Green and Sustainable Finance (FiBraS)
Title: Green Finance Market Regulation and Green Bonds
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Lead executing agency: Ministério da Economia (Ministry of the Economy)
Overall term: 2018 to 2022
Brazil needs substantial funds to invest in the environment and climate action in order to achieve national and international climate and development goals more quickly. This involves both public infrastructure and the private sector. The financial sector has an essential role to play in mobilising the required capital and hedging against environmental and social risks. Green finance instruments, such as green bonds or green loans, can steer large amounts of private capital into climate-friendly and environmentally friendly investments. With these types of investments, investors commit companies to climate-related projects, including expanding the use of renewable energy, measures to boost energy efficiency and adaptations to climate change. Private capital is very important in Brazil, particularly in light of the country’s precarious budget situation. An efficient combination of private and public engagement is key to a low-carbon and ecologically sustainable economy in Brazil.
The framework conditions for green investment are still inadequate in Brazil and a market that works well enough for green finance instruments does not yet exist. Tools for evaluating environmental and social risks are not yet widespread. Transparency requirements and obligations to disclose the social and environmental impacts of investments apply to only part of the financial market.
The framework conditions for developing green finance markets have improved.
Together with the Brazilian Ministry of the Economy, the project intends to move green finance higher up the political agenda. It aims to increase the significance of this issue in Brazil. For example, the project supports the further development of legal provisions and exchange between public and private actors. Among other activities, panel discussions and network meetings are planned for this purpose. The project can also help Brazil to introduce novel approaches at international level, for example in the context of the G20. The aim of the cooperation is to raise awareness of the unintended negative social consequences of changes to incentives and sanctions in connection with environmental investments. The goal is for this topic to gain in significance to facilitate equitable change.
The project analyses and further develops regulations on the management and transparency of environmental and social risks in financial markets. It therefore works with the Central Bank of Brazil. The project supports the exchange between regulatory authorities so that uniform standards are developed in the financial sector.The range of green finance services available in the market is being expanded. The aim is to make innovative approaches market ready by providing technical advice and support. Depending on the recipient, feasibility studies, certifications, instruments for risk assessment and advice on product development or legal issues are in the pipeline. Strategies that can serve as models and offer the prospect of profitability are taken into account to this end. Applicants must be willing to share the knowledge they acquire.
Scaled-up green investment will have positive climate and environmental impacts. It contributes to, among other things, reducing greenhouse gas emissions more quickly, using resources more efficiently and designing infrastructure measures more effectively.