Kjaer is the former CEO of Norges Bank Investment Management, and currently the chairman of FSN Capital, and provided the group with investor strategies for reducing carbon intensity in portfolios through bond markets. Ulf Erlandsson the CIO of Diem Green Credit followed with a discussion on mitigating financial risks and the linkage with government bonds.

It is clear that climate change is going to be one of the main market drivers in the next decade, with green bonds acting as a key insurance policy. Countries and corporates that position themselves at the forefront of low carbon investment, will therefore be at an advantage for long term economic resilience.

During the meeting, our guests were also given an update of recent regulatory changes regarding the investment allocations for the insurance sector (CMN 4.444) as well as the latest international green bond market developments, following a record year of issuance in 2019.

We also heard from Guilherme Scheffer, Finance Director, Grupo Scheffer on their company wide strategy to increase sustainability practices across their operations and potential areas of investment for green bonds.

 

Agriculture Sub-Committee 

On the 2nd day, members of the Agriculture Subcommittee met at Mattos Filho Advogados to discuss the latest developments in the sector. This included an overview of activities under the recently signed MoU between CBI and the Ministry of Agriculture, and a first-hand presentation of the Climate Bonds Standards Agriculture Criteria, currently under public consultation until 31st March. It is expected that the publication of the Criteria, in the second half of 2020, will encourage green bond issuances for agriculture production and livestock.

 During the meeting, members of the Subcommittee also shared their expectations for the year ahead, including raising market awareness amongst different stakeholders (issuers, structures and intermediaries) about green bonds and sustainable investment opportunities. This is connected to the development of the Sustainable Agriculture Investment Roadmap by the Subcommittee, that should be launched in the Spring, presenting a pipeline for investors.

 

Who’s saying what?

 

John Liu, Investment Executive Director, Zurich Brasil

“With the recent climate change events, we are seeing statements from great asset managers concerned about responsible investments as well as a greater focus on sustainability at the last World Economic Forum in Davos. With that being said, in 2020 we will continue to put effort into promoting the benefits of working with green investments."

 

Fabio Coelho, President, AMEC

"Most of the institutional investors in Brazil are still unaware of the impacts of climate change over global finance. That's the truth. Education on the green financing tools available today and positive outcomes that it can bring to the market is more urgent than ever. The Brazil Green Finance Initiative is on the right path to do so."

 

Guilherme Scheffer, Finance Director, Grupo Scheffer

"The greatest difficulty today for the Brazilian producers who want to be green is to combine the sustainable tools that already exist. We believe that investors still need to be educated on the subject to have more issuances in the sector. We at Grupo Scheffer consider the green bond issuance as a possibility, not only to enhance our reputation but also to deliver a better quality product."

 

Knut N. Kjaer, Chairman of FSN Capital & Executive Chairman of Sector Asset Management

 “Green bonds are an important tool, as they have direct capacity for financing carbon reduction projects. It is also a way to really start integrating, in a fast and practical way, climate topics into an investment organization. The fixed income market is central in providing what we see as too cheap capital to the fossil sectors.  Understanding that and changing will be a key driver of investment performance as well as positive climate impact.”

 

Ulf Erlandsson Ph.D., CIO, Diem Green Credit

“LatAm and Brazil are among the strongest green bond markets. We believe that a solid governance on the structure will attract more investors to the market in the region."

 

Justine Leigh-Bell, Deputy CEO Climate Bonds Initiative

“Given that Brazil continues to lead on issuance for green, despite other players in the region, we would love to see more, particularly from Agribusiness. We continue to believe that the Brazilian private sector and industries have enormous potential."

"The BGFI is a resource for the market, particularly a supporting network for the investor community and we will continue to strengthen it by connecting investors and issuers in the country across key industries particualry in the Agriculture, Infrastructure and Energy sectors."

 

The Last Word

Last year was strong for Latin America. From Chile's Sovereign green bonds to the first issuance from the Caribbean, LAC reached USD15.6bn in total cumulative green bond issuance as at 31st December 2019. 

We want more. Could we reach USD20bn by end 2020?

Stay tuned.

 

'Till next time

Climate Bonds