Brazil UK Green Finance Infrastructure Ecosystem Review Final

Brazil Green Finance programme (BGFP)
Milestone 2.1: The Brazil-UK Green Finance &

Infrastructure Ecosystem Review
Supported by
Report contents
Authors
1. Glossary & acronyms 04
2. Executive summary 10 Simon Retallack
Director, Latin America
3. Project methodology & approach 19 [email protected]
4. UK green finance market Joao Lampreia

Senior Country Manager, Brazil
4.1 Capabilities: Sectors & products 25 [email protected]
4.2 Policy context: Green finance & infrastructure 39 Nick Harris

5. Brazil green finance market Senior Manager, Green Finance
[email protected]
5.1 Capabilities: Sectors & products 54
Chantalle Thomson
5.2 Policy context: Green finance & infrastructure 67 Manager, Green Finance
[email protected]
6. Stakeholder insights & recommendations
Alp Katalan
6.1 Appetite for sustainable infrastructure 80 Senior Analyst, Programmes & Innovation
[email protected]
6.2 Recommendations 96
Annexes Felipe Botelho
Carbon Trust Associate
Annex A: UK Green Finance Stakeholders list 98 [email protected]
Annex B: Brazil Green Finance Stakeholder list 102

3
1. GLOSSARY & ACRONYMS
4
Glossary (1/3)
Term Meaning
Asset Classes An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset classes are made up of
instruments which often behave similarly to one another in the marketplace. Historically, the three main asset classes have been equities (stocks), fixed income
(bonds), and cash equivalent or money market instruments. Currently, most investment professionals include real estate, infrastructure, commodities, futures,
other financial derivatives, and even cryptocurrencies to the asset class mix under alternative assets. Investment assets include both tangible and intangible
instruments which investors buy and sell for the purposes of generating additional income on either a short- or a long-term basis (Investopedia).
Asset management Asset management refers to the management of investments on behalf of others. The process essentially has a dual mandate – appreciation of a client's assets over
time while mitigating risk (Investopedia).
Asset owners Legal owners of assets (often referred to as institutional investors) who make asset allocation decisions based on investment objectives, capital markets outlook,
regulatory and accounting rules. Asset owners can manage assets directly and/or outsource to asset managers. Examples of asset owners include: pension funds,
insurers, banks, sovereign wealth funds, foundations, endowments, family offices, individuals (Adapted from Blackrock).
Banks A bank is a financial institution licensed to receive deposits and make loans. There are several different kinds of banks, including:
• Retail banks: provide financial services to the general public (e.g. the provision of personal accounts, mortgages, and other loan facilities). Some may also provide
other services, such as wealth management, foreign currency exchange, and safe deposit boxes.
• Commercial or corporate banks: provide specialty services to business clients (from small businesses to large corporate entities). Along with day-to-day business
banking, other services may include credit services, cash management, commercial real estate services, employer services, and trade finance.
• Investment banks: focus on providing corporate clients with complex services and financial transactions such as underwriting and assisting with M&A activity. As
such, they are known primarily as financial intermediaries in most of these transactions (Investopedia).
Bond A bond is a fixed income instrument that represents a loan made by an investor to a borrower. They could be thought of as an I.O.U. (a document that
acknowledges the existence of a debt) between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies,
municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. Bond details
include the end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments made
by the borrower (Investopedia).
Capital markets Capital markets are venues where savings and investments are channelled between the suppliers who have capital and those who are in need of capital. The
entities that have capital include retail and institutional investors while those who seek capital are businesses, governments, and people. Capital markets are
composed of primary and secondary markets. The most common capital markets are the stock market and the bond market (Investopedia).
Climate finance Local, national or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions
that will address climate change (UNFCCC, 2020)
Diversified asset An asset manager that offers a diverse set of funds with different investment objectives, investing in a range of asset classes with no one specific investment
manager mandate (i.e. sustainability) (Carbon Trust).
Emerging Markets An emerging market is a market that has some characteristics of a developed market, but does not fully meet its standards. The countries listed as emerging
markets by the S&P are as follows: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru,
Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and the UAE (S&P, 2018)
Glossary (2/3)
Term Meaning
Equity Equity is typically referred to as shareholder equity which represents an ownership share in the company and the amount of money that would be returned to a
company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off (Investopedia).
ESG Environmental, social and governance (ESG) criteria are factors used by investors to assess the sustainability of investments. Examples of ESG criteria include:
a) Environmental: climate change, natural resource depletion and environmental degradation (including land use change, habitat loss and species loss);
b) Social: working conditions (including slavery and child labour), local communities, conflict, health and safety and employee relations and diversity; and
c) Governance: executive pay, bribery and corruption, political lobbying and donations, board diversity and structure and tax strategy (BSI PAS 7340, 2020).
EU Taxonomy The EU Taxonomy is a classification system establishing a list of environmentally sustainable economic activities. It is expected to create security for investors,
protect private investors from greenwashing, and help companies to plan a sustainable transition (European Commission).
Funds An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control
of their own shares. Types of funds include open and closed funds, mutual funds, exchange-traded funds, money market funds, and hedge funds (Investopedia).
Green bond Any type of bond instrument where the proceeds are exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible projects with positive
environmental outcomes (voluntary process guidelines such as the green bond principles identify core requirements for the issuance of green bonds, including the
promotion of transparency and disclosure along with management of proceeds) (adapted from ICMA, 2018).
Green finance A subset of sustainable finance that is concerned with environmental aspects, such as climate change mitigation and adaptation, and other environmental
considerations such as biodiversity and natural resource depletion (adapted from BSI PAS 7340, 2020).
This report is mainly focused on green finance, but also takes into account broader sustainable finance and ESG considerations.
Project Finance Project finance is the financing of long-term infrastructure, industrial projects, and public services using a non-recourse or limited recourse financial structure. The
debt and equity used to finance the project are paid back from the cash flow generated by the project (Investopedia).
Specialised asset An asset manager with specific focus on a certain investment strategy or a type of asset, this could include focus on infrastructure investments, renewable energy
manager assets or impact investments (Carbon Trust).
Sustainability State of the global system, including environmental, social and economic aspects, in which the needs of the present are met without compromising the ability of
future generations to meet their own needs (ISO 20400, 2017)
Sustainability-linked Sustainability linked loans are any types of loan instruments and/or contingent facilities (such as bonding lines, guarantee lines or letters of credit) which incentivise
loans the borrower's achievement of ambitious, predetermined sustainability performance objectives (Loan Market Association, 2019).
Sustainable finance Application of financial services to achieve the goal of sustainability, this includes integration of ESG practices into business or investment decisions. Sustainable
finance addresses the financing and investment activities needed to support the UN Sustainable Development Goals (BSI PAS 7340, 2020).
Sustainable Sustainable infrastructure projects are those that are planned, designed, constructed, operated, and decommissioned in a manner to ensure economic and
infrastructure financial, social, environmental (including climate resilience), and institutional sustainability over their entire life cycle (IDB, 2018).
TCFD The Taskforce on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board (FSB) in 2015. In 2017, the TCFD released
internationally applicable, climate-related financial disclosure recommendations designed to help companies provide better information to support informed capital
allocation. The recommendations are structured across four thematic areas: governance, strategy, risk management, and metrics and targets (adapted from TCFD).
Glossary (3/3)
“Development that meets the needs of the present
Sustainable
development without compromising the ability of future
generations to meet their own needs”
(1987, Brundtland report)
Environmental Social Governance Economic
Climate Climate
change change
Other “Sustainable finance is the application of financial
Environmental services to achieve the goal of sustainability”
mitigation adaptation
Low-carbon
Climate
Green
Socio-environmental
ESG
Sustainable
Adapted from BSI (2020), PAS 7340:2020, Framework for embedding the principles of sustainable finance in financial service organisations
Acronyms (1/2)
Acronym Meaning Acronym Meaning
ABDE Brazil’s Association of Development Banks CVM Securities and Exchange Commission of Brazil
AM Asset management Defra Department for Environment, Food and Rural Affairs
ANBIMA Brazilian Association of Financial and Capital Market Institutions DfT Department for Transport
AUM Assets Under Management DIT Department for International Trade
B3 Brazil Stock Exchange EIB European Investment Bank
BCB Central Bank of Brazil EPE Brazil's Energy Research Company
BCB Central Bank of Brazil EPL Brazil's Logistics Planning Company
BEIS Department for Business, Energy and Industrial Strategy ESG Environmental, Social, Governance
BGFP Brazil Green Finance Programme ETF Exchange-traded fund
BNDES Brazil's National Bank for Economic and Social Development EU European Union
BoE Bank of England EV Electric vehicles
BSI British Standards Institute FC4S Network of Financial Centres for Sustainability
CBI Climate Bonds Initiative FCA Financial Conduct Authority
CCC Climate Change Committee FCDO Foreign, Commonwealth & Development Office
CDSB Climate Disclosure Standards Board FEBRABAN The Brazilian Federation of Banks
CfD Contracts for Difference FIP-IE Brazilian Infrastructure Equity Funds
CGFI Centre for Greening Finance and Investment FRC Financial Reporting Council
CMN Brazil's National Monetary Council GDP Gross domestic product
CNSP Brazil's National Council of Private Insurance GFI Green Finance Institute
COP Conference of the Parties (to the UNFCCC) GHGs Greenhouse gases
CPI Climate Policy Initiative GIB Green Investment Bank
8
Acronyms (2/2)
Acronym Meaning Acronym Meaning
GIG Green Investment Group PACTA Paris Agreement Capital Transition Assessment
GIH Global Infrastructure Hub PFI Private Finance Initiative
GRI Global Reporting Initiative PPI Investment Partnership Programme
IAIS International Association of Insurance Supervisors PPP Public Private Partnership
IDB Inter-American Development Bank PRA Prudential Regulation Authority
IE:UK Infrastructure Exports UK PRB Principles for Responsible Banking
IFC International Finance Corporation PREVIC Brazil's Superintendence of Supplementary Pension
IIGCC Institutional Investors Group on Climate Change PRI Principles for Responsible Investment
IIRC International Integrated Reporting Council PSI Principles for Sustainable Insurance
IPA Infrastructure Projects Authority PWLB Public Works Loan Board
IPO Initial Public Offering RAB Regulated Asset Base
ISO International Organization for Standardization SASB Sustainability Accounting Standards Board
LAB Laboratory of Financial Innovation SBTi Science Based Targets Initiative
LSE London Stock Exchange SDGs Sustainable Development Goals (SDGs)
M&A Mergers & Acquisitions SUSEP Brazil's Private Insurance Superintendence
MHCLG Ministry of Housing, Communities and Local Government TCFD Taskforce on Climate-related Financial Disclosures
MoU Memorandum of Agreement TPI Transition Pathway Initiative
NGFS Network for Greening the Financial System TPR The Pensions Regulator
NGO Non-governmental organisation UKEF UK Exports Finance
NIC National Infratrcuture Commisson UKGS UK Guarantee Scheme
OECD Organization for Economic Cooperation and Development UN United Nations
9
2. EXECUTIVE SUMMARY
10
Overview of the project
BGFP Milestone 2.1: The Brazil-UK Green Finance & Infrastructure Ecosystem Review
Publication date: April 2021
Objectives of this report:
1. Provide an overview of the UK and Brazil’s green finance and sustainable infrastructure financing markets
► For Brazil’s sustainable infrastructure stakeholders: to understand the ESG requirements to attract UK investors
► For UK’s sustainable infrastructure stakeholders: to understand Brazil’s ESG capabilities and identify investment opportunities
2. Identify lessons that Brazil could learn from the UK’s green finance and infrastructure capabilities
3. Identify key stakeholders within the UK and Brazil’s green finance and sustainable infrastructure landscape
4. Feed into interventions across the UK Prosperity programme’s Brazil Green Finance Programme (BGFP), e.g.
► Milestone 1.1 – Strong Links: identify potential stakeholders that could be connected with Brazilian Development Banks
► Milestone 2.2 – Financial mechanisms: inform the ESG methodology being developed for BNDES
► Intervention 3 – Platform: help to identify what ESG information should be disclosed
Why is this useful?
► As the market landscape has shifted dramatically in the past year alone, this report will capture how COVID-19 and
Brexit have impacted, and are expected to impact, UK and Brazilian infrastructure investors’ priorities regarding
sustainability, ESG, and infrastructure.
► Building on past research, this report will for the first time synthesise both the UK and Brazil’s green finance and
sustainable infrastructure capabilities and landscape.
Summary of the UK and Brazil’s green finance markets
Summary of the UK’s green finance market Summary of Brazil’s green finance market
The UK is one of the few global financial hubs that is also a leader in green As of March 2020, Brazil is the second-largest green bond market in Latin America
finance. London is the only city that ranks in the top 5 of the most recent editions of ($5.9bn of green bonds issued). However, despite the country’s infrastructure needs,
both the Global Financial Centres Index and the Global Green Finance Index (ranking investment in infrastructure has been less than 2% of annual GDP.
3rd globally for the combined quality and depth of its green finance market). This A green finance ecosystem is still under development as Brazil builds local
leadership role in green finance has been developed through a concerted effort by the capabilities to provide both products and services, and to develop stronger institutional
public and private sector. The UK benefits from a unique ecosystem that attracts knowledge and engagement in the green agenda. In this sense, it is home to a fertile
capital, know-how and talent, combined with technological innovation and the political environment for new markets and innovation in green finance. Key features include:
will to tackle climate change and to transition to a net-zero carbon economy.These
conditions have also been conducive of private infrastructure financing expertise3. • A strong banking system backing infrastructure projects and increasingly focused on
developing green finance products and tools.
Some key factors that have contributed to this include: • ESG funds and green financial product offerings receiving increasing interest across
• A strong regulatory environment promoting green finance, e.g. the Bank of all types of investors.
England’s incoming climate stress-testing of the financial industry; and mandatory, • Lower interest rates incentivise investor diversification
economy-wide, TCFD-aligned reporting by 2025.
• The Central Bank of Brazil has committed to implement mandatory climate-related
• Proactive, high-level policy commitments, e.g. the 2019 Green Finance Strategy
disclosures for financial institutions aligned with TCFD recommendations by 2022.
(with its objectives of greening finance, financing green, and capturing the
opportunity); and hosting COP26, for which finance is a key theme. • Brazil’s Laboratory of Financial Innovation (LAB) became the first South American
• Research and capacity building, e.g. the world’s first Green Finance Education member of the International Network of Financial Centres for Sustainability (FC4S).
Charter; and research centres such as the Green Finance Institute, and the Centre
for Greening Finance and Investment with various links to academia. The country has a track record of attracting international climate finance (receiving over
• Shaping standards & international initiatives, e.g. TCFD launched by the former BRL 3bn from international donors toward the Amazon Fund and other funds/projects).
Governor of the Bank of England, Mark Carney; the government-supported However, this type of financial aid has had a minor effect in enhancing Brazil’s green
sustainable finance standards issued by the British Standards Institute (BSI). finance capabilities, limited to inducing the few institutions managing donations
• Professional expertise, e.g. asset managers developing a number of successful (primarily BNDES) to assess and report on basic ESG metrics related to this share of its
specialist green funds; world’s largest specialty insurance market. overall portfolio.
Despite this leadership across green finance activities, the UK still has multiple areas to Areas of development for Brazil’s green finance market include: Long-term, green
further develop, such as: issuance of its first sovereign green bond (due in 2021), finance policy & regulatory push; Consistent application of sustainability standards
maintaining competitiveness in international green bond issuance (particularly against across the existing pipeline of infrastructure projects; Enhanced capabilities of public
European peers such as Luxembourg, France and Germany), and managing the banks, insurers, and pension funds in terms of understanding, managing, and reporting
regulatory divergence from the European Union’s sustainable finance regulations. on ESG risks and their impacts.
Overview of the UK and Brazil’s capabilities across
green finance sectors and products
UK’s Green finance market capabilities Brazil’s Green finance market capabilities
Insurance Asset management and Insurance

Asset management and asset ownership Banking
Banking Global leader in specialty risk Local insurance market is
asset ownership
World leader in cross-border re/insurance products. Large AM centre in Latin A structured banking system concentrated into auto,
Largest AM centre in Europe America. Green finance is with advanced ESG rules. health, personal insurances.
lending and home to the Largest underwriting centre
and home to some of the not a strategic driver yet for Green finance is limited to Infra re/insurance usually
largest and most active in Europe with specialist
leading players and specialist asset managers (with few few operations. offered by international
banks in green finance. know-how in green, finance
funds in green finance. exceptions). players.
& climate risk.
Service providers Regulators, Government

NGOs, Think tanks
Service providers NGOs, Think tanks Presence of national and History of mandatory
Regulators, Government A variety of local and
A world leading legal sector A thriving sector, home to a international service environmental regulations
A joint drive to lead in green international NGOs and think
and various flagship and number of leading institutions providers, law & consultancy and voluntary commitments,
finance with strong regulatory tanks with socio-
specialist providers with setting the agenda in green firms. Specialisation in ESG but requires government
and governmental initiatives. environmental expertise.
great international outreach. finance. issues and green finance are leadership to promote the
Green finance is still a niche.
still scarce. market’s development.
Economic and Financial Universities, Professional

Universities, Professional Universities, Professional Dialogue (EFD)
bodies bodies bodies
The 4th UK-Brazil EFD in 2020
World class universities and World class universities and Research on green finance is
agreed to further bilateral modest but professional
professional bodies with professional bodies with
close links to markets and close links to markets and cooperation in areas including: programmes are being
innovative curriculums. innovative curriculums. sustainable recoveries, green developed.
finance, and infrastructure.
Funds Project finance Capital markets Funds

Capital markets Project finance
Great depth and variety of Very experienced market New indices and products An increasing offer of
A strong offering around Strong local expertise in
green funds on offer, participants playing a leading are being offered. infrastructure and ESG
green bonds and equity, from structuring infrastructure
experienced service role internationally in Infrastructure debentures and funds, but still accounting for
underwriting and listing to projects and leadership from
providers and strong sustainable infrastructure ESG funds are the main a rather small volume
legal advice or assurance. Development Banks.
exchange market. finance. drivers for green finance. considering its potential.
Sectors Products Sectors Products

