Brazilian companies and investors have gained new allies on the ESG (English acronym for the environmental, social and governance principles) agenda: the sectorial entities. From encouraging good practices to creating parameters, associations and confederations are beginning to move to help the market on this journey.
One of the most recent examples comes from Anbima (Brazilian Association of Financial and Capital Market Entities), which, in early December, defined criteria for identifying sustainable investments.
As of January 2022, funds that have sustainability as their objective will be able to apply for the IS (sustainable investment) suffix. For this, it is necessary that the portfolio is aligned with the established purpose, without any asset compromising it.
Self-regulation meets one of the main demands of the market on this agenda: standardization. Defining common parameters is a global challenge when it comes to ESG—one that affects investors and businesses alike.
Helping in the construction of these criteria also mobilized Abrasca (Brazilian Association of Publicly-Held Companies) and Amec (Association of Capital Market Investors). In November of this year, the entities started the ESG Forum, an initiative that brings together companies and investors in order to contribute to the convergence of standards.
According to Eduardo Lucano, CEO of Abrasca, there is an excess of indicators available for companies to disclose their sustainable initiatives.
It’s an alphabet soup. There is the GRI (Global Reporting Initiative), the TCFD (Task Force on Climate-Related Financial Disclosures), the CFD (Carbon Disclosure Project), among many other “frameworks”, as they are called.
“There is a company that produces 430 indicators”, says Lucano. “What we expect from the forum is, in the first place, to contribute to convergence, because one of ESG’s problems is the polyphony of standards”, he adds.
Abrasca brings together companies from all Brazilian economic sectors, and its members account for 85% of the market value of the Stock Exchange. According to the president, some companies have been dealing with sustainability for years, while others are just beginning.
“A role of the associations is to transmit this experience, all this know-how accumulated by the large [empresas], to make the ESG journey easier and cheaper for companies that are starting up,” he says.
Juliana Ramalho, ESG partner at Mattos Filho office, says that the socio-environmental agenda has reached the sectorial entities, but some are more engaged than others.
“ESG entered for real in associations linked to the financial market, because this is an investor’s agenda. But it is still not as evident in all of them. Like the companies, the associations are trying to understand what this journey is,” he says.
In her view, entities can work on the sustainability agenda in a broader way, as they bring together different companies.
“The capillarity that these associations have is the potential to make changes faster and on a broader spectrum than just each company [agir]. They play a big role in ESG,” he says.
Capillarity is also the word used by Davi Bomtempo, executive manager for the environment and sustainability of the CNI (National Confederation of Industry), when describing how the entity can promote environmental, social and governance principles.
According to him, CNI has worked to show the relevance of the topic in business, and the organization’s reach in the country is a facilitator.
“A challenge that we are overcoming is to show the importance of ESG at a strategic level for companies. It is the challenge of explaining that this agenda will be required in terms of competitiveness and insertion in global chains.”
The role of facilitator that the confederation plays is another point highlighted by Bomtempo.
The director cites two guides launched in 2020 to help companies raise funds for low-carbon projects and for adapting to climate change.
“We know that there are resources available internationally and that they can be used at the domestic level, but a large part of entrepreneurs and industrialists still do not have this knowledge”, he says.
“The capillarity that these associations have is the potential to make changes faster and on a broader spectrum than just each company [agir]. They play a big role in ESG,” he says.
Entities can be ESG inducers
In addition to facilitating the sustainable journey of business and creating parameters for the market, class entities can also promote good practices internally.
Juliana Ramalho, from the Mattos Filho office, recalls that companies need to comply with certain requirements to be part of an association. “Eventually, the entity can define that one of the criteria is to adopt ESG policies”, he comments.
This is what has been studied by Abralatas (Brazilian Association of Aluminum Can Manufacturers). According to President Cátilo Cândido, associations are transforming, adopting a greater political role, and it is normal for them to be inductors of good practices.
He cites the compliance criteria required by Abralatas. To join, a company must have a code of conduct, among other internal policies.
“Every company goes through a legal scrutiny to see if compliance matches what was approved by our board”, says Cândido.
According to him, this should also happen with the ESG criteria soon. “Want to be part of the association? You’ll need to have at least [a participação em] a sustainability index.”
At the moment, the entity is compiling the initiatives of each company to understand what would be the best design for a new entry policy.
“I think associations don’t need to create anything new. If we establish goals and minimum requirements for membership, we’ve already played a role,” he says.
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