Investor Engagement in Brazil Shows Encouraging Initial Results on Deforestation
Following the publication last month of an open letter to Brazilian authorities demanding an end to deforestation, a group of investors, led by Storebrand Asset Management, has met with members of the Brazilian government and the President of the Central Bank of Brazil to discuss the issue.
In June 2020, 30 investor signatories, including investment management firms from 9 countries, published the letter to state their concerns that recent legislative trends in Brazil would lead to an increase in the rate of deforestation in the country.
The letter made clear that as financial institutions who must operate in the fiduciary interests of their clients, the environmental trends evolving in Brazil were creating uncertainty regarding investment conditions in the country.
The investor group met with Brazilian Vice President Hamilton Mourão, Minister of Foreign Affairs Ernesto Araújo, Minister of Agriculture Tereza Cristina, Minister of Environment Ricardo Salles, and the President of the Central Bank, Roberto Campos Neto.
In the meeting, the group raised five issues that it said would impact the assessment of developments going forward:
- Significant reduction in deforestation rates, i.e. showing credible efforts to comply with the commitment set down in Brazil’s Climate Law, article 19.
- Enforcement of Brazil’s Forest Code.
- The ability of Brazil’s agencies tasked with enforcing environmental and human rights legislation to carry out their mandates effectively, and any legislative developments that may impact forest protection.
- Prevention of fires in or near forest areas, in order to avoid a repetition of fires like in 2019
- Public access to data on deforestation, forest cover, tenure and traceability of commodity supply chains.
Following the meeting, the group said that it will continue to monitor these developments in the country, in order to assess the financial risks arising from deforestation.
Commenting on the meeting, Jan Erik Saugestad, CEO Storebrand Asset Management, said:
“We are encouraged by the initial response and dialogue with the Brazilian government representatives and look forward to its continuation and results on the ground. It is only through collaboration between governments, companies and investors that we can achieve necessary changes. This marks a start.
“We are convinced that sustainability and economic development goes hand in hand. As financial institutions, we see deforestation and the associated impacts on biodiversity and climate change as systemic risks, that have the potential to negatively impact returns. Achieving a regulatory framework that is consistent, long-term and protects the forest is therefore in the best of interests of both companies and investors.”
The investor group meeting with the Brazilian representatives included Storebrand Asset Management, BlueBay Asset Management, NN Investment Partners, Robeco, KLP, SEB Investment Management, AP2 Second Swedish National Pension Fund, Legal and General Investment Management, Nordea Asset Management and Sumitomo Mitsui Trust Asset Management.