Timeline of key green finance developments in the UK
and Brazil
• 2012: Green • Transport for • UK and China co- • UK endorses the • Chartered Banker • Govt. sets Net-Zero • Plans announced for • UK Centre for
Investment Bank London issues UK’s chair the G20 TCFD’s final Institute launches GHG emissions target UK Green Taxonomy Greening Finance and
UK’s journey
(GIB) established first public agency Sustainable Finance recommendations world’s first Green for 2050 • Mandatory Investment established
• 2011: Gvmt. Green Bond Study Group • Gvmt. establishes Finance Certificate • Govt. publishes economy-wide • Bank of England to
launches £3.87bn • London Stock • City of London independent Green • Green Finance Green Finance climate-related launch climate stress
International Climate Exchange creates launches Green Finance Taskforce Taskforce sets out Strategy financial disclosure by test for the financial
Fund green bond segments Finance Initiative • Bank of England recommendations to • Green Finance 2025 announced industry
• 2009: London Sock • PRA publishes • £12bn mobilised by becomes founding government Institute (GFI) • Green finance and • UK to issue its first
Exchange lists its first report on the impact the Green Investment member of the NGFS • Financial regulator launched innovation is part of Sovereign Green Bond
green bond of climate change on Bank supporting 100 • Green finance (FCA) engages • Regulators publish the PM’s Ten Point • Finance is a key
• 2005: UN PRI the UK insurance projects across the leadership is part of stakeholders on supervisory climate Plan for a Green theme of the UK's
established in London sector United Kingdom Clean Growth Strategy climate change risk statement Industrial Revolution COP26 Presidency
Pre-
2015 2016 2017 2018 2019 2020 2021
2015
Brazil’s journey
• 2014: CMN Resolution 4,327 mandates all • CMN resolution • Ministry of Economy • BCB launches new • Brazil Treasury
• Green Bonds • CMN Resolution
financial institutions to develop socio- 4,661 requests proposes fast tracking sustainability agenda, announces plans for
Guidelines Released 4,557 on risk
environmental responsibility policies Pension Funds to sustainable infra. joins NGFS, announces issuing a sovereign
by FEBRABAN and management E+S
• 2012: Brazil’s B3 stock exchange recommends observe ESG risks debentures mandatory TCFD bond linked to ESG
CEBDS to support • Brazil Green
listed companies to provide ESG reporting • Voluntary guide for • CBI and Ministry of reporting for financial • The S&P/B3 Brazil
issuers Finance Initiative
• 2009: CMN’s resolution 3,792 requires closed TCFD-aligned Infrastructure sign MoU institutions from 2022 ESG Index launched,
• First issuance of launched bringing
pension funds to account for environmental and reporting released to evaluate potential • Decree No. 10,387 jointly developed by
Green Bonds (USD together key industry
social issues in their investment practices • Brazil’s Stock for green bonds expands incentives for S&P Dow Jones
1bn) by BNDES in and finance players
• 2005: ISE Corporate Sustainability Index launch Exchange allows listed • Ministry of Economy debentures financing Indices and the
Luxembourg Green • Issuances of Green
• 1995: Green Protocol voluntary guidelines companies to identify publishes report on sustainable Brazilian stock
Exchange Bond ~USD 2.3 bn
adopted by five public development banks green securities Green Finance in Brazil infrastructure exchange
Overview of infrastructure financing in the UK and Brazil
Infrastructure financing in the UK Infrastructure financing in Brazil
Review of infrastructure finance Support for private infrastructure financing
The government’s 2020 National Infrastructure Strategy plans to support •Law 11,478/2007 established what is called Infrastructure Equity Funds
private infrastructure investment through: A new national infrastructure bank; (FIP-IE), as a specific type of private investment funds with tax exemptions
Improved independent economic regulation; new innovative financing tools covering investment in energy, transportation, water and sanitation, irrigation
and other projects.
Support for private infrastructure financing •Law 12,431/2011 established infrastructure debentures giving tax
incentives for investors. This was recently updated through the decree No.
•Through the UK Guarantees Scheme (UKGS), the Treasury provides 10,387/2020 to include sustainable infrastructure projects in the list of eligible
guarantees to infrastructure project lenders so that if the recipients of loans issuers for incentivised debentures.
are unable to keep up re-payments or if the projects fail, the banks will still be •In its new sustainability #BC Agenda, the Central Bank of Brazil proposed a
reimbursed. In return for the guarantee, HM Treasury charge an annual fee to new green liquidity facility for financial institutions
each infrastructure company based on the project risks. •The Investment Partnerships Program (PPI) covers state and the private
•The UK has developed a range sector specific support mechanisms to sector partnerships projects and privatization of public services.
attract private investment in infrastructure projects, such as setting revenues
and prices on a competitive basis, e.g. Contracts for Difference (CfD) in
offshore wind; subsidising uncommercial projects like broadband rollout; or
the Regulated Asset Base (RAB) model for a wastewater tunnel. Development banks
•In 2017, the government procured Infrastructure Investment Funds in digital
infrastructure and EV charging infrastructure, acting as a cornerstone investor •The National Development Bank (BNDES),is the main long-term financier
with private sector fund managers operating the funds and making decisions. for infrastructure through its policy-driven lending with subsidized interest rate
and long-term loan maturity. Since 2017, a market-based long-term interest
rate was gradually introduced aiming to increase private financing from capital
Discontinued forms of financing markets, pension funds, and private banks.
•There are also various sub-national development banks catering to
•The European Investment Bank (EIB) has lent €119 billion to the UK since infrastructure projects in specific states. The Northeast Bank (BNB) is the
1973 for a range of infrastructure projects, with loan repayments expected to largest regional bank and has been increasing its infrastructure financing and
continue until 2030. The UK will no longer receive EIB funding following Brexit green credit lines (e.g. to distributed generation, water, sustainable forestry).
•Launched in 1992, the Private Finance Initiative (PFI) was the UK’s take on •The Amazon Bank (BASA) is the main financier for local productive activities
Public Private Partnerships (PPPs). Though it was reformed in 2012 as at the Amazon region; The Minas Gerais State Bank (BDMG) issued $50m
Private Finance 2 (PF2), the use of PFI/2 in new projects was ended in 2018 green bonds in 2020 to finance its green portfolio; and the Banco Regional
due to increasing contractual inflexibility, complexity & risk to gvmt. finances. de Desenvolamento do Extremo Sul (BRDE) has a history of lending to
•The Green Investment Bank (GIB), launched by the government in 2012 to sustainable activities, such as launching a credit line in 2015 targeted at
“accelerate the UK’s transition to a greener, stronger economy” was privatised municipalities for a broad range of activites, including sustianbale cities.
after its sale to Macquarie Group in 2017 for £1.62 bn, which continues to •The Association of Brazilian Development Banks (ABDE) is actively
finance sustainable infrastructure in the UK as the Green Investment Group engaging and providing guidance on ESG best practices for its members.
Stakeholder insights by key topic
Sector The infrastructure sectors that UK investors are most optimistic about: health and social infrastructure, digital infrastructure,
and renewable energy (including hydrogen generation). Transport is expected to suffer negatively (at least in the short to
interests medium term) due to shifting attitudes to commuting and working from home, and fossil fuel is on a long-term decline.
The Covid-19 crisis has shone a light on the need to further invest in Brazil’s infrastructure, particularly in sanitation. The recently
approved Sanitation Bill has created the expectation that the waste and water sectors will see an increase in interest from
public and private actors. Digital infrastructure and renewable energy are also seen as growth areas by investors.
Geographic UK infra investors are most interested in Europe, N. America & Asia, and least interested in LatAm & Africa. In Brazil, they
need to first grapple with country-level challenges (e.g. language barriers, regulatory complexity), followed by infrastructure
interests sector challenges (e.g. governance issues), before considering a pipeline of bankable, sustainable infrastructure projects.
Brazilian investors are largely focused on the domestic market. Some do invest abroad, but mostly in other Latin American
economies. Due to interest rates differentials, local investments were seen as safer in the past and delivered higher returns,
however with the collapse of interest rates, some investors are seeking further diversification abroad.
Defining There is no uniformly accepted definition of sustainable infrastructure, however there is a broad consensus that
sustainable infra is dependent on how various ESG criteria are considered across the asset’s lifecycle. There is also a
sustainable recognition of the need for flexibility, taking into account the social context, particularly in emerging markets.
infrastructure
The categorisation in Brazil on what infrastructure is green or sustainable is still at the early stages of discussion as there is
not yet a Brazilian taxonomy, and Brazilian investors often base their positions on European and American definitions and
standards.
ESG drivers Given the long lifetime of infrastructure assets, UK investors hold the view that they need to be inherently sustainable to
maintain consistent, long-term returns. Therefore, the top three ESG drivers for infrastructure investors are: asset
value/financial returns, ESG risk management, and brand reputation.
Perceptions about ESG have gradually shifted in Brazil as evidence mounts of the positive returns from high-ESG assets,
e.g. the MSCI Brazil ESG Leaders Index outperforming the MSCI Brazil index. Interest in ESG has been accelerated by
Covid-19 and pressure from international investors, particularly following the Vale dam collapse and continued deforestation
of the Amazon.
Stakeholder insights by key topic
International Due to a lack of uniform definitions, voluntary standards are a reliable means of clarifying project-level ESG requirements,
giving investors confidence about the bankability of projects. Applying these in emerging markets are often difficult due to a
ESG standards lack of data and complexity. Investors often adopted various standards, with the expectation of greater harmonisation soon.
As local Brazilian environmental licensing and permitting regulations are already stringent, project developers are reluctant to
voluntarily adopt ESG standards. However, Brazilian financial institutions increasingly subscribe to several international
ESG practices, with the most popular ones being the UN PRI, TCFD recommendations, and IFC Performance Standards.
There is a growing recognition of the importance of gender & social inclusion, as well as an acknowledgment that more
Gender & needs to be done. Promoting inclusion at the organisational level (e.g. board-level diversity) is seen as easier than at the
social infrastructure project level, where data collection and influence over supply chain contractors is more challenging.
inclusion Brazilian investors are starting to consider gender, with some adopting policies such as tracking gender in the hiring process.
However, there is not yet an approach for other forms of social inclusion. There’s a need for stakeholder engagement during
infrastructure planning, as projects have an outsize impact on local communities, particularly indigenous populations.
Impacts of Most UK stakeholders believed that Brexit is not particularly significant in relation to their engagement with Brazil, and if
anything, increases the appetite for cooperation with non-EU countries. However, the long-term risk of the UK losing out on
Brexit its leadership in green finance was identified in light of the EU’s role as a standard-setting regulatory regime.
Brexit was not a relevant topic for Brazilian stakeholders, and most agreed that it had not negatively affected the UK-Brazil
relationship, recognising the opportunity for greater collaboration. However, as the EU Taxonomy was identified as an
important framework monitored by Brazilians active in ESG, they recognised the potential risks of regulatory divergence.
Covid-19 had some immediate short-term operational impact on infra project timelines. Calls to ‘Build Back Better’ and for
Impacts of a ‘green recovery’ are promising signs that the UK and others will promote sustainable infrastructure in the aftermath. However
Covid-19 potential fiscal constraints due Covid’s impact on gvmt. finances was highlighted as a risk, particularly in emerging markets.
The pandemic reinforced the importance of considering ESG themes in a way that develops more robust risk management in
the face of new contagious diseases and other structural risks. Despite the increased interest generated in ESG, stakeholders
expressed a worry about the attempts to loosen environmental regulations as a result of Covid.
Recommendations to develop Brazil’s sustainable finance and
infrastructure attractiveness
1. Set out a cross-government, long-term, green finance policy strategy to provide clarity to the financial industry, act as a market signal, and demonstrate to
international investors Brazil’s strong commitment to green finance from the highest levels of government. This could for example be modelled after the UK’s
2019 Green Finance Strategy, draw from the recommendations of the 2020 report ‘Mainstreaming Sustainability in Brazil’s Financial Sector’ endorsed by the Financial
Innovation Laboratory (LAB), and build on the Ministry of Economy’s 2019 publication on the state of green finance in Brazil.
2. Establish independent bodies to assess Brazil’s infrastructure needs across all infrastructure sectors, with a climate change/sustainability lens, or
reinforce the climate/sustainability mandates of existing bodies and coordinate activities between the sector-level bodies (e.g. EPE and EPL). This could
draw inspiration from the UK’s National Infrastructure Commission (NIC), which regularly conducts impartial analysis of the UK’s infrastructure needs and provides
recommendations to the government, as well as the Climate Change Committee (CCC), which has a similar role in assessing the actions required by the government
to meet its long-term net-zero target.
3. Establish a national, harmonised standard to assess and approve infrastructure projects which integrates sustainability principles across federal, state
and municipal agencies. This approach could be modelled on the UK’s Five Case Model, for which the Association of Brazilian Development Banks (ABDE) have
already received training, and is also being adopted across Colombia and other emerging markets through the Prosperity Fund’s Global Infrastructure Programme.
Such a harmonised standard could be led by the recently announced Brazilian inter-ministerial committee on infrastructure or the Ministry of Infrastructure (MInfra).
4. Integrate a consistently applied and comparable sustainability lens across the existing pipeline of investable infrastructure projects developed by the
Brazilian Investments Partnerships Program (PPI). This could allow for filtering and categorising by international standards and third-party verification, as well as
relevant ESG metrics (such as avoided greenhouse gas emissions, water use, gender & social inclusion, stakeholder engagement etc.).
5. Ensure that the risk allocation between private and public sector is well apportioned in infrastructure projects to overcome the perception by international
investors that the private sector is overburdened with managing risks (e.g. relating to permitting and allowance). The Global Infrastructure Hub (GIH)’s PPP Risk
Allocation Tool, which has also been launched in Portuguese with the support of the Inter-American Development Bank (IDB), could provide this framework across
various sectors.
6. Coordinate the partnership and collaboration between Brazilian project developers and UK and international investors to facilitate deal identification and
financing. This could be jointly coordinated by the FCDO (e.g. through Intervention 3 of the BGFP), Infrastructure Exports UK (IE:UK) and UK Exports Finance
(UKEF). 18
3. PROJECT METHODOLOGY &
APPROACH
19
Overview of the project
BGFP Milestone 2.1: The Brazil-UK Green Finance & Infrastructure Ecosystem Review
Publication date: April 2021
Objectives of this report:
1. Provide an overview of the UK and Brazil’s green finance and sustainable infrastructure financing markets
► For Brazil’s sustainable infrastructure stakeholders: to understand the ESG requirements to attract UK investors
► For UK’s sustainable infrastructure stakeholders: to understand Brazil’s ESG capabilities and identify investment opportunities
2. Identify lessons that Brazil could learn from the UK’s green finance and infrastructure capabilities
3. Identify key stakeholders within the UK and Brazil’s green finance and sustainable infrastructure landscape
4. Feed into interventions across the UK Prosperity programme’s Brazil Green Finance Programme (BGFP), e.g.
► Milestone 1.1 – Strong Links: identify potential stakeholders that could be connected with Brazilian Development Banks
► Milestone 2.2 – Financial mechanisms: inform the ESG methodology being developed for BNDES
► Intervention 3 – Platform: help to identify what ESG information should be disclosed
Why is this useful?
► As the market landscape has shifted dramatically in the past year alone, this report will capture how COVID-19 and
Brexit have impacted, and are expected to impact, UK and Brazilian infrastructure investors’ priorities regarding
sustainability, ESG, and infrastructure.
► Building on past research, this report will for the first time synthesise both the UK and Brazil’s green finance and
sustainable infrastructure capabilities and landscape.
Project methodology
Literature review
• Key findings from existing research and published literature (in English and Portuguese) on the UK and Brazil’s
green finance and sustainable infrastructure landscape were identified, reviewed, and summarised across Section
4 (UK Green Finance market) and Section 5 (Brazil Green Finance Market).
• Please see slides 52-53 and 78-79 for details about the referenced material.
Stakeholder mapping
• Hundreds of stakeholders across the UK and Brazil’s sustainable infrastructure landscape were identified for
potential interviews. Please see Annexes for a selected list of some key stakeholders by country.
• Multiple databases were used to inform the stakeholder selection and validation, including: the shared
consortium stakeholder database, Long Term Infrastructure Investors Association (LTIIA) members, and
Carbon Trust’s own research
Stakeholder interviews
• 11 green finance & sustainable infrastructure stakeholders based in the UK and 11 based in Brazil were
interviewed on the condition of anonymity.
• Interviewees were segmented across: diverse services, infrastructure investors and public entities. Please see
slide 23 on the sector distribution of interviewees
• Gender of interviewees was tracked
Data synthesis and peer review

• The Brazil-UK Green Finance & Infrastructure Ecosystem Review was developed based on a combination of
stakeholder findings from the interviews and the existing literature review.
• Draft report was circulated amongst the Brazil Green Finance Programme (BGFP) consortium and select
external stakeholders for review prior to final publication.
Interviews conducted
Number of interviews conducted
12
11 11
10
0
UK Brazil
A total of 22 interviews have been conducted with The interviews have were split as follows: 10 diverse services (45%), 9
stakeholders equally based in the UK and Brazil infrastructure investors (41%), and 3 public bodies (14%) 22
Gender representation of interviewees
At least 1 female interviewee? Gender of all interviewees
No, 11, Male

44% Female
interviewee interviewees,
s, 20, 50% 20, 50%
Yes, 14,
56%
Some interviews had more than one interviewee,

Over half of all interviews conducted had at
but overall half of all individual interviewees were
least one female interviewee
female (without being prompted) 23
4. UK Green Finance market
24
4. UK green finance market
4.1: CAPABILITIES: SECTORS &

