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Brazil's climate agenda and ESG evolution: Discussions at the Sustainable Investment Forum Added in 6/14/2023
Tatiana Assali, Director of Programs at NINT, emphasized that climate is the current topic, but it is only part of the challenge. "Climate is the issue that, due to urgency and global understanding that we need to address together, is gaining space in discussions," she commented. She believes that the sustainability agenda should not neglect social issues. "The cost of climate change is much higher for those at the bottom of the pyramid than for those at the top. We need the discussion to be much broader than just climate and for money to have courage."

David Ferguson Smith, Head of ESG and Impact at Aqua Capital, stated that one of Brazil's challenges is to showcase good solutions already implemented in Brazilian companies, despite regulatory limitations. "We have few registered carbon market projects in the agricultural sector, and they are mostly in China. In Brazil, we don't have any yet," he said. He also affirmed that companies that cannot currently obtain carbon credits need to work on mitigation, adaptation to climate change, and keep up with the market evolution in other countries. "Companies need to implement actions that create value for their own company. Within all investments, we find opportunities that reduce emissions and generate economic value for the company."

Ricardo Mastroti, Executive Director of CEBDS (Brazilian Business Council for Sustainable Development), highlighted the moment Brazil is going through, especially the announcement of Belém as the host city for COP30 in 2025. He believes that industry agendas should be considered as allies in decarbonization goals. "There is no solution that does not involve industries," he pondered. "Carbon markets are in the spotlight now. Brazil is on the verge of having regulations, and it is essential for meeting the goals the country has assumed. We have a very mature business sector that will fight for more aggressive targets in the COPs, and a government that is open to discussing the matter," he said.

Balancing impact and return in sustainable investments

The second session of the forum, moderated by Julio Queiroz, partner at Lefosse Advogados law firm, discussed the construction of a portfolio of sustainable and impactful investments in the long term. The discussion focused on ESG strategies, on how products and services are delivered and its impact, concern about the product or service being delivered, and how to balance it with the expected returns for investors.
Luciana Ribeiro, founder and CEO of EB Capital, pointed out another aspect that needs to be considered in this discussion: climate. She mentioned that the United States and Europe have been discussing the issue more emphatically as a business strategy for companies. "If we look at all the major global players in alternative investments today, we will see that they have a climate-focused unit that encompasses social issues from a climate perspective," she emphasized.

Anibal Wadih, Executive Partner at GEF Capital, also highlighted the Brazilian reality and the need to include climate discussions in companies' agendas while paying attention to social demands. "In Brazil, it is impossible to invest in climate without it being related to the social aspect," he said.

Daniel Izzo, Co-founder and CEO of Vox Capital, emphasized the importance of quality management. "The trade-off for impact is smaller than not caring about it, especially in a society that increasingly demands positions on consumption, investment, work, and company purposes," he reflected.

José Luis Pano, Head of Impact and Return at Vinci Partners, stressed the need to find a balance between the impact of actions and financial returns. "There are investors who enter and even talk about impact, but they come for the returns, they like to know what the impacts were, but they want to know how much they earned," he emphasized.

How European and US examples can help regulate the climate agenda in Brazil

The speakers in the third panel discussed the advances of European legislation regarding the climate agenda. The moderator, Lina Garcia, leading partner of Environmental Law at Mattos Filho Advogados law firm, opened the conversation by recalling that the pioneering efforts on the continent were driven by civil society, particularly NGOs that acted in a very activist manner. "Today, European directives affect all members of a supplier chain of a company headquartered on the continent," she said.

Cristina Penteado, Executive Director of Blue Orange Capital, mentioned that the European reality has brought benefits in terms of standardizing metrics and harmonizing indicators to assess investments and impacts. "The regulation is not meant to measure the impact but to create a level of adherence and compliance with goals to establish discipline. If there is no regulation, the narrative remains shallow," she explained.

Ana Luci Grizzi, Partner of Sustainability and ESG at EY, spoke about the evolution of impact measurement methodologies with the development of indicators such as EROE (Environmental Return Over Equity) and SROE (Social Return Over Equity). "There is a great revolution in integrating the sustainability agenda into companies' strategic definitions, and asset managers have a significant role to play in driving compliance," she said.

