ESG Investment, the UK’s new finance minister and what matters in the market

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ESG managers look ahead

After a fever with ESG business (understand the acronym here) observed in recent years – with low interest rates and high liquidity in the markets -, this type of investment is now experiencing a downturn.

Fund managers and other professionals in the field reject the idea of ​​a bubble and are concerned with a question with an eye on the long term: what characterizes an ESG investment?

Understand: the idea is to give transparency to businesses that are truly green and to move away from the concept known as greenwashing – when the company says it has social, environmental and governance concerns, but it’s all just blah blah blah without concrete actions.

In numbers: From 27,893 funds available in the country, only 23 (or 0.22%) received seals of sustainability or that at least integrate ESG principles.

• The survey is from Anbima (Brazilian Association of Financial and Capital Market Entities), which also analyzes another 40 funds.

Sustainable investment x ESG: one is not the same thing as the other. Sustainable are only those investments that come from self-sustainable activities – an example is the production of energy from clean sources, such as solar and wind.

• Investments with aspects of the social, environmental and corporate governance agenda can be presented as ESG. Of the 23 funds classified by Anbima, 18 carry the sustainability seal, and another 5 are on the ESG list.

Does it make a profit? For the world’s largest private asset manager, yes. BlackRock has been in this position since at least 2020 and manages five of the top 20 US sustainable funds.

More about financial markets:

• Cousin Rico, Spare Me!, Sincere Economist… Survey indicates that 255 of finance influencers have 94 million followers; see the most famous.

• The stock market rose almost 10% in the first week of the month, but one in four operations in the month involved shares in Vale or Petrobras. Understand in Marcos de Vasconcellos’ column why concentration is a danger for those who invest in stocks.

New minister after chaos

After a tax-cut plan that sent the pound sterling crashing, bond prices soaring and putting British pension funds up against the wall, Prime Minister Liz Truss replaced the UK finance minister.

Jeremy Hunt, the new incumbent, vowed to regain the country’s economic credibility, while the tax cut plan went to waste.

Liz Truss, however, is still under frying and her future in office has spawned a meme: who lasts longer, she as prime minister or the lifespan of a lettuce.

Understand the crisis: the former minister, Kwasi Kwarteng, had announced a corporate and personal tax cut plan that sent the market into a panic. Its cost would reach 45 billion pounds (R$ 266 billion).

• Tensions among investors were that the move would spur demand and put pressure on prices just as the Bank of England struggles to cool historic inflation.

The substitute: Hunt is a former health and foreign secretary who had supported Truss’ rival Rishi Sunak in the race to become leader of the Conservative Party.

• He is the fourth finance minister in four months in the UK.

Offensive against Pix’s ‘clean it up’

The BC (Central Bank) and financial institutions work to increase the efficiency of the special Pix return mechanism and thus make it difficult for criminals to move money from victims of scams and robberies.

Understand: With access to the victim’s bank account, offenders disperse the money in different accounts, complicating the blocking and recovery of funds. To make the practice more difficult, the BC will adopt two new barriers:

• Today, the victim of a scam notifies their bank, which uses Pix’s infrastructure to block the resource on the target account. The idea now is to freeze transactions for up to five subsequent accounts where that money was transferred.

• Another measure is the creation of “labels” to identify types of fraud, such as fraudulent misrepresentation and orange bills. Suspected CPFs and CNPJs would receive these markings in the database operated by the BC.

why it matters: the system that allows the bank to reverse amounts to the payer’s account in cases of fraud or operational failure only recovers 5% of resources.

As there is a complexity to make the new tool work, the novelty should take at least a year to reach all users.

Other changes they involve the end of mandatory night limits per transaction via Pix –considered not very effective– and a self-assessment questionnaire completed by the institutions.

Ticket prices must remain in the skies

The Brazilian air network is expected to grow in the next high season compared to December and January 2019, before the pandemic.

But Brazilian travelers should not see ticket prices drop, say industry representatives.

In numbers: for this summer, there will be at least 519 routes, against 443 in 2019, a high of 17%according to a survey by CCR Aeroportos.

• Airline prices have gone up 47.35% in the last 12 months, according to data from the IPCA-15 of September.

What explains? The main cause is the increase in QAV (aviation kerosene), which rose 64.3% between January and August this year in Brazil, according to estimates by Abear, an entity that brings together the companies.

• As tickets are often sold weeks or months in advance, airlines need to try to predict what the costs will be.

More on the airline industry:

Latam Airlines, the largest air transport group in Latin America, confirmed on Friday (14) that it will withdraw from the judicial reorganization process it is conducting in the US.

• The process began in 2020 and went through a turbulent process, such as when it almost paved the way for a proposal to buy Azul.
• “In the coming weeks, we expect to come out of Chapter 11 with $2.2 billion of liquidity and a debt reduction of around 35% compared to what we had when we started this process,” said Latam President Roberto Alvo in note.