PRODUCTS
Overview of UK capabilities across green finance
sectors and products
Summary
The UK is one of the few global financial hubs that is also a leader in green Insurance
Asset management and
finance1. London is the only city that ranks in the top 5 of the most recent asset ownership
Banking Global leader in specialty risk
editions of both the Global Financial Centres Index 2 and the Global Green World leader in cross-border re/insurance products.
Largest AM centre in Europe
Finance Index 3 (ranking 3rd globally for the combined quality and depth of its and home to some of the
lending and home to the Largest underwriting centre in
green finance market). This leadership role in green finance has been developed largest and most active banks Europe with specialist know-
leading players and specialist
in green finance. how in green, finance &
through a concerted effort by the public and private sector. The UK benefits funds in green finance.
climate risk.
from a unique ecosystem that attracts capital, know-how and talent, which
has also been conducive of private infrastructure financing4.
Some key factors that have contributed to this include: Service providers NGOs, Think tanks
Regulators, Government
Sectors
• A strong regulatory environment promoting green finance, e.g. the Bank A world leading legal sector A thriving sector, home to a
A joint drive to lead in green
of England’s incoming climate stress-testing of the financial industry; and and various flagship and number of leading institutions
finance with strong regulatory
specialist providers with great setting the scene in green
mandatory, economy-wide, TCFD-aligned reporting by 2025. and governmental initiatives.
international outreach. finance.
• Proactive, high-level policy commitments, e.g. the 2019 Green Finance
Strategy5 (with its objectives of greening finance, financing green, and
capturing the opportunity); hosting COP26, for which finance is a key theme.
• Research and capacity building, e.g. the world’s first Green Finance Universities, Professional Universities, Professional
Education Charter; and research centres such as the Green Finance Institute, bodies bodies
and the Centre for Greening Finance and Investment with links to academia. World class universities and World class universities and
• Shaping standards & international initiatives, e.g. TCFD launched by the professional bodies with close professional bodies with close
former Governor of the Bank of England, Mark Carney; the government- links to markets and links to markets and
innovative curriculums. innovative curriculums.
supported sustainable finance standards issued by the BSI.
• Professional expertise, e.g. asset managers developing a number of
successful specialist green funds; world’s largest specialty insurance market.
Project finance
Capital markets Funds
Products
Despite this leadership across green finance activities, the UK is still at the early Very experienced market
A strong offering around Great depth and variety of
stages of the journey and has areas to develop, such as: issuance of its first participants playing a leading
green bonds and equity, from green funds on offer,
sovereign green bond (due in 2021), and managing the regulatory divergence role internationally in
underwriting and listing to experienced service providers
sustainable infrastructure
with European peers as the EU introduces key sustainable finance regulations. legal advice or assurance. and strong exchange market.
finance.
Estimates for the Climate Change Committee also suggest that capital
investment in net-zero technologies will need to scale up fivefold from ~ £10bn/
year in 2020 to around £50bn/year by 2030 to meet the UK’s net-zero target.
Green finance sector:
Asset management
Summary of UK’s green finance capabilities Case study: Schroders
► The UK is the second largest investment management centre ► Background: Headquartered in London, Schroders is a global
in the world (behind the US), and is the largest centre in asset and wealth manager operating from 35 locations across
Europe, where it is responsible for 37% of total assets under Europe, the Americas (including Brazil), Asia, the Middle East
management (AUM), managing £9.9 trillion of assets in 20196. and Africa. The infrastructure finance team, comprised of 15
► ~38% (or £3.76tn) of total AUM are subject to ESG integration, investment professionals, was set up in 2015 as a boutique
up from 26% in 2017, and 19% applied exclusion policies. within Schroders.
► The UK has the second highest number of TCFD signatories in ► Infrastructure focus: The infrastructure finance team
the world (behind Japan), and UN Principles for Responsible analyses ~300 projects each year and makes 10-20
Investment (PRI) signatories (behind the US). infrastructure debt investments across 10 subsectors, including
► Multiple UK firms joined the Net Zero Asset Managers Initiative
energy (generation, distribution, and storage), transport (local
as part of the Race to Zero campaign leading up to COP26. and global), telecommunications, and environment (i.e. waste
and water). As of 2019, they invested £1.3bn and raised
► There are 20+ sizeable specialised asset managers involved
£1.5bn.
specifically in green finance, including private equity and VCs.
► ESG: Schroders takes a multi-dimensional approach to fully
► There is still potential for a significant portion of the sector to be
integrate ESG in investment decisions through: (1.) exclusions
more engaged in green finance. New regulation and an (e.g. coal, nuclear and shale gas assets); (2.) quantitative
increased focus on green credentials from asset owners are assessment across 48 criteria (13 of which directly relate to
starting to move the sector in this direction. ESG); (3.) qualitative assessment of the investment proposal;
► Uncertainty and possible rejection of the EU taxonomy by the and (4.) ESG monitoring and reporting through the lifecycle of
UK could have some repercussions in the sector and favour the investment.
other markets (e.g. Netherlands and France) ► Schroders is rated A+ for its approach by the UN PRI and
► The sector’s great depth of talent is a key factor in international was ranked 7th in the 2020 ShareAction Responsible
firms choosing the UK as their European or global base. Investment Survey of European Asset Managers.
Source: Adapted from the DIT Green Finance Scoping Study 7, Carbon Trust research Source: Company websites
Asset owners
Summary of UK’s green finance capabilities Case study: Church of England Pensions Board
► Typical asset owners include pension funds, insurance ► Background: The Church of England Pensions Board
companies, sovereign wealth funds, family offices or high net administers pension schemes for those who have worked for
worth individuals (HNWIs). the Church of England. It is one of the Church’s three National
► Asset owners are feeling pressure from stakeholders and Investing Bodies. They are an active owner of over £2.8 billion
regulators to invest in green activities and disclose the carbon in assets under management.
intensity and climate risk of their portfolios. Therefore they are ► Infrastructure focus: the Pensions Board’s asset managers
increasingly interested in the green credentials of funds and are selected for their ESG credentials assessed by Mercer, their
incorporating ESG themes into index funds. Investment Consultant. Investments are made across asset
► Asset owners are also applying pressure on asset managers to
classes, including: public equity, fixed income, real estate,
pursue green investments and improve disclosure. private equity and alternative income. Its Private Infrastructure
Equity is managed by the likes of First State, Antin, EQT, KKR,
► The UK is home to a strong network of asset owners’ and asset
and Basalt. The investments are in pooled funds for global and
managers’ green alliances and initiatives, reinforcing its image
European “privately owned socially useful infrastructure”, which
as a centre for green finance. covers energy, transport, environmental infrastructure (i.e.
► Initiatives include the Transition Pathway Initiative (TPI), Net- waste and water), telecommunications and social infrastructure.
Zero Asset Owner’s Alliance, Investment Leaders’ Group, and ► ESG: The Pensions Board is committed to ethical and
the Institutional Investors Group on Climate Change (IIGCC). responsible investment, guided by their Ethical Investment
► There needs to be further coordinated engagement from asset Advisory Group. Their 2015 Climate Change Policy involves:
owners, stable government policy and access to ESG data to (1.) Active corporate engagement; (2.) Public policy
enable a greater flow of funds into the green space. engagement; (3.) Collaboration through international initiatives;
► In 2020, the Financial Reporting Council (FRC) updated the UK (4.) Investment and divestment thresholds; (5.) Internal capacity
Stewardship Code for asset owners, asset managers, and building and training; (6.) Investment manager selection and
service providers. monitoring; (7.) Reporting on implementation of climate policy.
Source: Adapted from the DIT Green Finance Scoping Study, Carbon Trust research Source: Company websites
Commercial banking
Summary of UK’s green finance capabilities Case study: Lloyds Banking Group
► UK’s banking sector assets totalled £8trn at the end of 2019, ► Background: Lloyds Banking Group operates the UK’s largest
the fifth largest in the world and the second largest in Europe8. retail bank and is active in commercial banking, as well as
► The majority of the largest global commercial banks and those pensions, general insurance and wealth management.
most active in green finance have offices in the UK. ► Infrastructure focus: Of its various specialist teams within
► The sector is increasingly cognisant of climate change – the corporate banking, the most relevant for infrastructure are:
PRA’s survey of 90% of the UK banking sector found that 70% ► Industrials, Infrastructure and Europe: supports clients
of banks recognise climate change poses financial risks9. through entire supply chain and lifecycle of economic and
► Multiple banks have recently set ambitious climate targets, e.g. social infrastructure projects via a range of services (e.g.
commitments to align portfolios with net-zero by 2050 or earlier debt finance, risk management, transaction banking tools)
by HSBC and Barclays, or to halving financed carbon ► Sustainable and Natural Resources: caters to clients across
emissions by 2030 by Lloyd’s and NatWest. utilities, energy and commodities through a range of services
► Volans, a UK-based sustainability consultancy, launched the and products (e.g. credit facilities, project refinancing,
Bankers For Net Zero initiative in the lead up to COP26 to securitisation, and hedging services).
enable banks to successfully support their clients, accelerate ► ESG: Lloyds Banking Group is committed to helping the UK
the transition to net zero, and deliver on government ambitions. transition to a low carbon economy through its Helping Britain
► Smaller banks have specialised in green finance faster and the Prosper plan. Over the last five years Lloyds have raised over
largest commercial banks have moved more slowly due to a £2.8 billion in green bonds for UK corporate issuers (more than
need to service the wider economy. any other UK bank); and established the £2bn Clean Growth
► All of the major UK banks offer green loan programmes, and
Financing Initiative (CGFI), which offers discounted lending to
many provide other bespoke green products10. Export commercial clients investing in reducing emissions, energy
opportunities include green loans, sustainability-linked loans, efficiency, reducing waste, or improving water use.
green trade finance, asset finance or project finance.
Investment banking
Summary of UK’s green finance capabilities Case study: Green Investment Group (GIG)
► London is one of the world’s most important centres for private ► Background: With offices in London and Edinburgh, and active in
and investment banking8. Many international banks, and those over 25 markets, the GIG is a specialist developer, sponsor, advisor
most active in green finance, have their investment banking and investor with a mission to accelerate the green transition. GIG
business in the UK, including Bank of America, Credit Suisse, originates from the Green Investment Bank (GIB) launched in 2012
by the UK Government, with the aim of mobilising private finance
Goldman Sachs, J.P. Morgan, Morgan Stanley, RBC Capital
into the green energy sector. This aim was maintained when GIB
Markets and UBS. was fully acquired by Macquarie Group in 2017.
► UK-based investment banks have a solid participation in
► Infrastructure focus: GIG has committed over £20 bn of capital to
international markets, namely Europe, the US and Asia-Pacific green energy projects across more than 250 projects globally. GIG
but are also growing in Latin America, India and China. works across the whole project cycle, investing in all stages of
► The sector is strong in arranging services on issuance energy infrastructure. This includes clean energy generation (such
initiatives, advisory or brokerage services on deals, as offshore wind, onshore wind, solar energy, and energy-from-
bookrunning, and services on project finance, M&A or IPOs. waste), as well as energy efficiency and energy storage.
► ESG: GIG have been pioneers in developing quantifiable green
► The sector is particularly strong in the services around green
metrics since 2012. Every investment is subject to a robust green
and sustainable bonds, such as underwriting, legal,
impact assessment process before it can be approved. The
accountancy and advisory services for both local and
investments must contribute to at least one of their five ‘Green
international customers. The sector is also well integrated into Purposes’ and consider their seven ‘Green Principles’ for assessing
the strong UK financial ecosystem. and managing the green impact of transactions.
► Specialist institutions such as the Green Investment Group ► GIG is also engaged in over 40 international initiatives, including
(GIG) or the CDC Group, the UK Government-owned the Climate Finance Leadership Initiative and the Global
development bank, have as a key part of their mission the Commission on Adaptation. GIG has adopted the Equator
global acceleration of the transition into a greener economy – Principles and is signatory of the UN PRI (with an A+ rating).
the latter particularly in developing/emerging markets. ► Macquarie Group also make financial disclosures aligned with
TCFD and have a detailed, 8-pronged approach to ESG.
Insurance
Summary of UK’s green finance capabilities Case study: Lloyd’s of London
► The UK insurance and long-term savings industry is the largest ► Background: Lloyd’s of London is the world’s specialist insurance
in Europe and the fourth largest in the world, managing market, bringing together a global network of more than 50 leading
insurance companies, over 200 registered Lloyd’s brokers and over
investments of almost £1.6 trillion11.
4,000 local cover holders. Behind the market is the Lloyd’s Corporation,
► The London market remains the largest global (re)insurance an independent organisation and regulator that maintains the market's
hub with $110bn of gross written premium in 2018 – 85% reputation, as well as providing services and original research
written by companies domiciled outside the UK12. ► Infrastructure Focus: The Lloyd’s market has a unique capacity to
► Considerable expertise and ideation in (re)insurance and reinsure risks of big infrastructure projects anywhere in the world,
climate-related risks sit in the UK. This is also true for a number across the entire lifecycle of assets. In 2017, Lloyd’s published a set of
principles to inform the planning, design and operation of infrastructure
of multinational insurance firms and brokers.
systems across sectors to increase their resilience (e.g. to climate
► The sector has a strong offering and specialist know-how, change and other shocks). This was followed by research into financial
particularly around a) insurance underwriting in the areas of tools to support infrastructure resilience, such as insurance-linked loan
renewables and other green technologies, real estate, packages, resilience bonds, and resilience service companies
agriculture, reinsurance, b) placement of insurance products ► ESG: Lloyd’s published its first ESG report in 2020 with commitments
and c) advisory on green risk finance and climate risk. across 5 key areas aligned with the SDGs and the Paris Agreement:
► The sector is increasing both its use of financial instruments ► (1) Responsible market, e.g. developing a framework to help
insurance businesses integrate ESG principles;
such as ‘catastrophe bonds’ to cover natural and non-natural
catastrophes and its capacity to perform climate risk modelling, ► (2.) People and culture, e.g. target of 35% female representation in
leadership positions across the Lloyd’s market by 2023.
particularly driven by insurance brokers, which is of increasing
interest to financial and non-financial sectors. ► (3.) Sustainable insurance, e.g. no new insurance cover for thermal
coal, oil sands, and Arctic energy exploration from 2022.
► A number of UK insurance firms are signatories to the
► (4.) Responsible investment:, e.g. the Corporation will allocate 5%
Principles for Sustainable Insurance (PSI), ClimateWise and of the Central Fund to impact investments by 2022.
the TCFD recommendations – particularly the major players. ► (5.) Responsible operations, e.g. net-zero operations by 2025.
Service providers
Summary of UK’s green finance capabilities Case study: Mott Macdonald
► The UK has strong expertise in consultancy services, in both ► Background: Mott MacDonald is a global engineering,
larger firms and smaller niche players. management and development consultancy, and one of the
► Of the ‘Big Four’ international accounting firms, three are largest employee-owned companies in the world. It is
headquartered in London (EY, Deloitte, and PwC) and all touch headquartered in London, but has an active presence in over
upon to some degree green finance advisory. 150 locations around the world.
► The UK also has a hub of specialist consultancies working in ► Infrastructure Focus: Mott MacDonald’s infrastructure
the green finance area both domestically and internationally capabilities span the entire project lifecycle across water,
(e.g. the Carbon Trust, Sustain Value, Volans, Ortec Finance) waste, energy, transport, digital and social infrastructure.
► 3Keel, Accenture, Deloitte and KPMG lead the Financial Times’
Services include full project management; integrated design;
2021 ranking of UK management consultants in the area of construction quality supervision; technical and operational
sustainability. advisory; and public or private infrastructure financing advice
from inception to financial close.
► As of 2020, 30 UK management consulting firms were Certified
► ESG: Mott MacDonald is committed to working with clients to
B-Corporations, meeting high standards of verified socio-
environmental performance and transparency. identify and assess climate risks across all projects by 2024.
Mott has also been increasing its focus on sustainability
► There are also multiple UK-headquartered, multinational
consulting, through its services such as environmental and
engineering firms that integrate sustainability across their social due diligence. Moata ESG is their proprietary digital tool
services, such as Arup, Ricardo, Mott MacDonald, and ERM. which provides clients with insights into the impact of
► There is growing interest in services relating to climate risk infrastructure assets on the environment and society, and
assessment, net zero and biodiversity, and opportunity to supports various frameworks such as the SDGs, UN PRI and
develop service offerings in those areas. SASB. In 2019, Mott Macdonald convened a new infrastructure
► European consultancies are also advancing their service industry coalition on net zero infrastructure in the UK, and in
offering due to EU regulations around non-financial reporting. 2020 became certified carbon neutral globally.
NGOs & think tanks
Summary of UK’s green finance capabilities Case study: Climate Bonds Initiative (CBI)
► The UK has the fourth largest number of think tanks in the ► Background: The Climate Bonds Initiative (CBI) is an
world as of 202013, and is home to some of the NGOs and think international, investor-focused not-for-profit and the only
tanks most active in green finance and the broader topics of organisation in the world fully focused on mobilising the $100
sustainability, climate risk and nature risk. trillion bond market for climate change solutions. The aim is to
develop a large and liquid Green and Climate Bonds market that
► Considerable expertise sits in the UK – for both small and large
will help drive down the cost of capital for climate projects and
international institutions.
improve access to lower-cost debt in emerging markets.
► The sector is able to leverage the maturity, talent and
► Infrastructure Focus: The Climate Bonds taxonomy, which
international drive of the UK market as a financial hub to
underpins the Climate Bond Standard, covers all infrastructure
demonstrate thought leadership, initiative and a desire to sectors, including energy, transport, water, waste, and ICT, as
support Governments, financial and non-financial institutions well as buildings (including social infrastructure), and land use &
understand and act in this space, both in the UK and overseas. marine resources. CBI’s Green Infrastructure Investment
► UK NGOs and think tanks have been proactive in their actions Opportunity (GIIO) programme also publishes reports with the
by leading global initiatives on best practice (e.g. E3G), data aim to identify and promote a pipeline of green infrastructure
disclosure (e.g. CDP), or investment landscape analysis (e.g. projects around the world, so far covering New Zealand,
Climate Policy Initiative and Carbon Tracker), or developing Australia, Brazil, Indonesia, and Vietnam.
first-of-a-kind green finance guidance (e.g. BSI). ► ESG: CBI provides green bond-related market intelligence, green
► UK NGOs and think tanks can have an important role in finance advice to policymakers and financial institutions, and runs
supporting the development of credible, green finance the Climate Bonds Standard and Certification Scheme. The
ecosystems in overseas markets through their knowledge, for Climate Bonds Taxonomy identifies the assets, projects and
example by sharing best practices, lessons learned, and data. associated financial instruments needed to deliver a low carbon
economy and gives greenhouse gas emission screening criteria
consistent with the 2-degree global warming target set by the
Paris Agreement.
Regulators & government
Summary of UK’s green finance capabilities Case study: HM Treasury
► The UK has a track record of ambitious climate policy, having ► Background: HM Treasury is the UK Government’s economic
set up the world’s first multi-sector carbon trading programme; and finance ministry, maintaining control over public spending,
was the first country to set a legally binding climate change setting the direction of the UK’s economic policy and working to
mitigation target through the 2008 Climate Change Act; and is achieve strong and sustainable economic growth. Its
the first major economy to commit to a ‘net zero’ target. responsibilities include: public spending, financial services policy,
oversight of the tax system, and delivery of infrastructure projects.
► UK firms have benefitted from this political will and regulatory
► Infrastructure Focus: In November 2020, HM Treasury published
environment helping to accelerate momentum in this space.
its first ever National Infrastructure Strategy, which sets out the
► The 2017 Industrial Strategy set out the transition to green
government’s plans to radically improve the quality of the UK’s
growth as one of the ‘grand challenges’ and the ambition to infrastructure across all regions and put the UK on the path to net-
make the UK the global standard-bearer for green finance. zero emissions by 2050. The strategy is a response to the
► The 2019 Green Finance Strategy set out the objectives of National Infrastructure Commission (NIC)’s assessment of the
greening finance, financing green, and ‘capturing the UK’s infrastructure needs across transport, energy, water and
opportunity’ to cement UK leadership in green finance. sewerage, flood risk, digital, and waste infrastructure.
► In 2020, the Prime Minister announced the Ten Point Plan for a ► ESG: In 2019, HM Treasury, along with the Department for
Green Industrial Revolution, which pledges to mobilise £12bn Business, Energy & Industrial Strategy (BEIS), published the
of government investment, and potentially 3 times as much pioneering Green Finance Strategy, which aims to align private
from the private sector, to invest in the UK’s environmental sector financial flows with clean, environmentally sustainable and
leadership, including in green finance and innovation resilient growth; and strengthen the UK financial services sector’s
► Published in December 2020, the Road to Net-Zero assesses
competitiveness. The Treasury is currently undertaking a Net-Zero
Review14 to understand how the costs of achieving net-zero are
the UK financial system’s ability to deliver a Net Zero target,
distributed across the economy, and the range of policy levers
and is comprised of independent expert advice to the Climate
available. In 2019, HM Treasury was also a founding member of
Change Committee to accompany its Sixth Carbon Budget.
the Coalition of Finance Ministers for Climate Action.
Universities & professional bodies
Summary of UK’s green finance capabilities Case study: Centre for Climate Finance & Investment, Imperial
► The UK hosts world-class universities with innovative green ► Background: The Centre for Climate Finance & Investment
finance programmes and links to policy and business. (CCFI) is one of ten research centres based at the Imperial
► Universities and their research centres provide thought College Business School in London. The CCFI works closely
leadership and capacity building in green finance, such as the with the Grantham Institute – Climate Change and the
Oxford Smith School of Enterprise and the Environment (SSEE), Environment, and the Brevan Howard Centre for Financial
and the Cambridge Institute for Sustainable Leadership (CISL). Analysis. Associated courses include the MSc in Climate
► UK business schools generate a future-ready talent pool by Change, Management & Finance, and the free online course
integrating sustainability into their curricula, e.g. 3 of the top 5 Climate Change: Financial Risks and Opportunities.
universities in the 2020 ‘Better World MBA’ ranking are British15. ► Infrastructure Focus: The CCFI has published research with
► UK universities make up around a quarter of the members of the TheCityUK on Financing low-carbon infrastructure to achieve
multi-disciplinary academic network GRASFI (Global Research net-zero emissions targets in the UK and the EU. They also
Alliance for Sustainable Finance and Investment). published research on how a COVID-19 green recovery could
► Professional bodies have created new qualifications for green be achieved through investments in resilient and low-carbon
finance, such as CFA UK’s Certificate in ESG Investing, and energy, transport, and broadband infrastructure. The
Chartered Banker’s Certificate in Green and Sustainable Finance establishment of the CCFI was sponsored by infrastructure
► The Green Finance Education Charter brings together 12 leading investment manager Quinbrook Infrastructure Partners.
financial chartered and professional bodies to integrate green and ► ESG: The CCFI undertakes cutting-edge research on how
sustainable finance principles into their training programmes. capital markets are responding to climate change, helping
► The Green Finance Institute (GFI) was established in 2019 at the investors and policymakers overcome the lack of clarity about
nexus of the public and private sector to unlock barriers to risk and return in clean energy, low-carbon technologies, and
investment that benefit the environment, society, and business. green infrastructure. CCFI’s research covers three challenges:
► In 2021, the UK Centre for Greening Finance and Investment Climate Risk Management; Energy Transition Investment; and
(CGFI) was launched, led by a consortium of universities. Financial Architecture for a Sustainable Climate.
Green finance product:
Capital markets
Summary of UK’s green finance capabilities Case study: HICL Infrastructure – InfraRed
► The UK is one of the world’s largest capital markets and one of ► Background: Launched in 2006, HICL is the UK’s largest
the world’s largest issuers of sustainable debt to date. infrastructure investment company, and first to list on the main
► In 2020 the London Stock Exchange (LSE) ranked 10th globally market of the London Stock Exchange. HICL’s investment
for volume of green bond listings, down from 2nd in 2018, due manager is InfraRed Capital Partners.
to an increase of listings across European peers16, 17. ► Infrastructure focus: HICL invests in operational and under-
► The LSE, joined the UN Sustainable Stock Exchanges in 2014, construction infrastructure to support the delivery of essential
before peers in Germany, Japan, Singapore and Hong Kong. services for local communities, working in partnership with the
► In 2015, the LSE became the first major exchange to launch a
public and private sectors. HICL's portfolio comprises over 100
dedicated segment for green bonds, and has since developed investments, located primarily in the UK, but also in Canada,
a broad sustainable debt offering thorough the Sustainable France, Ireland, the Netherlands and the USA. The projects
Bond Market (SBM),a platform designed to help issuers meet span various sectors – namely social infrastructure (such as
investor demands for greater sustainable finance disclosures. schools, hospitals libraries); transport (such as rail and roads);
and utilities (such as electricity, gas and water).
► The SBM has 260+ debt securities, many of which are ‘world
► ESG: Sustainability factors are embedded into InfraRed’s
firsts’ in terms of currency, geography or structure, including the
first certified green bonds out of China, India, the Middle East, investment processes across the investment lifecycle, which
and first sovereign green bonds from Asia and the Americas. covers: (1.) Negative screening; (2.) Deal screening; (3.) Due
diligence; (4.) Investment approval; (5.) Management and
► UK firms have strong international expertise in underwriting,
reporting; (6.) End of investment life. InfraRed is a UN PRI
listing, assurance and legal services, e.g. Barclays and HSBC signatory, maintaining an A+ rating for its infrastructure
are regularly among the top green bond underwriters globally. business since 2014. A climate change impact assessment is
► In November 2020, the Chancellor announced that the UK will underway across HICL’s portfolio, aligned with TCFD
launched its first Sovereign Green Bond in 2021, further recommendations. HICL also considers how its investments
underlining the UK’s sustainable finance commitment and offer. contribute to the SDGs and has been a certified carbon neutral
company since 2019.
Funds
Summary of UK’s green finance capabilities Case study: Foresight Global Real Infrastructure Fund (GRIF)
► The UK asset management sector has a strong and unique ► Background: Foresight is a newly listed infrastructure and
green finance offering, with a few key players in the UK leading private equity investment manager which has been managing
the way globally, developing a number of successful funds and funds on behalf of institutions and retail clients for over 35 years.
helping to create depth in the market. Foresight has over £6.6 billion of assets under management
across a number of funds. Headquartered in London with six
► The UK is strong in offering funds with innovative designs, such
further UK regional offices, Foresight also has offices in
as renewable energy, sustainability and impact funds, creating
Luxembourg, Rome, Sydney, Madrid and Guernsey.
variety in the market, and has the know-how to replicate these
► Infrastructure focus: The Foresight Global Real Infrastructure
funds in other international markets, which they are
increasingly doing globally. Fund (GRIF) invests in publicly traded shares of companies that
own or operate infrastructure or renewable energy assets across
► UK firms also provide a strong offering of services related to
the world. Other infrastructure funds managed by Foresight
green funds that builds on the maturity of the UK market and include the Foresight UK Infrastructure Income Fund and the
expertise and credibility of its service providers – notably in listed JLEN, which was awarded the Green Economy Mark by the
terms of legal and non-legal advisory, listings, assurance and London Stock Exchange. These funds invest across solar, wind,
data services. hydro, bioenergy, waste and wastewater infrastructure.
► The green equity market has a number of listed equity funds ► ESG: Foresight evaluate and score projects’ sustainability
from specialist asset managers and the London Stock credentials throughout the investment cycle against a number of
Exchange’s Green Economy Mark helps investors identify ESG factors. Each infrastructure investment must adhere to their
London-listed companies and funds which derive 50% or more Five Criteria for Sustainable Infrastructure, which cover: (1.)
of their revenues from environmental solutions. Sustainable development contribution; (2.) Environmental
► Currently over 25 green funds and over 125 ETFs (exchange- footprint; (3.) Social engagement; (4.) Governance; and (5.) Third
traded funds) are listed with the Green Economy Mark, party interactions. Foresight is a UN PRI signatory, UN Global
attracting the interest of global asset managers and owners. Compact participant, and tracks the SDGs across its investments.
Project finance
Summary of UK’s green finance capabilities Case study: Infracapital
► The UK’s expertise in project finance and infrastructure ► Background: Infracapital is the infrastructure equity
development stem from its mature infrastructure regulatory investment affiliate of M&G, a British investment manager.
framework and its experience in structuring and financing low- Infracapital is one of the longest standing European
carbon infrastructure projects, such as offshore wind. infrastructure platforms investing in a wide range of greenfield
► Most energy, utilities and digital infrastructure projects have and brownfield infrastructure projects across Europe across the
been financed privately, and almost half of the infrastructure past twenty years.
pipeline is expected to be financed privately in the next years. ► Infrastructure: Infracapital invests in unlisted equity positions
► The UK Government’s commitment to net-zero by 2050 will in European infrastructure assets, covering utilities, transport,
further drive green project financing opportunities, particularly communication, renewables, waste, water and social
with the establishment of the new UK Infrastructure Bank which infrastructure. In April 2020, it acquired a 63% majority stake in
counts tackling climate change as part of its objectives, and will Fortum Recharge, the largest public electric vehicle charge
co-invest alongside the private sector in infrastructure projects18. point operator in the Nordics, which owns 1,300 and operates
► Various UK banks and asset managers are active in project 1,400 public charging points in Norway, Sweden and Finland.
finance, with an appetite to export their capabilities, providing ► ESG: as a long-term owner of essential infrastructure assets,
debt, equity and management of assets. Infracapital sees responsible investing as part of its ethos. ESG
► The UK shows leadership in the appraisal sustainability plays a role across the lifecycle of their investments, in
indicators of infrastructure assets, through the development of identifying and appraising investment opportunities through to
propriety sustainability frameworks and the integration of the post-acquisition monitoring and oversight to improve the
Equator Principles in project due diligence processes. companies in which Infracapital invests. Infracapital was
► UK stakeholders play a leading role in international sustainable accredited an A+ in their first submission as signatory to the UN
infrastructure initiatives, such as the Green Investment Principle PRI in 2020.
(GIP) for the Belt and Road Initiative, and the FAST-Infra
initiative.
4. UK green finance market
4.2: POLICY CONTEXT: GREEN FINANCE