Another topic discussed in the panel was climate litigation. "Climate litigation is here to stay and will intensify. With this movement, stakeholders, including shareholders, start exploring paths that were not obvious," said Natalie Sequerra, partner at Graça Couto Advogados. The lawyer mentioned international data that indicate slightly over 50 climate-related lawsuits in Brazil and about 2,000 worldwide, with 25% of them filed in the last two years.

The evolution of the entrepreneurship ecosystem to address social and environmental issues

The maturation of the entrepreneurship ecosystem in Brazil and its contribution to solving social and environmental problems was the topic of the fourth session of the Sustainable Investment Forum. Andrea Minardi, professor at Insper and panel moderator, highlighted the profile of Brazilian entrepreneurs: generally humble individuals without a college education. "The ability to be an entrepreneur is independent of social class, origin, or race, but opportunities are not equal. The most successful classes have a superior network of contacts," she pointed out.

This network of contacts is one of the aspects offered when a startup joins, for example, Cubo Itaú. Marcella Falcão, Head of Investors at Cubo, emphasized the importance of diversity and representation in companies. "We have 121 companies at Cubo Itaú with women among the founders, and 41 with black founders on the team. What we have, as a differential, is curation, and we seek companies that have traction and big dreams," she commented.

Helene Meurisse, Director of Operations at the International Finance Corporation (IFC), emphasized that one of the many barriers faced by entrepreneurs is access to financial capital, but not only that. "IFC helps financial institutions extend their financing capabilities to micro, small, and medium-sized enterprises with a focus on gender and racial aspects. The needs of entrepreneurs are diverse and include access to technical and social capital," she highlighted.

One of the bottlenecks in the search for capital is also the disparity between the South-Southeast axis and the rest of Brazil, according to José Mattos, Director of the Brazilian office of the Aspen Network of Development Entrepreneurs (ANDE). He believes that the world looks at the Amazon, which will host COP30 in 2025, but there is still no data proving interest in Amazonian products. "What we are trying to do is calibrate our focus on each region because we have several markets within the Brazilian market. How can I, for example, support a small cosmetics industry in the Amazon in terms of equity?" Mattos questioned.

At Climate Ventures, projects such as "Amazônia em Casa" and "Floresta em Pé" seek to foster a new economy in the region while preserving the biome. Daniel Contrucci, Co-founder and CEO of the platform, stated that the focus is on supporting startup accelerators and local entrepreneurship. "We focus on business models that help solve local challenges and promote businesses that can also be interesting to the market," he said. He also emphasized the need to try to build more suitable financial instruments for businesses that deliver climate justice combined with entrepreneurship, especially in regions affected by climate change.

The challenges of Net Zero and how companies can help

The Net Zero Ambition, launched by the United Nations (UN) in 2022, aims to achieve carbon neutrality by 2050. Concrete actions to reach this goal depend on the entire society, including the private sector. This was the theme of the fifth session of the forum, moderated by Helena Brandão, Investment Coordinator at ApexBrasil.

Electricity generation, one of the most strategic aspects for Net Zero, has been advancing globally with efforts to achieve an increasingly cleaner energy matrix. According to Vitor Mascarenhas, Head of CVC at EDP Ventures, leading the area in a global company is a challenge because each country has its own reality in the energy paradigm. "What we want is to invest in companies that have scalable technologies. Our big challenge is to invest in companies that have an international approach from the start," he said.

Arthur Faria, CEO of Oxygea Ventures, a subsidiary of Braskem, stated that often the public commitments made by corporations do not have a clear path to follow. "The industry must actively participate in the discussion. The numbers and scientific knowledge of the industry make a difference," he commented.

Mariana Sang, from the Sustainable and Impact Investments area at BTG Pactual, pointed out that there are sectors facing difficulties in decarbonizing and achieving Net Zero. The bank's involvement in this area occurs through funds, sustainable finance, and carbon credit development. "We don't have an exclusion list because we believe that all sectors need this transformation to reach Net Zero. We need to establish goals so that we can finance and the company can transition," she affirmed.

