SESG and the Capital Markets

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Observers in Brazil are paying close attention to the approaches the country is taking to address SESG – Sustainability and Environmental, Social and Governance – issues, the broad term for factors used to evaluate a business’ collective conscientiousness about social and environmental factors. SESG factors embrace climate impacts as well as concerns around diversity, inclusion, communities (and other social issues) and governance.

Brazil faces enormous challenges in seeking to address SESG and move toward a more carbon-neutral future.  For instance, in the environmental area, one great challenge concerns the reduction of carbon emissions.  Brazil is one of top ten carbon emitters on the planet.

SESG’s social factor

Social issues are no less challenging. SESG’s “social” factor is relevant to diversity and inclusion policies in companies, but it can also relate to monitoring the supply chain and social actions with companies’ local communities – in particular, economic inequality.  According to a 2020 report by Oxfam, Brazil was the seventh most unequal country in the world – a situation that worsened during the pandemic.  According to the Brazilian Institute of Geography and Statistics (IBGE), last year, 10.3 million Brazilians were experiencing serious food insecurity.

Brazil is seeking to use the capital markets, which can play an important role in enhancing companies’ SESG actions, as one pathway to address these concerns.

SESG funds and the PRI criteria

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