& INFRASTRUCTURE
Green finance:
UK market development timeline (1/2)
2001 2005 2006 2008 2009 2011 2012 2015
UK Emission UN PRI Stern Review Climate First Green UK govt. Green Transport for
Trading established on the Change Act Bond listed in launches Investment London issued UK’s
Scheme (ETS) in London Economics of adopted by the London innovative Bank (GIB) first public agency
is the first Climate Parliament Stock £3.87bn established Green Bond
multi-sector Change making the Exchange by International
carbon trading published UK the first the World Climate Fund, PRA publishes its
Natural
programme country to Bank setting the report on the impact
Capital
(subsequently enshrine its scene for the of climate change on
Committee
scaled-up and carbon UK’s various the UK insurance
established
replaced by reduction International sector, setting out a
to advise
EU-ETS) targets into Climate framework for
gvmt. on
legislation Finance climate-related
natural
initiatives financial risks
capital, such
as oceans & Mark Carney
ecosystems spearheads the
establishment of the
TCFD as Chair of the
Financial Stability
Board
UK govt. Commits a
further £5.8bn to the
KEY:
Government-led policy/initiative
International Climate
Private-led initiative Sources: Adapted from HM treasury & BEIS (2019), Green Finance Strategy; additional Carbon Trust research Fund
Green finance:
UK market development timeline (2/2)
2016 2017 2018 2019 2020 2021
G20 Sustainable TCFD publishes final World’s first Green PRA and FCA jointly Mark Carney is The Dasgupta Review
Finance Study Group, recommendations Finance Certificate establish the Climate appointed as the PM’s on the Economics of
co-chaired by UK and endorsed by the UK launched by the Financial Risk Forum COP26 Finance Adviser, Biodiversity is
China, holds its first government Chartered Banker launches the COP26 published
meeting and produces Institute PRA publishes supervisory Private Finance Agenda
synthesis report for Green Finance Initiative statement to enhance banks’ The UK joins the
Leaders hosts first Green Finance The Green Finance and insurers’ approaches to The Chancellor International Platform
Summit Taskforce sets out climate risks announces plans for a on Sustainable Finance
Launch of the City of recommendations UK Green Taxonomy
London’s Green Government establishes to accelerate green UK is a founding member of and UK Green Technical Govt. invests £10m in
Finance Initiative and the independent Green finance the Coalition of Finance Advisory Group the new UK Centre for
publication of its first Finance Taskforce and Ministers for Climate Action Greening Finance and
report on ‘Globalising publishes the Clean PRA publishes its The Joint Government- Investment (CGFI)
Green Finance’ Growth Strategy report “Transition in Bank of England (BoE) Regulator TCFD The govt. plans to issue
thinking: The announces plans to stress- Taskforce publishes a
Central Banks and its first Sovereign
£12bn mobilised by impact of climate test financial system’s roadmap for mandatory
Supervisors Network for Green Bond in 2021
the GIB supporting change on the UK resilience to climate risks economy-wide climate-
100 projects across Greening the Financial banking sector” related financial
System (NGFS) is Govt. sets Net-Zero GHG BoE to launch the
the UK with 75% disclosure by 2025 Climate Biennial
leveraged beyond GIB announced with Bank of FCA engages emissions target for 2050
England as founding Green finance and Exploratory Scenario
stakeholders on its
member Govt. publishes Green Finance innovation is part of (stress test) in June
discussion paper on
Strategy; launches the Green the PM’s Ten Point Plan
climate change and COP26 to be hosted in
Finance Institute (GFI) co- for a Green Industrial
KEY: green finance Glasgow in November
funded by the City of London Revolution
Government-led policy/initiative
Private-led initiative Sources: Adapted from HM treasury & BEIS (2019), Green Finance Strategy; additional Carbon Trust research
Green finance:
Regulatory context
The Bank of England - Prudential The Financial Conduct Authority (FCA) The Financial Reporting Council (FRC) The Pensions Regulator (TPR)
Regulation Authority (PRA) The Financial Conduct Authority (FCA) is the The Financial Reporting Council (FRC) is the The Pensions Regulator (TPR) is the
The PRA sits within the Bank of England and conduct regulator for 56,000 financial services UK’s independent regulator for accountants, public body that protects the UK’s
is responsible for prudential regulation of firms and financial markets in the UK and the actuaries and auditors, responsible for workplace pensions. TPR makes
banks, building societies, credit unions, major prudential regulator for over 18,000 of those promoting transparency and integrity in sure employers, trustees, pension
investment firms and insurers. Prudential firms. The FCA’s actions on green finance business. It also sets the UK Corporate specialists and business advisers can
regulation require financial firms to maintain include: Governance Code and Stewardship Code. fulfil their duties to scheme members.
sufficient capital and have adequate risk ► Extending the remit of the Independent The FRC’s actions on green finance include: It has a role in driving up standards of
controls in place. The PRA’s actions on Governance Committees to cover ► The Corporate Governance and governance and trusteeship. The
green finance include: consideration of firm’s ESG priorities Stewardship Codes encourage TPR’s actions on green finance
► Published reviews into the financial risks ► Launched a Green FinTech Challenge to companies and investors to report on include:
from climate change facing the encourage firms to develop innovative accounting for sustainability factors ► Updating Defined Contribution
insurance sector and banking sectors; solutions to support the UK’s transition to ► Through the Joint Forum on Actuarial investment guidance to clarify
► Published a Supervisory Statement to cleaner economic growth. Regulation, the FRC highlights the risks and strengthen trustees’ duties,
enhance banks’ and insurers’ ► Published a discussion paper on climate to actuarial work from climate change including in relation to ESG and
approaches to managing climate risk change and green finance setting out a ► Monitors whether companies are climate considerations,
► Asked insurers to consider impact of range of proposals in relation to climate complying with the statutory disclosure ► Contributed to the revised
physical and transition risk scenarios as change. requirements of the strategic report Stewardship Code consultation
part of the insurance stress test. ► Joined the IOSCO sustainable finance ► The FRC’s audit monitoring considers the as a tool to improve investment
► Plans to test the financial system’s network to collaborate with other adequacy of the auditors’ work over risk governance and risk
resilience to climate-related risks members on sustainable finance issues. disclosures, including climate risk management on ESG issues
► Established the Climate Financial Risk ► Introduced new requirements to improve ► The Financial Reporting Lab published a ► Co-established the Pensions
Forum, jointly with the FCA, to build the shareholder engagement and increase report on best practice climate reporting Climate Risk Industry Group
private sector’s intellectual capacity transparency around stewardship. for corporates. (PCRIG) with the Department of
Work and pensions and industry
► Co-founded the Network for Greening ► Launched a Discussion Paper on building ► The FRC’s Future of Corporate Reporting representatives to produce
the Financial System (NGFS) a regulatory framework for effective considers the need for better corporate guidance for pension schemes
► Undertake climate disclosures in line stewardship with the FRC sustainability information. on climate-related. 42
with the TCFD.
Sources: Adapted from HM treasury & BEIS (2019), Green Finance Strategy; additional Carbon Trust research
Overview of UK’s infrastructure policy, planning and financing landscape
GOVERNMENT
GOVERNMENT FUNDED
PUBLIC BODIES Departments
Advises on Government Centre of
long-term Develops sector policies, proposes regulatory changes, collects
National Infrastructure Expertise
strategy and taxes, and allocates budget to sectors & local authorities. Advises on
Commission planning project Infrastructure
Cabinet Office MHCLG DEFRA
delivery Projects Authority
Climate Change Committee Treasury BEIS DfT
Funds made available for local authorities (e.g. via the PWLB)
FINANCIAL REGULATORS
Local Authorities
Prudential Regulation Authority
Competitively awards, manages
Guarantees & co-investment
and co-finances infra projects Directly

