A handbook for green investing

By MURILO PORTUGAL E MARINA GROSSI

“Brazil has an advantage in efforts to reduce gas emissions and has exceptional conditions to take advantage of opportunities”

The United States, the European Union, China, Brazil and India were quick to ratify the Paris Agreement, by which 195 countries committed themselves, in December 2015, to the goal of keeping the average temperature increase on the planet below 2º W.

The accession of countries responsible for more than 55% of global emissions will make the agreement enter into force in November, four years ahead of schedule.

Brazil, an active protagonist in discussions on the climate, has an advantage in efforts to reduce the emission of gases that cause the greenhouse effect and has exceptional conditions to take advantage of the opportunities created by this initiative.

The agreement indicated the urgency of funding for actions aimed at the goal of reducing gas emissions – in Brazil, in 43% by 2030, based on 2005 emissions. is one of the best moments to boost, in the country, the issuance of so-called green bonds, the green bonds.

You green bonds are fixed income securities issued by financial institutions and companies to finance, or refinance, projects and the purchase of assets capable of bringing benefits to the environment or contributing to mitigating climate change.

In 2015, US$ 42.2 billion in green bonds were issued worldwide, according to the Climate Bonds Initiative organization, which predicts US$ 100 billion in 2016.

These bonds are important market alternatives for long-term financing of initiatives with a positive socio-environmental effect.

They can compose the portfolio of a new type of investment vehicle that is becoming popular around the world, sustainable funds, with priority, in their statutes, for environmental issues. They also attract investors with specific mandates to buy green bonds, authorized to hold the paper in their portfolio for the long term.

A growing and socially valued market can open up to Brazil with the classification, as “green bonds”, of already regulated financial instruments, such as shares of investment funds in credit rights, debentures, financial bills and promissory notes.

This Friday (21), in São Paulo, Febraban (Brazilian Federation of Banks) and the CEBDS (Brazilian Business Council for Sustainable Development) will launch the “Guide for Issuing Green Bonds in Brazil”, to support this market.

The classification of a fixed income security as green bond Its issuance is linked to environmental and climate sustainability criteria, in addition to supervision by a specialized organization.

These securities guarantee investors better monitoring of the application of funds; for issuers, they are a market differentiator, a seal of recognition of the explicit commitment to good socio-environmental practices.

In 2015, bonds for undertakings committed to the climate cause raised US$ 694 billion, US$ 2.4 billion issued by Brazilian groups and only a portion classified as green bonds – which shows great potential for green bonds.

With a mature financial market and great demand for financing in low-carbon agriculture, forestry, pulp and paper, renewable energy, clean transport and other infrastructure projects, Brazil has a favorable scenario for green investment. Febraban and the CEBDS encourage this change.

MARINA GROSSI is president of Brazilian Business Council for Sustainable Development (CEBDS)

MURILO PORTUGAL President of the Brazilian Federation of Banks (Febraban). He was Deputy Director General of the International Monetary Fund (2006-2011) and Executive Secretary of the Ministry of Finance (Lula government)

Article originally published in the newspaper Folha de S. Paulo (19/10).

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