ANBIMA's Sustainability Network: Advancing ESG Leadership in Capital Markets

In a move to enhance Brazil’s role in global sustainability, ANBIMA has launched the Sustainability Network, a collaborative platform dedicated to advancing the Environmental, Social, and Governance (ESG) agenda within the nation’s capital markets. This initiative is designed to bring together a diverse group of stakeholders, including professionals from the financial sector, sustainability experts, academics, and civil society representatives.

The Sustainability Network serves as a forum for discussing global ESG trends and developing practical tools to support the adoption of sustainable finance practices. This initiative reflects ANBIMA's commitment to working with its members and the broader Brazilian society to embed sustainability into the capital markets. The importance of this agenda was underscored by feedback from ANBIMA’s members during the strategic planning process for the 2023-2024 period.

Brazil’s capital markets are positioned to play a crucial role in transitioning to a more sustainable and equitable economic model. The country has significant potential to contribute to global sustainability through initiatives such as forest conservation and nature-based solutions. The Network aims to channel financial resources effectively to support this transition, ensuring inclusive economic development.

Key Focus Areas Aligned with Global Sustainability Goals

The Sustainability Network’s activities are organized around four key thematic areas, each aligned with the United Nations Sustainable Development Goals (SDGs). These areas provide a framework for the Network’s work, which includes monitoring trends, creating educational resources, and developing practical tools for managing and implementing ESG practices. Each thematic area is guided by a leadership team comprising an ANBIMA board member and a leading ESG expert, ensuring a balance between strategic direction and subject matter expertise.

Focus Areas and Leadership Teams:

Climate Change and Biodiversity: This area focuses on strategies for decarbonization and conservation, led by key figures from ANBIMA and the ESG community.

Human Rights and Social Equity: Addressing the social dimension of sustainability, this area works on initiatives to promote diversity, inclusion, and social investment.

Financial Mechanisms and Instruments: This focus area explores innovative financial tools and strategies to support sustainable finance, guided by experts in the field.

Governance and Leadership: This area is dedicated to enhancing governance practices within the capital markets, promoting leadership in ESG initiatives.

Early Initiatives and Participation

The launch of the Sustainability Network brought together a wide array of experts from both the sustainability and financial sectors. Initial working groups have been established to identify key challenges and opportunities within their respective focus areas, with ongoing efforts to refine and expand these initiatives.

The Network is open to participation from market professionals, organizations interested in ESG, and individuals committed to sustainability.

Sustainability Network Action Platform

The Sustainability Network will drive its mission through several key initiatives:

Mobilization and Collaboration: Elevating the ESG agenda and encouraging active participation across the market.

Education and Capacity Building: Providing educational resources to deepen understanding and enhance the ability to take action.

Data and Insights: Supplying the market with essential data, and trends, and insights to foster innovation.

Tools and Resources: Developing and distributing tools to facilitate the adoption of sustainable practices.

Best Practices Sharing: Promoting the exchange of knowledge and successful ESG practices.

Through these efforts, the ANBIMA Sustainability Network aims to position Brazil as a leader in sustainable finance, integrating ESG principles into the core of the country’s capital markets.

Investment Funds Initiative

To align with the evolving dynamics of the local market and global sustainability initiatives, ANBIMA's Sustainability Advisory Group has introduced criteria for identifying investment funds related to sustainability. This initiative reflects our commitment to mitigating the risks of greenwashing and fostering the sustainable growth of investment alternatives in Brazil.

Drawing from global best practices, our approach recognizes that incorporating ESG considerations into funds requires more than just portfolio adjustments. Fund managers must also demonstrate robust policies and governance frameworks dedicated to sustainability, ensuring transparency and accountability in their practices.

One of the key insights from our research is the need for clear guidelines to enhance the availability of information. These guidelines are essential for helping investors differentiate between products that prioritize sustainability and those that incorporate ESG risks and opportunities without having sustainability as their core objective. This clarity is crucial for understanding the material risks and opportunities linked to sustainability across various investment products.

In line with both local and international standards, ANBIMA's rules aim to:

Identify Sustainable Products: Clearly identify and label sustainable investment funds ("IS" funds) to ensure that their names and objectives are consistent with their sustainable investment goals.

Differentiate ESG Integration: Distinguish between funds that integrate ESG risks and opportunities, even if sustainability isn't their primary focus, and those that do not.

Ensure Commitment and Transparency: Set requirements for funds to demonstrate their commitment to sustainability, ensure ongoing actions in this regard, and provide consistent and transparent information to investors.

These criteria initially apply to equity and fixed-income funds that either currently identify or intend to be identified as sustainable. This includes funds that use terms like ESG, SDG, green, or impact in their names.

According to the new guidelines, "IS" (an acronym in Portuguese for Investimento Sustentável, or Sustainable Investment) funds are those explicitly committed to sustainable investing. These funds must formally document their commitment, adopt strategies aligned with their sustainability objectives, and maintain transparency with investors and the public.

Additionally, the new rules allow equity and fixed-income funds that consider ESG factors, even if they don't have sustainability as their primary objective, to disclose this in their marketing materials, provided they meet specific requirements.

This initiative sets the stage for future developments, including extending these rules to other fund classes, structuring information and monitoring standards, and promoting systematic ESG integration across all institutions. ANBIMA is committed to advancing the sustainability agenda in Brazil’s financial markets, ensuring that investors have access to credible and transparent sustainable investment options.

The Second Edition of the ANBIMA ESG Guide

The latest edition of the ANBIMA ESG Guide offers updated insights into the local market landscape and provides valuable data, references, and examples to assist fund managers in understanding our guidelines. While this guide is not regulatory in nature and does not cover every aspect of rule implementation or compliance, it is designed to support managers by offering practical examples that enhance their understanding of ESG principles.

Click here to read the full report.

Capital Markets Initiative

ANBIMA has developed a comprehensive guide to support financial institutions in the public offering of fixed-income securities aligned with ESG (Environmental, Social, and Governance) criteria. The Guide on Sustainable Bond Offerings is designed as an educational resource rather than a regulatory tool, meaning there will be no formal oversight to ensure compliance. Its primary aim is to stimulate the growth and development of the sustainable bond market in Brazil.

ANBIMA has previously focused on the buy side, specifically targeting green bond investors. Recognizing the importance of also addressing the supply side, this guide serves to educate the market by consolidating a clear understanding of what constitutes an ESG-related public offering. It complements existing resources for investors by providing standardized information on sustainable bonds.

Content Overview

The guide, endorsed by the International Capital Market Association (ICMA), is grounded in principles established by the organization, which have been translated, adapted, and refined to fit the Brazilian market. It outlines the essential criteria for classifying bond offerings as ESG-compliant. These criteria include the essential content for issuance documents, mandatory disclosure of additional information and periodic reports, and the requirement for independent evaluations of specific ESG characteristics of the assets.

Target Audience

While primarily intended for coordinators of sustainable finance-related bond offerings, the guide also contains valuable information for others involved in the issuance and distribution process—such as investors, consultants, independent valuers, fiduciary agents, and custodians.

Although adherence to the guide is not mandatory, it represents a significant advancement for the market by establishing clear parameters for ESG-related offerings, which differ from traditional bonds. By guiding financial institutions on how to classify these bond issuances as ESG, the guide contributes to the sustainable growth of green bond trading in the country.

Continuous Improvement

Institutions that follow the guide's recommendations are encouraged to report their usage when registering with ANBIMA. This feedback will allow ANBIMA to gauge market adherence and identify areas for improvement. The guide was developed by a working group comprising representatives from financial institutions that are actively involved in structuring ESG bond offerings.

Click here to read the full report.