Financial Conduct Authority Competitively
awarded
awarded
Infrastructure developers & operation
Financial Reporting Council operation
contracts &
contracts construction firms
core funding
Govt. awarded contracts or
The Pensions Regulator
private-led initiatives
construction INFRASTRUCTURE REGULATORS
Sets rules and standards
FINANCIERS Private infrastructure Public infrastructure Sets rules OFGEM
operators INFRASTRUCTURE operators and
Public Financing e.g. power, ASSETS OFCOM
e.g. Highways standards
e.g. National Infrastructure Bank
distribution network England
Private Banks operators operation OFWAT
Institutional investors Insurance and other service providers

e.g. pension funds, venture Debt and equity for infrastructure sectors
e.g. law firms, consultancies, etc. Source: Carbon Trust research, non-
capitalists exhaustive map
GOVERNMENT
GOVERNMENT FUNDED
Develops sector policies, proposes regulatoryA Regulated
collectsAsset Base (RAB) model is commonly
long-term changes,
strategy and taxes, and allocates budget to sectors & used in the UK for infrastructure
local authorities. Advises on assets across water,
Commission project Infrastructure
planning Cabinet Office MHCLG gasDEFRA
and electricity delivery
networks, as well as unique
Projects Authority
Climate Change Committee Treasury BEIS projects
DfT such as the Thames Tideway Tunnel and
Funds made available for local authorities (e.g. vianuclear
the PWLB) energy.
The company receives a licence
Local Authorities which grants it the right to charge a regulated price
to users in exchange for provision of the
Financial Conduct Authority Competitively and co-finances infra projects infrastructure.

Directly The independent regulators ensure
awarded
awarded expenditure is in the interest of users, and that
operation
Financial Reporting Council operation Infrastructure developers &
contracts construction firms operating and &safety standards are maintained.
contracts
core funding
private-led initiatives
construction INFRASTRUCTURE REGULATORS
FINANCIERS Private infrastructure Public infrastructure Sets rules OFGEM
operators INFRASTRUCTURE operators and

GOVERNMENT
GOVERNMENT FUNDED
TheNational
UK hasInfrastructure
been a global long-term Develops sector policies, proposes regulatory changes, collects
Expertise
market leader in developing
Commission planning Cabinet Office MHCLG project Infrastructure
DEFRA
new funding and financing delivery Projects Authority
models for infrastructure. For
example, the transport sector
has been historically Local Authorities
developed via government/ Competitively awards, manages
and co-finances infra projects Directly

Financial
public Conduct(i.e.
funding Authority
they are Competitively
awarded
awarded
paid for by
Financial the taxpayer),
Reporting Council operation Infrastructure developers & operation
contracts &
whilst privatised and contracts construction firms
core funding
The Pensions
regulated Regulator
sectors such as private-led initiatives
energy & utilities have been construction INFRASTRUCTURE REGULATORS
privately
FINANCIERS funded (i.e. they are Private infrastructure Public infrastructure Sets rules OFGEM
FINANCIERS operators INFRASTRUCTURE
paid for by the consumer). operators and

GOVERNMENT
GOVERNMENT FUNDED
long-term Develops sector policies, proposes regulatory changes, collects
Commission planning project Infrastructure
Cabinet Office MHCLG DEFRA
delivery Projects Authority
Local Authorities
Government Directly plays a role in implementing
Financial Conduct Authority Competitively and co-finances infra projects

awarded infrastructure
awarded policy in several ways:
Infrastructure developers & operation
Financial Reporting Council operation • Providingcontractsfunding
& (varying widely between
contracts construction firms
Govt. awarded contracts or sectors and projects), directing investment
core funding
private-led initiatives and support towards certain projectsREGULATORS
INFRASTRUCTURE that the
construction
Sets rules and standards Government considers valuable for the UK.
OFGEM
FINANCIERS Private infrastructure • Ensuring
Public infrastructure
the development
Sets rules of coherent
operators INFRASTRUCTURE operators and OFCOM
e.g.infrastructure “systems” through long-term
Public Financing e.g. power, ASSETS Highways standards
distribution network frameworks
England in which individual projects
OFWAT play a
Private Banks operators operation role but which require national-level strategic
Civil Aviation Authority
Institutional investors leadership and decisions19.
Insurance and other service providers
Policy context:
Domestic planning of infrastructure
The National Infrastructure Commission In November 2020, HM Treasury The Infrastructure Projects Authority (IPA) is
(NIC) provides the Government with published its first ever National the government’s centre of expertise for
impartial, expert advice on the UK’s long- Infrastructure Strategy21, which sets out infrastructure and major projects. It provides
term infrastructure needs. It was the government’s plans to radically expert project delivery advice, support and
established in January 2017 as an improve the quality of the UK’s assurance to various government
executive agency of HM Treasury. infrastructure across all regions and put departments. The IPA’s purpose is to drive
the UK on the path to net-zero emissions continuous improvement in the way
by 2050. The strategy is a response to government delivers infrastructure and major
In each Parliament, the NIC will provide a
report with recommendations on the UK’s the NIC’s National Infrastructure projects. Established in 2016, it combined the
Assessment. functions of the Major Projects Authority and
infrastructure needs over the next 30 years
Infrastructure UK. The IPA reports jointly to
called the National Infrastructure
Published during the Covid-19 pandemic, HM Treasury and the Cabinet Office.
Assessment20, to which the Government
will respond to. The first Assessment was the Strategy intends to demonstrate how
published in July 2018. In addition to the the government will “build back fairer, The IPA’s publications include: the National
Assessments, the NIC publishes reports on faster and greener” as part of its Infrastructure Delivery Plan22, which sets out
pressing infrastructure challenges and economic recovery. The objectives of the how the government will support the delivery
topics, such as resilience to shocks and Strategy are to: of infrastructure projects from 2016 to 2021;
Greenhouse Gas Removal technologies, ► Boost growth and productivity across the National Infrastructure and Construction
as requested by the Government. the whole of the UK (and Procurement) Pipelines which regularly
The NIC’s mandate covers all sectors of ► Decarbonise the economy and adapt sets out details of planned public and private
economic infrastructure, defined as: to climate change investment in infrastructure; and the Annual
energy, transport, water and wastewater, ► Support private investment, e.g. Report on the Government Major Projects
waste, digital communications, and flood through a new national infrastructure Portfolio (GMPP), which provides a status
risk management. However it does not bank update on the largest, most innovative and
cover social infrastructure, housing, land highest risk projects and programmes
► Accelerate and improve project
use or agriculture. delivered by government.
delivery, e.g. through regulatory
Govt. funded public body reform.
Ministerial department Govt. Centre of Expertise
Policy context:
Domestic financing of infrastructure
Review of infrastructure finance UK Guarantees Scheme (UKGS) Sector-specific support mechanisms European Investment Bank (EIB)
In November 2020, the Treasury UK Guarantees Scheme (UKGS) The UK has developed a range of tools to The European Investment Bank (EIB) has lent
published the feedback from its supports infrastructure investment by attract private investment in infrastructure €119 billion to the UK since 1973 for a various
consultation on Infrastructure providing financial guarantees for projects. The mechanisms operating in each infrastructure projects. Repayments on the
Finance Review23. The government’s money lent to fund infrastructure sector are refined by government and regulators loans are predicted to continue until 2030.
full policy response is included in the projects. HM Treasury provides to ensure they continue to support policy goals Following the UK’s departure from the EU, the
National Infrastructure Strategy. guarantees to lenders so that if the and deliver value for money. These include UK is no longer an EIB member
Plans to support private infrastructure recipients of loans are unable to keep setting revenues and prices on a competitive
investment include: up re-payments or if the projects fail, basis, e.g. Contracts for Difference (CfD) in Private Finance Initiative (PFI)
► A new UK Infrastructure Bank the banks will still be reimbursed. In offshore wind24; subsidising uncommercial Launched in 1992, the Private Finance
to co-invest alongside the private return for the guarantee, HM projects like gigabit broadband rollout; or Initiative (PFI) was the UK’s take on Public
sector in infrastructure projects Treasury charge an annual fee to bespoke mechanisms like the Regulated Asset Private Partnerships (PPPs). These were long-
with a high degree of operational each infrastructure company based Base model for Thames Tideway Tunnel . term contracts (~30 years) between a public
independence. It will support the on the project risks. This is intended sector entity and a private sector provider. The
Infrastructure Investment Funds (co- private sector would design, build, finance,
UK’s net-zero target and will offer to transfer the risk of investing in
infrastructure from the banks to the investment) maintain and operate infrastructure assets (e.g.
a range of products, e.g.
guarantees, debt, and equity) government and therefore encourage The government has established funds to hospitals, roads), and once operational, the
more lending for this sort of project, develop new markets. The aim is to crowd-in public sector would pay a monthly fee. Though
► Improve independent
ultimately avoiding adverse credit market participants and set a track record for reformed in 2012 as Private Finance 2 (PF2),
economic regulation, such as
conditions that make securing private these new technologies. The government acts the use of PFI/2 in new projects was ended in
by setting a clear, long-term
finance for infrastructure difficult. as a cornerstone investor, with private sector 2018 due to increasing contractual inflexibility,
strategy for regulators; updating
Eligible sectors include transport, operating the funds and making investment complexity & risk to gvmt. finances25.
regulator duties (e.g. to support
energy, utilities, housing, health and decisions. In 2017, the government procured
net-zero targets); promote more Green Investment Bank (GIB)
education. The UKGS was funds for digital and EV charging infrastructure.
competition; and build public The Green Investment Bank (GIB), launched
confidence in utility provisions. announced in July 2012 and was last
Local Government Pension Schemes by the government in 2012 to “accelerate the
extended in 2016 until to at least
► Develop innovative financing In 2018, 89 Local Government Pension UK’s transition to a greener, stronger economy”
2026. To date it has issued £1.8
tools, such as new funding Schemes (LGPS) pooled their assets into 8 was privatised after its sale to Macquarie
billion of guarantees to projects worth
mechanisms (e.g. for CCUS), “British Wealth Funds” to reduce costs and Group in 2017 for £1.62 bn, which continues to
£4 billion. UKGS reports yearly in the
expanding existing mechanisms achieve greater scale to invest in infrastructure finance sustainable infrastructure in the UK as
Infrastructure (Financial Assistance)
(e.g. CfDs for solar energy), R&D projects. the Green Investment Group (GIG)26.
Act 2012: Annual Report.
National Infrastructure Strategy Support for private infrastructure financing Discontinued forms of financing
Policy context:
International financing of infrastructure
UK Export Finance Infrastructure Exports: UK (IE:UK) Global Infrastructure Programme (GIP) CDC
UK Export Finance (UKEF) is the UK’s Infrastructure Exports: UK (IE:UK) is a The £25 million Global Infrastructure Established in 1948 and wholly owned
export credit agency and a government joint venture partnership between the Programme (GIP) was a cross-government by the FCDO, the CDC is the UK’s
department, working closely with the Department for International Trade initiative funded through the Prosperity Fund and development finance institution. It
Department for International Trade (DIT) (DIT) and UK industry. The IE:UK delivered by the FCDO, the IPA, and BEIS until invests in businesses across Africa
and under the consent of HM treasury. With board is made up of 18 of the UK’s March 2021. The GIP provides and funds and South Asia active in seven
a maximum commitment of £50 billion, leading companies in the infrastructure technical support to disseminate world-leading priority sectors with the highest
UKEF provides guarantees, loans and sector and is co-chaired by the UK infrastructure methodologies, such as potential to create the most jobs for
insurance to help UK companies: Minister for Exports and a leading National Infrastructure Planning (NIP), the 5 the capital invested, and contribute
► Win export contracts, through attractive private sector industrialist. The Case Model (5CM) for business case towards many of the SDGs. Their
financing terms to their overseas buyers purpose of IE:UK is to bring together development, Project Initiation Routemap (PIR), second highest sector of investment
► Fulfil orders via access to trade finance the very best of UK expertise and and Building Information Modelling (BIM). These is infrastructure, which includes water,
experience in the infrastructure sector, are intended to produce lasting change in energy, and transport among others.
► Get paid for overseas sales, by forming consortia groups in response partner countries (Colombia, Indonesia and
providing export-related insurance to major overseas infrastructure Vietnam) across economic infrastructure and International Development
► Protect their international investments, projects. IE:UK consortia groups look social infrastructure. Infrastructure Commission
by providing political risk insurance to work alongside client teams as a Sustainable Infrastructure Programme (SIP) In 2020 the former Department for
UKEF works with over 100 private sector delivery partner, bringing blended The Sustainable Infrastructure Programme Latin International Development (DFID)
partners to deliver support and complement finance and funding options to the America (SIP-LA) is a £177.5m bilateral [now the FCDO], published a report27
the private sector. UKEF supports UK table through UKEF and The City, programme funded by UK International Climate by the International Development
businesses across all sectors, including the cutting edge digital design techniques, Finance (ICF), managed by BEIS and delivered Infrastructure Commission
infrastructure supply chain, such as by technologies and sustainable and by the Inter-American Development Bank to recommending a new: UK
supporting the fulfilment of bridge and green modern methods of construction support partner countries reduce their emissions Infrastructure Project Development
airport projects. In December 2020, the UK through the supply chain, and working by mobilising private investment into low-carbon Facility; UK offer on guarantees to
Prime Minister announced ending support with local suppliers and contractors to infrastructure. The programme works across mobilise private capital; and
for fossil fuel projects abroad through export build capacity in market and create a Brazil, Colombia, Mexico and Peru, and will structures to strengthen institutional
finance, aid funding and/or trade promotion. legacy for the future. span a period of 5 years (2017 – 2022). investment into infrastructure
49
Export support Development aid (non-exhaustive list of examples)
Policy context:
Economic engagement between the UK and Brazil
Economic and Financial Dialogue (EFD)
The UK holds bilateral Economic and Financial Dialogues (EFDs) with the respective finance ministries of three key emerging market partners: Brazil, India, and
China. In December 2020, the 4th UK-Brazil EFD was held between the UK’s Chancellor of the Exchequer and Brazil’s Economy Minister. In addition to
agreements across the topics of coronavirus and economic cooperation, multilateral cooperation, and financial services, the Joint Statement covered:
► Sustainable recoveries, including commitments to promote low carbon growth and economic recoveries from Covid-19 based on more sustainable, digital,
and resilient economies; supporting the development of global carbon markets; promoting sustainability across agriculture and supply chains; cooperation in
multilateral fora and international initiatives on environmental challenges; working together to achieve an ambitious outcome at COP26.
► Green finance, including strengthening green finance markets to facilitate capital flows into sustainable infrastructure; supporting the engagement between
the Green Finance Institute (GFI) and the Brazilian Financial Innovation Laboratory (LAB) to foster innovative sustainable finance instruments; new
engagements on sustainable finance (including an industry roundtable in early 2021); mainstreaming climate risks into financial decision-making.
► Infrastructure, including support for Brazil’s efforts to attract private investment by promoting regulatory reforms that increase competition across energy,
sanitation and freight transport; welcoming the Global Infrastructure Programme, which is providing guidance and capacity building to the Brazilian
Government; encouraging the ongoing work of the UK-Brazil Infrastructure and Capital Markets Taskforce.
Trade Foreign Direct Investment (FDI) Development Aid

