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“This marks a start”: Investors hail engagement with Brazil over Amazon fires

Engagement with sovereign entity is a significant development

A group of leading institutional investors (see list below) has succeeded in persuading the Brazilian government to commit to putting a temporary halt to fires in the Amazon.

The Brazilian government announced overnight that it planned to ban setting fires in the Amazon for 120 days. A decree banning fires is set to be issued next week.

It follows a meeting with investors with the government and the Central Bank of Brazil yesterday. The bank is a member of the high-level Network for Greening the Financial System (NGFS) group, which last month published a conversation in sustainability with Deputy Governor Fernanda Nechio.

The commitment marks a significant success for investor engagement with sovereign entities and could prove a blueprint for further engagement with countries that fall short of environmental standards. 

Typically, engagement takes place between investors and corporate issuers.

“We are used to sustainability dialogues with the companies in which our funds hold stocks and bonds," said Elisabet Jamal Bergström, Head of Sustainability and Governance at SEB Investment Management. "We very much appreciated the opportunity to talk to the government and central bank about an issue that is very important to our customers and other stakeholders." 

Norway's Storebrand, which is leading and coordinating a public policy dialogue with Brazilian embassies around the world (see RI coverage) said that, so far, 34 investors representing over $4.6trn have joined its initiative. 

"It is only through collaboration between governments, companies and investors that we can achieve necessary changes. This marks a start," said Jan Erik Saugestad, CEO Storebrand Asset Management.

Storebrand said it raised five issues in the meeting.

1. Significant reduction in deforestation rates, i.e. showing credible efforts to comply with the commitment set down in Brazil’s Climate Law, article 19.

2. Enforcement of Brazil’s Forest Code.

3. 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.

4. Prevention of fires in or near forest areas, in order to avoid a repetition of fires like in 2019

5. Public access to data on deforestation, forest cover, tenure and traceability of commodity supply chains.

Saugestad added: "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".

See related RI story: We need to talk about Brazil: How are responsible investors reacting to Bolsonaro?

The investors who met the Brazilian government:

Storebrand Asset Management

BlueBay Asset Management

NN Investment Partners

Robeco

KLP

SEB Investment Management

AP2 Second Swedish National Pension Fund

Legal & General Investment Management

Nordea Asset Management 

Sumitomo Mitsui Trust Asset Management