Finance experts explained investors’ growing concern about sustainable practices in the business environment
Last June 17, Insper invited investment and ESG experts to discuss the growth of green bond offerings. Green bonds are debt securities that can only be used to fund investments deemed sustainable.
In the webinar “Ofertas de títulos Green, a experiência das empresas emissoras” (Green bond offerings, the experience of issuing companies), the guest speakers were João Pacífico, CEO of Brazilian securitization company Grupo Gaia; Marcelo Bacci, Executive Director of Finance and Investor Relations at pulp and paper manufacturer Suzano S.A.; and Marcelo Azevedo, Vice President of Finance and Strategy at beauty company Boticário Group. Besides them, the webinar mediator was Ricardo Humberto Rocha, professor at Insper and consultant at the Brazilian Financial and Capital Markets Association (ANBIMA), and Fábio Zenaro, director of Over-the-counter Products, Commodities, and New Businesses at financial market infrastructure company B3.
Zenaro opened the debate by citing the investment numbers listed on the Stock Exchange that point to an ever-increasing growth in market concern with businesses’ socio-environmental impact. “It is clearly a topic that is here to stay and tends to grow. Besides being something good for market uptake, it is also good for society. Companies are looking at not only the corporate benefit but also at the impact on society as a whole.”
One of the topics covered at the meeting was the popularization of the term ESG (Environmental, Social, and Governance) to refer to practices guided by social and environmental sustainability. Some companies practice what is called greenwashing. That is, they use the nomenclature only to attract investors, not transforming their practices for real.
For Pacífico, there is a lack of consistency among certain particular investment management firms that are seeking to enter ESG’s capital flow. “The amount of funds that became focused on ESG overnight is huge,” he said. “Although there is this ‘fad’ issue, I hope people start to appreciate what is actually being impacted. That is because an environmentally responsible operation has a cost, and they have to receive a premium to become perennial.”
Bacci cited Suzano’s commitment to reducing its carbon emissions as an example of sustainable action from which debt securities were issued to strengthen the company’s goals. “In these cases, you take the risk of paying the penalty if you don’t reach that goal. It only makes sense if the market gives you a premium at the start, and one thing that’s concerning is that those premiums are getting smaller and smaller,” he said.
The guests also discussed their views on the future of sustainable investing in Brazil and worldwide. For businesses, there is an increasing challenge to provide data and metrics that prove their sustainable commitment, at the risk of losing not only their investors but also the consumers of their products.
“From a five-year perspective, if you don’t make these commitments, there’s a risk of the company not performing and having financial losses because its consumers and investors no longer believe in its business model,” said Azevedo. He mentioned that the issuance of green bonds by the Boticário Group had served to reinforce the actions already taken by the company. “Ambitious, long-term goals attract investors who are committed to the company for a long period.”
Pacífico distinguished the reasons why sustainable investments are sought. Among them are constraint, consistency, and consciousness. In the first case, the investor is pressured by society; in the second, they already have a sustainable narrative, which would become inconsistent when investing in companies that are not. In the third, they actively seek socially and environmentally correct investment for understanding that this is essential to society.
“We hope more and more people will migrate from constraint to consistency, and more and more will shift from consistency to consciousness. Every day a consumer who is not conscious leaves the market, and a conscious consumer enters the market,” said Pacífico.
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