Total trade between the UK and Brazil, including imports and In 2017, the UK’s Department for International According to Development Tracker, there
exports in goods and services, was worth £6.5bn in 2019, an Trade (DIT) signed a Memorandum of are 89 active aid projects sponsored by
increase of 12.6% from 2018, according to the ONS Pink Understanding (MoU) with Apex-Brasil (the the UK in Brazil as of February 2021.
Book. In terms of total trade in 2019, Brazil was the UK’s 34th Brazilian Trade and Investment Promotion These are implemented by various
largest trading partner (the largest in Latin America, ahead of Agency) with the aim to enhance cooperation to governmental and non-governmental
Mexico and Chile); and the UK was Brazil’s 16th largest trading promote foreign direct investment (FDI) between entities, such as BEIS, Defra, the FCDO,
partner (behind other European countries like Germany, Brazil and the UK. At the time of signing, the UK the British Council, and the Inter-
Netherlands, Italy, Spain and Belgium). was the 4th largest foreign investor in Brazil. American Development Bank. This
However, by 2018 the UK had fallen out of the incudes the FCDO Prosperity
top 10 foreign investors in Brazil. Programme’s £2.1m Brazil Green
Following the 11th UK – Brazil Joint Economic and Trade
The UK has also consistently been a supporter Finance Programme (BGFP), which
Committee (JETCO) meeting in November 2020 between
of Brazil’s accession to the OECD, which would sponsors this report, among other
trade secretaries, the UK and Brazil agreed to intensify
further facilitate investment into the country. workstreams.
preparations for a future Free Trade Agreement.
Sources: Office of National Statistics (ONS), BEIS, DIT, HM Treasury, FCDO – all sources are linked within the text
UK market
References
1) City of London (2020), Our global offer to business: London and the UK’s competitive strengths in a changing world:
https://www.theglobalcity.uk/PositiveWebsite/media/Research-reports/CoL-Our-global-offer-to-business.pdf
2) Long Finance And Financial Centre Futures (2020), Global Financial Centres Index 29: https://www.longfinance.net/publications/long-finance-reports/global-
financial-centres-index-29/
3) Long Finance And Financial Centre Futures (2020), Global Green Finance Index (GGFI6): https://www.longfinance.net/publications/long-finance-reports/global-
green-finance-index-6/
4) City of London (2019), London: A Global Marketplace For Infrastructure Solutions: https://www.theglobalcity.uk/resources/london-infrastructure-solutions
5) HM Treasury and BEIS (2019), Green Finance Strategy: https://www.gov.uk/government/publications/green-finance-strategy
6) Investment Association (2020), Investment Management in the UK 2019-2020, https://www.theia.org/sites/default/files/2020-09/20200924-imsfullreport.pdf
7) Carbon Trust for the Department of International Trade (DIT) (2020). Green Finance Scoping study
8) TheCityUK (2020), Key Facts about the UK as an international financial centre 2020, https://www.thecityuk.com/assets/2020/Reports/8716847a2f/Key-facts-
about-the-UK-as-an-international-financial-centre-2020.pdf
9) PRA (2018), Transition in thinking: The impact of climate change on the UK banking sector, https://www.bankofengland.co.uk/news/2018/september/transition-in-
thinking-the-impact-of-climate-change-on-the-uk-banking-sector
10) City of London (2020), Sustainable and green finance: https://www.theglobalcity.uk/resources/green-finance
11) ABI (2021), UK Insurance & Long-Term Savings Key Facts, https://www.abi.org.uk/globalassets/files/publications/public/key-facts/abi_key_facts_2021.pdf
12) LMG (2020), London Matters, https://lmg.london/wp-content/uploads/2020/05/London-Matters-2020-Digital-1.pdf
13) University of Pennsylvania (2020), 2020 Global Go To Think Tank Index Report, https://www.gotothinktank.com/global-goto-think-tank-index
14) HM Treasury (2020), Net Zero Review: Interim Report,

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945827/Net_Zero_Review_interim_report.pdf
UK market
References
15) Corporate Knights (2020), 2020 Better World MBA rankings, https://www.corporateknights.com/reports/2020-better-world-mba-ranking-better-world/2020-better-
world-mba-ranking-results-16049880/
16) Climate Bonds Initiative (2020), Green Bonds Market Summary Q3 2020,
https://www.climatebonds.net/system/tdf/reports/cbi_q3_2020_report_01c.pdf?file=1&type=node&id=54810&force=0
17) Climate Bonds Initiative (2018), Green Bonds Market Summary Q3 2018, https://www.climatebonds.net/files/files/Q3%202018%20Highlights_final.pdf
18) HM Treasury (2021), Policy Design of the UK Infrastructure Bank, https://www.gov.uk/government/publications/policy-design-of-the-uk-infrastructure-bank
19) UK Parliament House of Commons Library (2021), Infrastructure policies and investment: briefing paper, https://commonslibrary.parliament.uk/research-
briefings/sn06594/
20) National Infrastructure Commission (2018), National Infrastructure Assessment, https://nic.org.uk/studies-reports/national-infrastructure-assessment/
21) HM Treasury (2020), National Infrastructure Strategy, https://www.gov.uk/government/publications/national-infrastructure-strategy
22) Infrastructure Projects Authority (IPA) (2020), National Infrastructure Delivery Plan and Pipeline, https://www.gov.uk/government/collections/national-
infrastructure-plan
23) HM treasury (2020), Infrastructure Finance Review, https://www.gov.uk/government/consultations/infrastructure-finance-review
24) UK Parliament House of Commons Library (2020), Support for low carbon power: research briefing, https://commonslibrary.parliament.uk/research-briefings/cbp-
8891/#:~:text=The%20Government's%20primary%20mechanism%20for,per%20unit%20of%20power%20output.
25) National Audit Office (2018), PFI and PF2, https://www.nao.org.uk/report/pfi-and-pf2/
26) National Audit Office (2017), The Green Investment bank, https://www.nao.org.uk/report/the-green-investment-bank/
27) DFID (2020), International Development Infrastructure Commission Recommendations Report,

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/859311/DIC-Report-2020b.pdf
28) CLT (2019), UK-Brazil Infrastructure and Green Finance Commercial Assessment
5. Brazil Green Finance market
53
5. Brazil green finance market
5.1: CAPABILITIES: SECTORS &

PRODUCTS
Overview of Brazil capabilities across green finance
sectors and products
Summary
As of March 2020, Brazil was the second-largest green bond market in Latin Asset management and
Insurance
America ($5.9bn of green bonds issued)¹. However, despite the country’s asset ownership Banking
infrastructure needs, investment in infrastructure has been less than 2% of Local insurance market is
Large AM centre in Latin A structured banking system
concentrated into auto,
annual GDP. America. Green finance is not with advanced ESG rules.
health, personal insurances.
a strategic driver yet for asset Green finance is limited to
A green finance ecosystem is still under development as Brazil builds local Infra re/insurance usually
managers (with few few operations.
offered by intl. players.
capabilities to provide both products and services, and to develop stronger exceptions).
institutional knowledge and engagement in the green agenda.
In this sense, it is home to a fertile environment for new markets Service providers
NGOs, Think tanks
Regulators, Government
and innovation in green finance. Key features include: Presence of national and History of mandatory
Sectors
A variety of local and intl.
international service environmental regulations and
• A strong banking system backing infrastructure projects and increasingly providers, law and
NGOs and think tanks with
voluntary commitments, but
focused on developing green finance products and tools. socio-environmental
consultancy firms. Those that requires government
expertise. Green finance is
• ESG funds and green financial product offerings receiving increasing interest are specialised in ESG issues leadership to promote the
still a niche.
or green finance are scarce. market’s development.
across all types of investors.
• Lower interest rates incentivise investor diversification
• The Central Bank of Brazil (BCB) has committed to implement mandatory Universities, Professional
climate-related disclosures for financial institutions aligned with TCFD bodies
recommendations by 2022. Research on green finance is
modest. Professional
programmes are being
The country has a track record of attracting international climate finance² developed.
(receiving over BRL 3bn from international donors toward the Amazon Fund and
other funds/projects). However, this type of financial aid has had a minor effect in
enhancing Brazil’s green finance capabilities, limited to inducing the few
Capital markets Funds
institutions managing donations (primarily BNDES) to assess and report on basic Project finance
Products
ESG metrics related to this share of its overall portfolio. New indices and products are An increasing offer of
Strong local expertise in
being offered. Infrastructure infrastructure and ESG funds,
structuring infrastructure
Areas of development for Brazil’s green finance market include: Long-term, debentures and ESG funds but still accounting for a rather
projects and leadership from
green finance policy & regulatory push; Consistent application of sustainability are the main drivers for green small volume considering its
Development Banks.
finance. potential.
standards across the existing pipeline of infrastructure projects; Enhanced
capabilities of public banks, insurers, and pension funds in terms of
understanding, managing, and reporting on ESG risks and their impacts.
Asset management
Summary of Brazil’s green finance capabilities Case study: Itaú Asset Management
► Asset managers in Brazil are positioning themselves to attract ► Background: Established in 1957, Itaú Asset Management
international investors interested in green opportunities. Local (IAM) is part of Itaú-Unibanco Bank. IAM has ~13.5% of the
demand is still timid. Brazilian asset management market share, with over 200
► Brazil is the largest asset management market in Latin America professionals managing more than BRL 700bn from almost
with more than 600 firms³. According to ANBIMA, this market 3000 mostly local clients. IAM’s investment strategies are built
accounts for $1.1tn assets under management (AUM), where based on research and sophisticated analysis.
most products are for local investments. ► Infrastructure focus: IAM funds are mainly focus on listed
► The 2018 ANBIMA’s sustainability survey with 110 Brazilian equities and sovereign. Offering access to a global trends, the
asset managers and administrators (78% total AUM), showed fund ESG Clean Energy Itaú Index invests in international
that 85% of those include at least one of the three ESG companies in the clean energy sector. In turn, the fund ESG
aspects in their decision making4. Water Itaú Index seeks to invest in a portfolio of global
► Asset managers such as BlackRock Brasil, BTG Pactual, and
companies whose business model is related to water.
Itaú manage ETFs following ESG-related indexes. ► ESG: Itaú-Unibanco has committed to ESG voluntary
► Large asset managers associated with banks (Itau, Bradesco

