RIO DE JANEIRO, BRAZIL – Managers of large Brazilian fortunes are expanding the supply of funds focused on sustainability. Driven by the increased demand in the global market for investments in “green causes”, asset managers are migrating their business portfolios and structuring new products guided by environmental, social, and governance (ESG) criteria.
With some R$30 billion (US$6 billion) under green fund management, Brazil is still crawling compared to the global market, which manages almost US$1 trillion in sustainable funds.
With resources in the hands of only three exclusively green managers in Brazil (Fama, JGP, and Constellation, all of which are small or medium-sized), large financial institutions have begun to structure themselves, mainly through partnerships, to manage resource funds associated with environmental projects. Among the large institutions are BTG Pactual and XP.
The brokerage house founded by Guilherme Benchimol is launching “a fund of funds” of R$100 million to encourage local managers to administer resources in companies and green debt securities. “We want to act as a development bank to promote the management market that follows ESG criteria”, says Gustavo Pires, a partner in XP.
More managers and financial institutions are expected to enlarge this trend, as early as in the coming months, as discussions on socio-environmental practices grow stronger in Brazil, managers and banks say.
Last week, Santander stated that its asset management team is launching an ESG fund, in partnership with Dutch investment house Robeco, known for being an activist in social and environmental projects. The fund, one of the institutions that called for specific government actions on deforestation in the Amazon, removed mining company Vale from its portfolio.
Pioneer
With R$2.5 billion under management, Fama is the only investment house that was fully built with sustainable projects. Founded in 1993, it invests in approximately 15 companies listed on the B3, the São Paulo Stock Exchange. “All the companies targeted for investment pursue social and environmental goals,” says Fabio Alperowitch, one of the founders.
“The onset of the environmental debate is important and I’m glad it’s happening. I’ve waited 30 years for it. I also see that managers and companies still deal with the subject superficially”, says Alperowitch. Companies like Vale and Petrobrás are out of the manager’s investment portfolio.
At JGP, which was founded by former BTG Pactual partners André Jakurski and current Economy Minister Paulo Guedes in the late 1990s, the transition to green funds began at the start of last year, after Vale’s environmental tragedy in Brumadinho (Minas Gerais). The manager, who was well positioned in the Brazilian mining company, was requested by a client – the SKP family office, which manages the fortunes of German families – to migrate its investments to the ESG criteria.
With over R$20 billion in assets under management, JGP announced in April its total migration to ESG criteria and launched a fund fully dedicated to green projects in June.
But unlike Fama, which does not invest in companies like Vale and Petrobrás, JGP keeps these companies in its portfolio because it believes that shareholders have more power to demand positions from their principals. “This is our role as company shareholders. We have to trigger the trend and demand,” says Márcio Correia, partner in charge of the management’s variable income area.
At Constellation, which has among its investors billionaire Jorge Paulo Lemann (owner of AmBev and Kraft Heinz), the shareholder’s power can also influence the decisions of companies receiving the investment. With R$14 billion in assets, the investment house is on the B3 board of directors, says partner Florian Bartunek.
“The companies already do more than we think. When we started to engage for ESG criteria, we were surprised”, says the manager. According to him, another concern of the market in investing in funds with these criteria is the investment performance. “Many think funds with these ESG criteria perform poorer, but that’s not the case,” Bartunek says. “The largest companies listed on the Exchange observe socio-environmental and governance criteria. Natura is a reference in sustainability in Brazil, but many Brazilian companies are following in its footsteps.”
Source: O Estado de S. Paulo