How Brazil will step up its sustainable finance focus

The Brazilian government will advance with an ESG plan that is focused on promoting sustainable finance, a finance ministry official told BNamericas.

As part of these efforts, the government will issue sovereign sustainability-linked bonds abroad and advance with a carbon credit market regulation, among other initiatives.

"Our intention is to develop sustainable development mechanisms on issues related to climate change, income redistribution and the promotion of social inclusion," said Cristina Reis, who is deputy secretary for sustainable economic development at the finance ministry.

"Since the beginning of this administration, the finance minister [Fernando Haddad] has created the fiscal framework, the tax reform and the environmental framework as priorities for the economic plan, resuming the environmental agenda that had been lost in Brazil in recent years," said Reis.

In the second half, the government plans to issue its first sustainability-linked bonds on the international markets.

In addition, the administration has been following discussions in congress regarding the creation of a carbon credit market regulation, with the most advanced initiative being a bill presented by senator Leila Barros of the center-left PDT party, to implement a trading system for greenhouse gas emissions.

"Accompanied by the creation of a carbon credit market, we will likely see the development of sophisticated mechanisms to combat greenwashing since market regulation tends to bring strong punishment for such practices," said Reis, who declined to provide an estimate for when congress could approve the carbon credit market framework.

The plan that the government seeks to implement, in addition to attracting investments for the local green economy, could also help unlock negotiations for a free trade agreement between the Mercosur trade bloc and the EU, since European countries allege that one of the obstacles to further progress is uncertainty regarding environmental protection in Brazil and South America.

Mercosur is made up by Argentina, Brazil, Paraguay and Uruguay.