standards (CDP, Equator Principles, GRI, PACTA, PRB, PRI,
and Santander) could be considered 'first movers' in ESG TCFD, UN Global Compact). In 2004, the Itaú Social
practices. Besides them, Costellation, Fama, JGP are some Excellence Fund (FIES) was created adopting an “exclusion
independent asset managers that are vocal on ESG, paving approach”, excluding investment in certain sectors/companies.
the way for their peers. Since 2010, IAM established a methodology for assessing
socio-environmental impact on companies’ value and credit
► In 2020, asset managers saw the rise in demand for ESG
risk5. IAM also manages various ESG-related ETFs: ISUS11
products. New equity funds with sustainable labels were (which follows B3 Sustainability Index - ISE B3) and GOVE11
created and this group grew two-fold (from ~BRL 400m to (which follows the B3 corporate governance index - IGCT).
~800m), but still marginal compared with other fund types.
Sources: Carbon Trust research; stakeholder interviews, and literature review (see slides 71-72 for references) Source: Company websites
Asset owners
Summary of Brazil’s green finance capabilities Case study: Fundação dos Economiários Federais (FUNCEF)
► While international investors are increasingly interested in ► Background: The Fundação dos Economiários
green bonds and securities, interest from local investors is still Federais (FUNCEF) is a pension fund for Caixa Econômica
weak. Federal bank employees. It is the third largest pension fund
in Brazil with 135,000 participants and more than BRL 70bn in
► The growing international shift of funds, banks and institutional
assets fully invested in the country. Created in 1977, FUNCEF
investors reserving part of their international portfolio to buy
has CAIXA as its sole sponsor.
green bonds might set the tone for international best practices.
► Infrastructure focus: FUNCEF invests in infrastructure
► International investors’ pressure towards sustainability and projects through other funds (FoF) and private equity in
environmental protection are increasing. In 2020, 29 infrastructure. It invests in urban mobility, sanitation, airports,
international investment and pension funds (which together ports, telecom, railways and, its biggest position, energy. It has
manage ~US$3.7tn) sent an open letter to seven Brazilian 25% stake in Invepar (one of Latin America’s largest private
embassies in Europe, Japan and the United States asking to urban mobility and infrastructure management companies).
stop deforestation in the Amazon forest6.
► ESG: FUNCEF also invests in green funds (FoF). In terms of
► Brazilian pension funds market sums up ~BRL 2tn in assets7. ESG practices, FUNCEF is at early stages of implementing a
► Regarding local awareness, the Closed Pension Funds broader ESG framework, including internal and external
Association (ABRAPP) in 2008 created the Technical policies that includes environment and sustainability in its
Sustainability Commission (CTNSUS) to propose, coordinate decisions, i.e., going beyond just governance-related practices.
and encourage actions related to Social Responsibility and ► Improving governance and transparency became a big focus of
Sustainability. The 10 largest pension funds in the country FUNCEF, as other large pension funds (Previ, Petros, Vivest).
(>BRL 540 bn AUM) all have signed onto the UN PRI. In 2017, FUNCEF signed the AMEC’s Stewardship Codes and
recently (2020), published its new Code of Conduct and Ethics
► Few wealth management offices include ESG as a core part of
and created a Conduct and Ethics Committee.
their operations (e.g. Pragma, Península, Wright Capital).
Commercial banking
Summary of Brazil’s green finance capabilities Case study: Banco do Brasil S.A.
► Public and private banks have been important actors in the green ► Background: Banco do Brasil (BB) is the second biggest bank in
finance agenda. The banking sector has been involved with the country (BRL 1.4tn in assets) and largest public bank. It holds
sustainability for a long time. In 1995, federal public banks a strong position in retail banking, covering 99% of Brazilian
(BNDES, Caixa, Banco do Brasil, Banco de Nordeste, and Banco municipalities, with more than 50,000 service points, over 4000
da Amazônia) signed a letter of green principles to adopt socio- branches and ~93k employees. BB has branches in 16 countries
environmental and sustainability policies. and through other financial institutions can reach up to 106
► The Brazilian Banking Association (FEBRABAN) published green countries. BB was created in 1808, making it the oldest bank in
banking guidelines, first adopted voluntarily in 2008 by 5 Brazilian Brazil.
state-owned banks followed by commercial banks in 2009. ► Infrastructure focus: BB has credit lines for the public sector
► Currently, commercial banks are obliged to apply socio- (Federal, State and Municipalities) in infrastructures such as
environmental risk management criteria in their corporate credit housing, urban mobility, sanitation, environmental preservation,
operations (Central Bank Resolutions 4,327/2014 health, safety, among other areas. It is an accredited financial
and 4,557/2017). institution that transfers federal funds to the public sector
► In July 2020, private banks (Itaú, Bradesco and Santander)
(including BNDES credit lines). In 2019, the credit to
launched a plan (Frente Amazônia) aiming to develop the infrastructure sectors reached BRL 212bn: Energy (48%);
Amazon region and avoid deforestation by financing, among Transportation (42%) and Telecom (12%).
others, sustainable infrastructure (energy, sanitation, telecom, ► ESG: BB has committed itself to a series of ESG-related
water transportation) and stop financing slaughterhouses that put agreements and practices (e.g. CDP, Equator Principles, Global
a pressure on deforestation. Compact). It is the sole Brazilian bank listed in the B3 Stock
► Socio-environmental policy-driven loans and credit lines from
Exchange New Market (with a particularly strong governance
banks are the most common sources of finance. Green finance label). It is listed in the B3 Corporate Sustainability Index (ISE)
products are recently being developed, such as green loans (e.g. and in the NYSE’s Dow Jones Sustainability Index (DJSI).
Santander lending BRL 250M to CBA). BB offers green agriculture products that in 2019 reached BRL
81.3bn.
Investment banking
Summary of Brazil’s green finance capabilities Case study: BTG Pactual
► Brazil has the largest investment banks in Latin America, and
► Background: BTG Pactual is a publicly-traded, diversified global
investment company with over 2,200 employees. It operates in the
some of them have expanded operations to other countries in markets of investment banking, wealth management and asset
the region. management. The BTG Pactual Investment Bank is the largest in Latin
► Among its activities, they are specialized in structured America, providing financial advisory, equity and debt underwriting (in
transactions for companies (which may involve a shareholding 2019, reaching $14bn in total deals). Over 90% of its operations are
carried out in Brazil and in Latin America.
or corporate interest), manage stock portfolios. The sector is
► Infrastructure focus: Its project finance services include financial
strong in arranging services on issuance initiatives, advisory or
advisory, bond issuances coordination and finance structuring for energy
brokerage services on deals, bookrunning, and services on and infrastructure projects. In 2020, it issued the BTG Pactual
project finance, M&A or IPO initiatives. Infraestrutura Dividendos fund (FIP-IE) of BRL 800m focusing on the
► The sector is just in the initial stages of offering services around energy sector. Corporate lending to utilities and infrastructure summed to
green and sustainability bonds (such as underwriting and BRL 12bn in 2019.
advisory services) for local players, building partnerships with ► ESG: BTG Pactual Investment Banking area coordinates the issuance of
green, social and sustainable bonds. In 2019, it coordinated debentures
international service providers.
issuance of BRL 450m for TAESA, a power transmission company.
► In Brazil, investment banks are restricted in operations with the ► BTG Pactual Group has a Global ESG Policy and is committed to the
public sector and can invest in real estate projects only through UN Global Compact, PRI and CDP. The exposure of its credit portfolio
bonds. is BRL 15.9bn in Green Economy companies. In the past 5 years, it
has distributed $ 1.8bn in green, sustainable and transitional debt in
► Most of banking conglomerates also have investment
the local and international markets.
banking branches (e.g. Banco do Brasil, Itaú, Bradesco, and
► With CBI, BTG Pactual developed a framework to issue green, social
Santander). and sustainable debt, encouraging finance in sectors such as
renewable energy, efficiency energy, sanitation, clean transport,
sustainable buildings, affordable housing and affordable basic
infrastructure. Sustainalytics also provides second opinion.
Insurance
Summary of Brazil’s green finance capabilities Case study: Liberty Seguros Brasil
► The Brazilian insurance players are advancing in terms of the ► Background: Liberty Seguros is part of the Liberty Mutual
range of products offered (e.g. climate disasters response). Group, one of the largest North American insurers. In Brazil, it
has 1.8 million insured parties, 1,700 employees and 18,000
► Brazilian insurers are focused in automotive, personal (incl.
brokers. Over 80% of its portfolio is concentrated in vehicles
open private pensions) and health insurance, accounting for a
insurance.
combined ~80% of revenues, with minor operations in the
► Infrastructure focus: All infrastructure offerings are under the
infrastructure sectors.
Liberty Specialty Markets (LSM Brasil), division of the Liberty
► In 2019, Brazilian insurance market reached BRL 489bn in Mutual Group. It covers power generation (hydro, thermal, wind
gross revenues. and biomass), maritime transportation (ports, shipyards), water,
► International insurers (such as Swiss Re, Allianz, Liberty) have sanitation and railways, with special insurance products
a local presence, offering services to the infrastructure sectors. (including environmental risks).
► In 2012, the Rio+20 UN Conference raised awareness about ► ESG: Liberty Seguros launched a 2023 Sustainable Liberty
sustainable practices and pushed insurance companies to Plan focused on 10 themes for sustainable development. The
launching the Principles of Sustainable Insurance (PSI). 2023 Plan is aligned with the UN's 17 Sustainable
Development Goals (SDGs) and aim to meet clients’
► In 2016, the Insurance Regulator (SUSEP) adhered to the PSI. expectations.
► However, an IAIS survey in 2018, showed that most Brazilian ► Among its planned actions, Liberty will review its current
insurance companies have not integrated ESG risks into their product portfolio considering ESG criteria and ensuring new
core business activities4, being mostly limited to awareness products and services also consider them as a differential.
campaigns for their employees and resource savings (e.g. ► It will also integrate ESG criteria in the investment portfolio
energy, water, etc). Re/insurers were a step ahead on these through risk management assessments, and applying them
matters, most probably, due to their international nature and in assessments of customers, suppliers and partners.
high-level administration engagement.8
Service providers
Summary of Brazil’s green finance capabilities Case study: Mattos Filho Law Firm
► Brazil well-established national and international service ► Background: Mattos Filho is one of the biggest law firms in
providers, law firms and consultancies. However, those that Brazil, covering all practices of law. It is headquartered in São
are specialized in ESG issues or green finance are still scarce. Paulo, and it has offices in Campinas, Rio de Janeiro, Brasilia,
► Consulting firms working on climate issues enjoyed early New York and London.
exposure to international agreements and carbon markets ► Infrastructure focus: Mattos Filho has an Infrastructure and
(e.g. the Kyoto Protocol’s clean development mechanism) Energy practice area providing legal advice across all
building local expertise and knowledge. infrastructure project phases, including contracts' preparation
► With the market’s growing interest to meet foreign investors’ and negotiation (EPC, JV, project finance, PPP, etc.). The firm
ESG demands, services in demand are usually related to serves a diverse range of infrastructure projects such as: oil
assessment of corporate and portfolio-level climate risks; and gas, mining, transportation, sanitation, ports,
quantifying GHG emissions; and developing climate change telecommunications, airports, railways, and logistics, among
mitigation, adaptation and resilience strategies. others.
► The demand for consultancy services is currently met by a mix ► ESG: Mattos Filho has an ESG practice area with expertise
of: international ‘Big 4’ consultancies with compliance and across various topics related to corporate sustainability. It
financial expertise (e.g. Deloitte, EY, KPMG, and PwC); local serves clients in all industries, as well as their investors and
consultancies with ESG and risk assessment expertise (e.g. financers, integrating ESG issues to their business. It also
SITAWI); local consultancies with broad GHG inventory maintains an active pro-bono volunteer service on topics
expertise (e.g. WayCarbon); and international consultancies related to human rights, citizenship, democracy, social and
with hands-on climate impact, target setting, and risk environmental transformation in the regions where it operates.
assessment expertise (e.g. Carbon Trust).
► Due to the dominance of some low-carbon infrastructures in
the country (e.g. renewables), some local providers export their
services (e.g. engineering).
NGOs & think tanks
Summary of Brazil’s green finance capabilities Case study: Brazilian Business Council for Sustainable
► Brazil has a variety of local and international NGOs and think Development (CEBDS)
tanks with socio-environmental expertise (e.g. WWF, IPAM, ► Background: CEBDS is a non-profit civil association that
Greenpeace) playing the important role of ‘watch-dogs’ or promotes sustainable development through coordination with
‘whistle-blowers’. Governance and financial-practice watch-dogs governments and civil society. Representative in Brazil of
are less common (e.g. Contas Abertas and Transparência the World Business Council for Sustainable
Brasil). Development (WBCSD) network, it brings together about 60 of
► This heterogenous and fragmented network of NGOs form a the largest business groups in Brazil, with revenues equivalent
generally uncoordinated but somewhat effective net of scrutiny on to ~45% of national GDP.
infrastructure projects, pointing to socio-environmental impacts ► Infrastructure focus: In 2016, CEBDS created the Green
(e.g. social degradation, human rights infringements and Bonds Guide (prepared with FEBRABAN) to participants
biodiversity loss) and governance or financial red-flags (e.g. signs
interested in fixed income market, the green bonds issuance
of corruption) to the extent that projects affect their regions of
process and particularities of the market, such as the
focus, such as hydropower plants in the Amazon Basin or
procedures for framing projects.
sanitation projects in a given city.
► ESG: CEBDS’ work is focused on sustainability-driven actions
► Beyond NGOs, civil associations such as the Brazilian Corporate
Governance Institute (IBGC) and the Brazilian Business Council such as guides, advocacy, networking and research. It
for Sustainable Development (CEBDS) have played a central role manages thematic chambers on water, biodiversity and
in coordinating corporate sustainability efforts toward common biotechnology, energy and climate change, sustainable finance
goals, e.g. enabling further issuances of green bonds and and social impact. Relevant activities are: (i) Energy Efficiency
inducing science-based greenhouse gas mitigation targets. Front project, (iii) Regulatory Framework for the Carbon
► International organisations such the UN Principles for
Market; (iii) Guide to Renewable Energy Corporate PPAs in
Responsible Investment (PRI), UNEP FI, Climate Bonds Initiative Brazil; (iv) Guide for Issuing Green Bonds in Brazil; (v)
(CBI), Climate Policy Initiative (CPI), and CDP have a local discussions around training and implementing TCFD in the
presence. country.
Regulators & government
Summary of Brazil’s green finance capabilities Case study: Comissão de Valores Mobiliários (CVM)
► Brazil’s financial system has a long history of sustainability ► Background: The Brazilian Securities and Exchange Commission
regulations, voluntary environmental commitments and self (CVM) was created by Law 6,385/1976,with the purpose of inspecting,
regulation, even predating mainstream sustainable finance regulating, disciplining and developing the securities market in
Brazil. CVM is an autonomous entity under a special regime, linked to
discussions, all of which support the incorporation of ESG
the Ministry of Economy. It has: its own legal personality and assets,
considerations across various financial institutions9.
independent administrative authority, an absence of hierarchical
► Several financial institutions are taking seriously the build up of rules subordination, a fixed mandate, and financial and budgetary autonomy.
and conditions to promote sustainable finance and best governance ► Infrastructure focus: CVM and the Ministry of Economy are
practices in the country. responsible for managing and supervising infrastructure funds and
► It includes the Ministry of Economy, the National Monetary Council debentures due to tax incentives. Public offers of debentures and
(CMN), the Central Bank, the Securities and Exchange Commission infrastructure funds (FIP-IE) are registered and regulated
(CVM), the Brazilian Financial and Capital Markets Association by CVM. Debentures' issuance follows the same processes as ordinary
(ANBIMA), the Brazilian Federation of Banks (FEBRABAN), Social bonds, with no specific regulations yet for the labelling of green bonds.
Security and Insurance Superintendencies (PREVIC and SUSEP). ► ESG: CVM provides guidance to issuers regarding the inclusion of
socio-environmental risks in its disclosed information and materials for
► The Climate Bonds Initiative (CBI) has signed a total of four MoUs financial education that includes ESG assessment as financial practice.
with Brazilian Public Institutions (Ministries of Agriculture, A reference form allows investors to understand the social and
Infrastructure, Regional Development and the Central Bank). environmental risks faced by companies that issue shares and bonds.
► The Brazilian Central Bank announced TCFD reporting as This document is required by CVM and among others, the standard
mandatory to all financial institutions starting from 2022. determines the provision of information on: the existence of socio-
environmental policies; the costs of environmental recovery; the
► Despite the existing and increasing sustainable finance regulations, existence of impacts on the environment; and corporate
there is a general consensus on the need for the government governance. The Financial Innovation Laboratory (LAB) is a multi-
to assume a greater leadership role on sustainability practices and sectoral forum created by CVM, ABDE, IDB and GIZ to promote
seizing opportunities. sustainable finance in the country by creating innovative financing
solutions.
Universities & professional bodies
Summary of Brazil’s green finance capabilities Case study: Center for Sustainability Studies (GVces)
► Brazilian universities have considerable knowledge on ► Background: The Center for Sustainability Studies
sustainable practices, natural resources-related and social (GVces) of the Business Administration School
development finance (e.g. microcredit). However, research on of Fundação Getulio Vargas (FGV-EAESP) is a think tank
green finance, green infrastructure, climate impact and risk focused on formulating and following public policies, building
assessment is still relatively modest outside of some circles. strategies and tools for corporate sustainability. It has a team of
over 60 people divided in 6 research programs all engaged
► Few leading universities have associated centers that build on an in development and sustainability. It has partnered with
understanding of climate and ESG challenges (e.g. FGV, PUC- several international institutions (such as the IFC, German BMU,
Rio) by developing applied research. GIZ, Swiss COSUDE, Gordon & Betty Moore, among others).
► Funding for green finance related research is diverse, covering ► Infrastructure focus: In its portfolio, GVces has projects
both local private and public entities, as well as international in different types of infrastructure, e.g.:
organizations (such as GIZ, IDB, IFC). ► Energy: Belo Monte dam indicators, Start ups in the
► Graduate programmes on sustainable or green finance are not power sector, Financing Solar PV
► Water: Water resources management
offered yet but specialization and professional certification
► Transport: Roads Governance in the Amazon
courses are being developed.
region, Barriers on Railways Investment
► In 2019, the Brazilian Research Alliance for Sustainable Finance ► Others: Large projects in the Amazon Forest
and Investment (BRASFI) was founded with the aim to expand as
► ESG: GVces has built all ESG dimensions into is core activities.
a network, foster research, and offer courses in sustainability and
The centre is particularly proactive in the Brazilian climate
ESG. BRASFI is a partner in a training course WeESG, inspired
agenda (e.g. PMR project) having developed education programs
by the CFA’s ESG Investing certificate.
and public policy tools on measuring, registering and simulating
► In 2020, Fama Investimentos has launched a student's award for emissions trading. In 2019, it engaged with the 29 largest
ESG Investment research. companies by creating the Business Initiatives forum to discuss
common sustainability business challenges.
Capital markets
Summary of Brazil’s green finance capabilities Case study: Patria Investments
► The São Paulo Stock Exchange (B3) has promoted sustainability for ► Background: Patria Investments is one of the leaders in alternative
around a decade, driving ESG disclosure across all listings and asset management in Latin America, with over 30 years of experience
registering green bonds. However, Brazil still has a limited universe of in Private Equity, Infrastructure, Real Estate and Credit. Patria has ten
public listings across sectors, reducing options for ESG investors. offices in leading financial centres and $12.7bn AUM (16 active funds
► B3 and partners (FGV, Ethos Institute and Ministry of Environment) invested in over 55 companies and assets) and has Blackstone as a
pioneered in Latin America by creating in 2005 the ISE Corporate leading shareholder. In 2021, Patria had its IPO on the Nasdaq.
Sustainability Index. In 2010, it created the ICO2 Carbon Efficient Index ► Infrastructure focus: Their infrastructure portfolio includes data
through a partnership with BNDES. In 2020, it created the S&P/B3 infrastructure, environmental services (water), transport, logistics,
Brazil ESG Index, a broad-based index using S&P DJI ESG score. power (renewables, gas-fired power plant and transmission lines).
► Examples of debt instruments that can be labelled as green10: Credit Patria Infrastructure performs equity investments in Brazil and other
Rights Investment Fund Quotas (FIDC); Agribusiness Receivables Latin American countries. Patria has built expertise in projects in the
Certificate (CRA); Real Estate Receivables Certificates; Debentures; development stage (green and brownfield).
Infrastructure incentivized debentures; Promissory Notes. ► ESG: Patria has an ESG Forum composed of different business areas.
► Regarding infrastructure investment, it is increasingly financed by It is responsible for the management and operation of ESG actions,
capital market instruments, in particular Infrastructure Debentures due development of specific policies, procedures and tools to ensure
to11: (i) tax incentives; (ii) a lower interest rate environment, and (iii) consistency and appropriate taxonomies. Patria follows the UN PRI,
restrictive financing policies from public banks (BNDES)². In 2020, IFC Performance Standards and GRI.
Decree No. 10,387/2020 expanded eligibility for issuing incentivised ► It shares guidelines for investees to monitor supply chains to
debentures to sustainable infrastructure projects (e.g. BRT, sanitation, prevent the violation of human rights (slave and child labor,
renewables). discrimination and unhealthy or unsafe working condition). Patria
► Since its inception in 2012, the infrastructure debenture market sums measures emissions in all invested companies (carbon reduction
over BRL 100 billion (~ BRL 9billion certified as green), funding mostly and, particularly, carbon avoidance). Examples of projects’
energy projects (90%). initiatives include: (i) reduction of energy consumption and
► Some sustainability-linked bonds (SLB) began to be offered (e.g. renewable sources (e.g. through energy efficient LED lamps); (ii)
USD$ 750m Suzano's bonds and BRL 1bn from Boticário). rational use of water (including possibility of rainwater utilization);
and (iii) reduction of residues and waste in the production line.
Funds
Summary of Brazil’s green finance capabilities Case study: JGP ESG FIC FIA
► Professional investors have shown an increasing interest in ► Background: JGP Asset Management is an independent asset
aligning their investments with ESG practices as an integral manager with over 20 years of experience and BRL 30bn AUM
part of their risk-return assessments. invested in Brazil and abroad. It manages different types of
► According to CVM, there are 133 funds (fixed-income) with a multimarket funds (e.g. long biased, ESG equity funds, credit
special focus on Infrastructure Debentures, having over 120k funds, private pension funds) and wealth management.
quota holders and BRL 15 bn in net equity value. ► Infrastructure focus: JGP ESG FIC FIA is a fund that
► In 2020, over 30 ESG-labelled funds were created. invests in companies that have a strong positive impact (e.g.
► ESG-related equity (stocks) funds, following ANBIMA’s
green energy portfolio, applying regenerative agriculture and
classification, accounted for BRL 810 million in 2020, a minor adopting innovative technologies). Its investment policy is
share of total funds asset value (<0,01%). The growth in focused on listed companies in Brazil, companies invested in
resources allocated to responsible investments is still JPG's funds, and compounders (including ESG).
dependent on investor’s understanding on ESG aspects. ► ESG: JGP adheres to Stewardship codes and the UN PRI. In
► Access to individual investors is increasing to ESG funds, both

2020, it created 13 ESG products. According to its 1st ESG
passive (ETFs) and active (strategy-driven). letter13, for all investment funds, JGP is committed to use a
combination of strategies: (i) ESG negative screening (tobacco,
► There are few examples of real state funds (e.g. FII) with ESG
gambling; war and coal mining industry) and (ii) ESG
practices (e.g. energy efficiency). integration (e.g. hydrocarbons). However, the JGP's ESG fund
goes beyond that, including a more restricted layer of ESG
practices (such exclusion of companies with negative socio-
environmental impacts and corruption records). Another rule is
the exclusion of companies in the last quartile of their
respective sectors in the ESG criteria. JGP is also developing
its own ESG framework based on the SASB.
Project finance
Summary of Brazil’s green finance capabilities Case study: Vinci Partners
► Brazil has a long tradition of renewable green infrastructure ► Background: Vinci Partners specialises in asset management,
projects (e.g. renewables) usually financed through project wealth management and financial advisory. Founded in 2009
finance structures based on long term contracts. by experienced managers in the financial market, Vinci
► Infrastructure sectors, such as energy and transportation Partners manages around BRL 50bn across more than 250
have regulatory frameworks well suited for such type of funds/vehicles.
financing structures. ► Infrastructure focus: Vinci Partners gives strategic advisory
► BNDES is the leader provider of funds and structuring for power, logistics, transportation, water and sanitation assets
infrastructure project finance. BNDESPAR, BNDES’ subsidiary and companies. It manages funds invested in energy
to invest directly in infrastructure projects, regularly participates companies, with BRL 2 bn in equity and debt. One of them is
in local and international capital markets to fund both private the Vinci Energia FIP-IE, an infrastructure investment fund that
and public investments. In recent years, the financing model for seeks to invest in SPVs from the electricity sector such as
infrastructure projects has evolving to stimulate private funding. generation and transmission (value BRL 380M).
► In turn, the BRICS-led New Development Bank (NDB) ► ESG: Vinci signed the PRI in 2012, integrating ESG issues in
commited most of its balance sheet targeting sustainable the investment process (Private Equity, Real Estate and
infrastructure (~68% in 2019) and implemented a coherent Infrastructure). In 2020, it raised BRL 330m for a Private Equity
eligibility criteria for its credit operations through a Sustainable Impact and Return Fund (VIR IV) aiming to invest at least 90%
Financing Policy Framework14. of its net equity in small and medium-sized companies with
► Besides Development Banks, there are commercial banks,
high growth potential complying with ESG principles.
asset managers and service providers (law, consultancy firms) Preference for companies in the health, specialized retail,
active in project finance in infrastructure projects. value-added services, education and healthy food.
► Funding from the private market often come from structured
infrastructure funds (FIP-IE), with tax incentives for investors.
5. Brazil green finance market
5.2: POLICY CONTEXT: GREEN FINANCE