The forestry sector is also making progress in actions that contribute to reducing carbon emissions into the atmosphere, including investing in other companies. "The forestry sector is also a sea of opportunity to have initiatives that reduce costs, inputs, and increase productivity," commented Alvaro Gomez Rodriguez, Business Development Manager in the Venture area at Suzano. The company currently plants about 1 million tree seedlings per day. According to him, the company looks globally at startups and is developing acceleration programs to turn ideas into reality.

The difficulty in accessing specialized sustainable funds

The sixth session of the Sustainable Investment Forum, moderated by Renato Ramalho, CEO of KPTL, discussed the difficulties and pathways to accessing sustainable investment funds. Mosi Mosquera, Director of Investments at BID LAB, the innovation laboratory of the Inter-American Development Bank, emphasized that there is capital available. "We look at very specific issues such as gender diversity and areas like climate and healthcare. We look at the team and say, 'bring the strategy and connections to the table, and let's try'," she commented.

Guilherme Meira, Director of Investments at PROPARCO, believes that Brazil positions itself well in the global context, and they operate in less liquid and less developed markets, such as African countries. He believes that his goal, when investing in a new business, is not to maintain exclusivity but to mobilize the sector and ultimately allocate as little capital as possible. Meira also suggested looking at the long term when carrying out these operations. "I can't react to quarterly results of companies when I have a ten-year horizon. We expect to build a portfolio for the long term, and the expectation of development banks is to be relevant investors for decades."

Murilo Marins, Vice President of the Private Sector at CAF (Andean Development Corporation), also believes that Brazil stands out compared to other emerging markets in attracting investments. "We look at all segments, and a central issue is the importance of resources for the company. Our money has to make a difference," he questioned.

The panelists also raised other important points for fundraising, such as fund regulations, anti-corruption practices, adjusted valuation, and investment history. "We need partners with technical capacity, with a track record. It is important to seek diversification and not have repeated funds every year from the same firms," Marins emphasized.

Success stories: Innovation with a focus on the environment and sustainability

The closing session of the forum presented successful business cases that bet on products and services focused on the environment and sustainability. With Carlos Miranda, CEO of X8 Investimentos as the moderator, five entrepreneurs shared their stories and highlighted the importance of venture capital funds in scaling their businesses.

Ages Bioactive Compound - The company develops new bioactive compounds focusing on longevity using Amazonian plants. Caio Agmont, CEO of Ages, highlighted that aging is one of the major themes in modern society. "We need to look closely at prevention, conduct research, publish, work with the medical community, bring solutions to the market with the support of investors. Brazil has a unique opportunity to become a global player in bioactive compounds and export them. These are highly functional metabolic products," Agmont commented, emphasizing the need to give voice to Brazilian researchers and open up avenues for research, including outside the country.

Nanovetores - The company specializes in nanotechnology for cosmetics and is chaired by Betina Zanetti. "I have one culture; the investor has another. Alignment is important. When we think about strategic investors, it's about whether I can continue with my dreams. It's always necessary to align because we want to grow, but if companies get the timing right, they can rapidly expand globally," Zanetti emphasized.

Órigo Energia - Órigo is a pioneer in selling solar energy credits to retailers. The company operates in the Northeast, Southeast, and Midwest regions of Brazil and aims to expand its business nationwide. According to Carolina Sierra de Oliveira – Brand, Communication, and ESG Director –, the goal is to popularize the use of solar energy. "Our dream is to also offer other products related to conscious energy consumption, sustainable impact, and social and environmental responsibility to a broad customer base."

Future Co. - Based in Argentina, the platform works with technologies that can help communities in extreme poverty. Their products include software that helps microbusinesses self-manage and activities focused on entrepreneurship. "We want to address the problem of rural poverty," said Jorge Aguardo, CEO of Future Co. "Profitability comes from selling the service mainly to governments and companies that want to work for the communities where they operate. We want investors who understand the company's purpose. It's a long-term project."

Eureciclo - The company specializes in solid waste recycling, providing certification and subsequently trading credits. Marcelo Falanga Lopes, CFO and COO of Eureciclo, highlighted that in Brazil, the recycling market is regulated, and companies need to demonstrate reverse logistics for 22% of the packaging they place on the market. "We track solid waste and use a certified methodology where a certain weight and product type sell recycling credits to consumer goods companies to demonstrate compliance with legislation," he explained.


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