Green Financing and Data Charges to Highlight ESG Environmental Agenda in 2024

The expectation is that the agenda will be guided mainly by the sanctioning of the International Financial Reporting Standards (IFRS) by CVM and the highlighted discussions from COP.

After Brazil became the first country in the world to officially adopt global ESG (Environmental, Social, and Governance) data reporting standards, the strengthening of financial and numerical information on the sustainability agenda is expected to be one of the major highlights in 2024.

Experts interviewed by Estadão point out that this is a natural trend, following the Securities and Exchange Commission (CVM) issuing a resolution endorsing the International Financial Reporting Standards (IFRS) in October of this year. “The standards have put Brazil in the world’s spotlight,” says Ricardo Assumpção, Sales Director for EY Latin America.

The standards, globally launched in June of this year, establish standards for reporting financial information related to sustainability for companies and investment funds, obliging publicly traded companies listed on B3 to publish a special report with sustainability-related financial information from 2026 onwards. The measure is part of the ecological transformation plan, as officially called by the government.

Although the standards will not take effect next year, it is expected that large companies in relevant economic sectors will start moving to comply with IFRS in 2024, impacting small and medium-sized enterprises as well. According to Hugo Bethlem, President of the Board of the Conscious Capitalism Institute Brazil, these smaller enterprises often follow the actions of the market leaders.

Additionally, this is a way to meet the demand from investors, who have been requesting more comparable ESG agenda data for years, allowing it to become a guide for corporate decisions. “With this launch, you can no longer choose the report you want to use; you will have to comply with this and integrate your integrated report with the financial statement,” says Bethlem.

The executive also points out that issues extensively worked on by the Lula government this year, such as the production of green hydrogen, investments to create structures for the development of these technologies, and biofuels, are expected to continue to be prominent.

Post COP-28, Maria Emília points out that a topic that gained prominence was companies revisiting their sustainable plans, especially those related to energy transition. For her, in 2024, this should be a growing agenda to bring tangibility to the actions.

“When these plans were made, there was a lot of focus on electrification. It has potential and will account for a large part, but when it comes to trucks and heavy industry, it won’t be a tangible reality. This challenge is very pertinent to accelerate companies’ plans.”

For her, other highlighted topics in 2024 will include the use of artificial intelligence to accelerate hypothesis creation within companies and the growing prominence of Saudi Arabia on the international agenda. She explains that the country has a large amount of internal resources that, combined with their influence on the world economy, can lead the country to become a leader in the bioeconomy.

“Today they have this dependence on oil and need to diversify the economy, but they also have a potential for natural resources that can be leveraged for renewable energy, especially solar. They have been developing technologies; they showed that at COP and are likely to advance even more,” she explains.

Sustainability

According to EY’s Latin America specialist, Ricardo Assumpção, while the concern for green financing is a possible highlight for 2024, the expert believes that there will be a decreasing trend in investments exclusively focused on sustainability.

The executive explains that the global demand for the bioeconomy agenda, combined with actions by the private industry and the federal government, will increasingly integrate into business strategy as something essential, not a separate matter.

“The decrease in sustainability investments will lose individual strength but will gain integrated strength in any practice a company performs. An integrated climate change agenda within other agendas. In 2024, we won’t have ESG and business strategies. We’ll have sustainable business strategies,” explains Assumpção.

For him, proof of this is that previously, climate adaptation investments and costs were massively made by the government, something that has changed drastically in recent years, becoming a concern for businesses. Assumpção sees that currently, the Brazilian business community is focused on investing in regulation, something that is problematic for him and should be reviewed next year.

“Today, capital is focused on regulation. This attention will cause a bit of distraction from what should be the focus. We are focused on compliance and not on promoting change now. I see this ringing very loudly in the corporate world in the coming years.”

Another highlight should be the carbon market, especially after it was approved in the Chamber of Deputies in late December. Biofílica Ambipar’s CEO, Plínio Ribeiro, believes that in 2024, carbon accounting at the corporate level should be strengthened.

For her, currently, the theme is still focused on end-of-chain solutions, where efforts are made to solve the problem of waste after it has already been generated, such as recycling. However, the most effective solutions from an economic and environmental perspective are those that prevent waste and pollution from being generated and that contribute to regenerating nature.

Cleber Genero, Vice President of SMEs at Serasa Experian, states that the ESG agenda is already a concern for medium and small business owners and that this should strengthen more and more, both with the government’s incentives to boost this agenda in companies of all sizes and with the supply chain.

“Large companies have been demanding that their suppliers demonstrate good practices in social and environmental areas,” explains Genero, highlighting that this action by major market players drives the entire production chain to adopt ESG within their companies.

However, government engagement is not unanimous. According to Carlos Portugal Gouvêa, former director of the Securities and Exchange Commission (CVM) and partner at Bocater Advogados, Brazil has great potential to lead the bioeconomy due to its clean energy matrix and the quantity of natural resources. He emphasizes that for this to become a reality, there is still a long journey to be traveled.

“Some of the discourse that Brazil will be a green power has no practical basis. Before becoming a leader, we are still in the process of catching up, of years and years when the Brazilian government and companies did not participate intensively in this process and did not engage in discussions in more developed countries,” he says.

“We have state-owned companies that have done nothing for energy transition in recent years. Now it is necessary to invest without reservations, without doubts. We need to look at the balance sheet and see that more than half of the revenue comes from clean energy. Show results, numbers, and not just intentions. Currently, things are being said but not done.”

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