& INFRASTRUCTURE
Green finance:
Brazil market development timeline
1995 2005 2009 2012 2014 2016 2017 2018 2019 2020
Green B3’s CMN’s Brazil’s B3 Resolution Green Bonds CMN resolution CMN resolution Ministry of Brazilian Central
Protocol Corp- Resolution stock 4,327 Guidelines 4,557 on risk 4,661 requests Economy Bank announces
Voluntary orate 3,792 exchange mandates all Released by mgmt E+S Pension Funds to proposes a TCFD reporting to
Guidelines Sustai- required recommen financial FEBRABAN observe socio- fast track for be mandatory to
adopted closed ds listed institutions to Brazil Green environmental and sustainable all financial
nbility and CEBDS to
pension develop social- Finance Initiative governance risks. infrastructure institutions from
by five Index companies support
funds to environmental launched
state (the ISE) to provide issuers debentures 2022
account for responsibility bringing
develop- created environ- ESG Guidelines for
reporting. policies First together key voluntary CBI and Decree 10,387
ment mental and
banks issuance of industry and implementation of Ministry of expanded
social issues
CVM’s Green Bonds finance players TCFD climate risk Infrastructure eligibility for
in their
Instruction (USD 1bn) by reporting released sign an MoU issuing
investment Green Bond
522 on S&E BNDES in to evaluate incentivised debe
practices by FEBRABAN &
policies and statement
Luxembourg Sitawi Brazil’s ntures to
CVM’s risks reporting signed by
Green infrastructure sustainable infras
Instruction from issuers of investors
Exchange Brazil’s Stock potential tructure projects
480 on S&E securities representing ~ Exchange allows funding via in urban mobility,
reporting USD 500 bn in listed companies
FEBRABAN
Green Bonds. energy and
requirements assets to identify sanitation.
for issuers of publishes a
social- securities as green Green Bond
securities Green Bond
environmental issuances15 issuances15 Green Bond
self-regulation of ~USD 2.3 bn Green Bond of ~USD 2.2bn issuances15 of ~
KEY: framework for issuances15 USD 5 bn
Government-led policy/initiative banks (SARB14) of ~USD 200M
Private-led initiative
Green finance:
Regulatory context
CMN
The National Monetary Council (CMN) The Brazilian Central Bank (BCB) The Securities and Exchange Pension Regulators
The CMN is the normative body The Brazilian Central Bank (BCB), as Commission (CVM) The National Council of Private Insurance
responsible for formulating the currency the National Financial System CVM is responsible of inspecting, regulating, (CNSP) is the normative body and
and credit policy, i.e., the coordinating regulator, has been implementing a disciplining and developing the securities responsible for policy guidelines and
body of the federal government's series of measures focusing at market in Brazil. It has a seat on the Task directives, while the Private Insurance
macroeconomic policy (inflation, promoting socio-environmental (S&E) Force on Sustainable Finance of IOSCO Superintendence (SUSEP) is the executive
exchange rate, rules for financial practices over the past few years, as (International Securities Organization) and body of CNSP, responsible for the
institutions, etc.). part of the central bank’s green also a founding signatory of the UN supervision and control of the insurance,
Since 2008, CMN published several network (NGFS). The BC# Agenda Sustainable Stock Exchanges initiative, SSE open private pension funds and
norms that integrate ESG practices, embraced the ‘Sustainability (Sustainable Stock Exchanges, created in capitalization markets.
such as compliance for rural credit that Dimension’ as its fifth pillar. 2012 at Rio +20). Resolution CNSP 379/2019 included,
affect the Amazon region or present BCB is working, as a supporting In Dec 2020, launched a public hearing for whenever possible, ESG criteria as part of
slave-like work conditions. Following institution, to implement the changes in the Instruction CVM 480 about investment policies required from entities
CMN’s Resolution 4,327/2014 financial recommendations from the Task Force securities issuance registry on regulated supervised.
institutions have to manage their on Climate-related Financial markets. Among other changes, it seeks The National Supplementary Pension
exposure to Socio-Environmental (S&E) Disclosures (TCFD), while in a monthly improvements at the ESG provision of Council (CNPC) is the normative body and
risks and formulate their Socio- basis, monitors portfolio exposure to information, meeting a growing demand from the Superintendence of Supplementary
Environmental Responsibility Policies sensitive sectors following UN and IFC investors, such as: (i) emphasis on the Pension (PREVIC) the executive body for
(PRSA). Institutions must maintain a recommendations. S&E is a criterion disclosure of ESG risk factors, (ii) issuers closed supplementary pension entities.
governance structure compatible with within the BCB’s main supervision tool must position themselves at a relevant UN- Instruction PREVIC 6/2018 requires ESG
their size and business nature, following for capital risk and will be included for SDG, (iii) oblige issuers who do not release principles to be part of entities’ investment
guidelines and PRSA objectives. CMN counterparties selection in the sustainability reports or adopt ESG KPIs to policy.
Resolution no. 4,661 / 2018 requests management of international reserves explain why they do so (“practice-or-
Pension Funds to observe, whenever and investment decisions. explain”), (iv) information on diversity in In 2021, PREVIC launched an ESG survey
possible, environmental, social and management positions and among issuers' to their supervised entities to evaluate
BCB is also studying the creation of a adoption of ESG criteria.
corporate governance risks in their Green Liquidity Facility. employees.
activities.
Overview of Brazil’s infrastructure policy, planning and financing landscape
Congress
Federal Government State-owned
Proposes and Develops sector policies, roadmaps and decrees, collects taxes and allocates budget to sectors and states Advises on planning
approves relevant Ministry of Ministry of Regional Ministry of Ministry of Sector-specific ministries expansion companies
legislation, e.g. Treasury needs
Economy Development Infrastructure Environment e.g. Energy, Communications, Transport EPE (Energy)
new sanitation bill
(PL No.
State and municipal governments including local sector regulatory agencies EPL
4,162/2019)
Proposes and approves local legislation, infrastructure plans and budgets, in particular for waste and sanitation sectors (Transportation)
Financing policies Competitively awarded

and funds to BNDES construction contracts
and federal banks
Directly
Competitively
Infrastructure developers & awarded
FINANCIERS awarded REGULATORS
construction firms operation
operation
National Dev. Bank (BNDES) Govt. awarded contracts or contracts +
National Monetary Council
contracts
Key provider of debt and issuer of private-led initiatives core funding
Credit and currency policies
bonds for infrastructure sectors
Federal banks: CAIXA & Central Bank
Banco do Brasil Private infrastructure construction Oversees banks’ operations
Public infrastructure Sets
State Development Banks operators operators rules and Sector-specific regulatory
Smaller scale provision of debt e.g. power generators, INFRASTRUCTURE e.g. state or federal standards agencies, e.g. ANEEL, ANATEL,
for municipal infrastructure distribution utilities, ASSETS owned power utilities, ANA, IBAMA. Regulate sectors
subway, and railway municipal waste and based on enacted policies
Private Banks
e.g. Itaú, Bradesco, Santander
concessionaries operation sanitation companies
Capital Market Regulator
Oversees capital market players’
Institutional investors Insurance and other service providers operations and creates instruments
e.g. pension funds, venture Equity, debt and bonds for infrastructure sectors e.g. law firms, data providers, etc. to facilitate transactions
capitalists
Congress
new sanitation bill
(PL No. Energy and Transportation expansion needs are EPL
4,162/2019) State and municipal governments including local sector regulatory agencies
planned by research companies linked to
ministries which also run concession auctions.
Financing policies This is not
Competitively the case for all sectors, e.g. Telecom
awarded
and funds to BNDES
and federal banks
expansion
construction is planned by its regulatory agency
contracts
Competitively (ANATEL); sanitation and wasteDirectly infrastructure is

FINANCIERS awarded planned at the local level although the national REGULATORS
operation
operation construction firms
National Dev. Bank (BNDES) water regulatory agency (ANA) provides
Govt. awarded contracts or contracts + guidance
contracts National Monetary Council
Key provider of debt and issuer of leveraging
private-led initiatives its national plancore (PLANSAB).
funding
Banco do Brasil Private infrastructure construction Oversees banks’ operations
Public infrastructure Sets
Private Banks
capitalists
Congress
new sanitation bill
(PL No.
4,162/2019)

The development
and funds to BNDES and construction contracts
and federal banks
operation of infrastructure is Directly
Competitively
held by a mix of private FINANCIERSand awarded Infrastructure developers & awarded
REGULATORS
construction firms operation
public companies.BNDES Sectors such operation Govt. awarded contracts or contracts +
contracts National Monetary Council
asKey
railways
provider ofare
debt fully private.
and issuer of In private-led initiatives core funding
turn, sanitation is still mostly
public. Banco do Brasil construction Oversees banks’ operations
Private infrastructure Public infrastructure Sets
Private Banks
capitalists
Congress
new sanitation bill
(PL No.
4,162/2019)

and funds to BNDES construction contracts
and federal banks Depending on the sector, the Directly
Competitively
FINANCIERS legal responsibility
awarded for
operation REGULATORS
construction
providing public services
operation is firms
National Dev. Bank (BNDES) Govt. awarded contracts or contracts +
National Monetary Council
contracts
Key provider of debt and issuer of exclusive to or shared by initiatives
private-led core funding
Federal and local governments
Federal banks: CAIXA & (State and Municipal). construction Central Bank
Banco do Brasil Private infrastructure Public infrastructure Oversees banks’ operations
Sets
Private Banks
capitalists
Policy context:
Domestic planning of infrastructure
Interministerial Committee on Sanitation and Water
Infrastructure Planning Planning
Created in Oct 2020, the by the Decree Local planning: Actual sanitation
expenditure planning is done by Telecom Planning Energy Research Company Logistics Research Company
10,526/2020 to ensure alignment with
OECD best practices this, committee is sub-national governments Telecom regulatory The Energy Research Company The Logistics Planning Company
composed by the Casa Civil (municipality or State) within the agency (ANATEL) (EPE) is a federal company created in (EPL) is a federal company
~50 municipal, state and micro- publishes each 5 2004, linked to the Ministry of Mines created in 2011, linked to the
(coordination) and by the Ministries of
regional Regulatory Agencies. years a Structural Plan and Energy (MME). EPE develops Ministry of Infrastructure. EPL
Economy, Infrastructure, Regional Sanitation asset operation is
for studies and research designed to develops the country’s integrated
Development, Environment, Science and conducted by 26 State Sanitation
Telecommunications support the planning of the energy logistics planning, seeking to
Technology and sectorial ones. Companies covering >70% of
Networks (PERT) with sector (electricity, oil and products, integrate highways, railways, ports,
Brazilian municipalities. natural gas, and biofuels). EPE also airports and waterways over the
Investment Partnership Program (PPI) a diagnosis of the
National Sanitation Plan runs generation and transmission territory.
The Investment Partnerships Program (Plansab): Published in 2014 and infrastructure set
lines auctions, setting the rules and EPL works in the structuring and
(PPI) covers state and the private sector revised every 4 years, it reflects a indicating network
parameters and conducting the qualification of transport
partnerships projects and privatization of national and sub-national gaps, investment
technical qualification. infrastructure projects and runs
public services. By the end of 2020, it had aggregate ideal plan for water projects required and
201 projects in the portfolio (BRL 741.5 bn The National Energy Plan 2050 was concession auctions.
supply, wastewater, urban waste public measures if
in investments and BRL 144.5 bn in and drainage infra over a 20-year recently published bringing policy The National Logistics Plan 2025
needed.
government grants). It includes concession horizon. The plan does not have recommendations, covering different identified and proposed solutions
Current discussions aspects of the energy sector (future
and partnership projects from several legal enforcement, serving as a for transport cost reductions, level
around 5G energy production, demand, of service improvements, efficiency
ministries (e.g. infrastructure, mines and guidance for infrastructure needs.
energy).
implementation has transition, innovation, etc.). increase for transport modals
The New Sanitation Law (No.
risen attention of The Decennial Energy Expansion (loads logistics), while decreasing
The PPI governance is held by: 14,026/2020): It established
ambitious goals: (i) achieving international Telecom Plan 2030 (about to be published) is carbon emission.
► The PPI Council: a collegiate body providers. A 5G
universal sanitation services by the annual report that provides The role of EPL seems to be
that evaluates and recommends auction run by
2033, (ii) ensuring access to information about energy short- and insufficiently defined, and there
projects to the President. ANATEL is expected
drinking water to 99% of medium-term energy terms and may be overlaps with other
► The PPI Secretariat: linked to the population and (ii) 90% of sewage take place this year. supply requirements. It is particularly planning bodies, such as the
Ministry of Economy, acts in support of treatment and collection (reducing relevant as it gives signals for energy Ministry of Transport16.
Ministries and Regulatory Agencies for pollution on water basins and auctions (transmission and
the Execution of Program Activities. sea). generation).
Ministerial infrastructure portfolio Decentralised planning Government–owned planning companies and regulators
Policy context:
Domestic financing of infrastructure
Green Finance Assessment Infrastructure funds legislation Sector-specific support mechanisms National Development Bank (BNDES)
In 2019, the Ministry of Economy Law 11,478/2007 established what is Brazil has systematically developed The BNDES is the main long-term financier for
published report about Green Finance in called Infrastructure Equity Funds (FIP- processes to ensure procurement of infrastructure through its policy-driven lending
Brazil17. It highlighted some challenges IE), as a specific type of private infrastructure projects, in particular with subsidized interest rate and long-term
to address: investment funds with tax exemptions maturity of its loans. Since 2017, a market-
energy and transportation. Competitive
covering investment in energy, based long-term interest rate was gradually
► Need for diversification of financing bidding auctions enables a range of long
transportation, water and sanitation, introduced aiming to increase private financing
for infrastructure, emphasizing term contractual formats, improving
irrigation and other projects. (capital markets, pension funds, private banks).
private sources; bankability and enabling project finance Regarding green finance, BNDES was pioneer
► Green bond issuance cost reduction, Regarding investment funds broadly, a structures. issuing $1bn green bonds on the Luxemburg
increase in issuance numbers, and new CVM Resolution, still in public Green Exchange (May/2017) and BRL1bn
Currency risk is still an issue for
the diversification of economic hearing (n.8/2020), provides new domestically (Oct/2020).
international investors, but hedging has
sectors financed; aspects for the funds’ constitution,
been applied to recent PPI concessions.
► Need for a secondary green bond operation and disclosure of information.
Sub-national Development Banks
market; One novelty of this regulation is to allow
the labeling of ‘socio-environmental’ The Northeast Bank (BNB) is the largest
► Creation of a market consensus on funds, based on recognised certification regional bank and has increasing its
concepts and metrics defining the processes. infrastructure financing and green credit lines
ESG market and avoiding (distributed generation, water, sustainable
‘greenwashing’; forestry).
Infrastructure debentures legislation Central Bank – Green Liquidity Facility
► Implementation of CMN Resolution The Amazon Bank (BASA) is the main financier
4,327 / 2014, which rules the social Law 12,431/2011 established In its #BC Agenda, the Central Bank for local productive activities at the Amazon
and environmental responsibility infrastructure debentures giving tax proposed a new liquidity facility for region. In 2019, infrastructure accounted for
policy of financial institutions; incentives for resident investors and financial institutions, whose collaterals BRL 1.5bn and Environmental financing, BRL
those living abroad. Recently, Decree can be private credit operations or private 3bn.
► Implementation of TCFD No. 10,387/2020 included sustainable
recommendations by companies, securities. BCB is studying the feasibility The Minas Gerais State Bank (BDMG) issued
infrastructure projects in the list of of this new facility and subsequent $50m green bonds in 2020, to finance its green
financial institutions, insurance eligible issuers for incentivised implementation. portfolio.
companies, institutional investors; debentures.
and development of measuring The Development Banks Association (ABDE) is
methodologies for ESG impacts on active in engaging and providing guidance
on ESG best practices for its members.
companies’ performance.
Gov. assessment on Green Finance Support for private infrastructure financing Development banks
Brazil Market
References
1) GIZ (2020) O Mercado Emergente de Finanças Verdes no Brasil. Report. June 2020. Retrieved on Jan 2021. From
http://www.labinovacaofinanceira.com/wp-content/uploads/2020/07/mercado_financasverdes_brasil.pdf
2) Climate Finance Update (2019) Climate Finance Regional Briefing: Latin America. Retrieved on Jan 2021. From
https://climatefundsupdate.org/publications/climate-finance-regional-briefing-latin-america/
3) Valor Invest. Asset management market in 2019. Retrieved on Jan 2021. From
https://valorinveste.globo.com/produtos/fundos/noticia/2020/02/19/conheca-as-20-gestoras-que-fisgaram-os-investidores-em-2019.ghtml
4) ANBIMA (2018) 2ª Pesquisa de Sustentabilidade. Retrieved on Jan 2021. From

https://www.anbima.com.br/data/files/4C/92/36/CF/D6C17610167AA07678A80AC2/Relatorio-Sustentabilidade-2018.pdf
5) Itau Asset Management. Integração de questões ESG na avaliação de empresas. White paper. Retrieved on Jan 2021. From
https://www.itauassetmanagement.com.br/content/dam/itau-asset-management/content/pdf/white-
papers/ESG%20na%20avalia%C3%A7%C3%A3o%20de%20empresas.pdf
6) O Globo (2020) Amazônia fundos globais que administram us 375tri pressionam por reducao de desmatamento. Retrieved on Jan 2021. From on
https://oglobo.globo.com/economia/amazonia-fundos-globais-que-administram-us-375-tri-pressionam-por-reducao-de-desmatamento-24493136
7) ABRAPP. Revista da Previdencia Complementar. nº 430. Sep-Oct 2020. Retrieved on Jan 2021. From
http://www.abrapp.org.br/Lists/Revista/VisualizarConteudo.aspx?ID=587
8) IAIS (2018) Issues Paper on Climate Change Risks to the Insurance Sector. Retrieved on Jan 2021. From https://b9ea8c1e-dc19-4d5f-b149-
9b1ea4b8d050.filesusr.com/ugd/eb1f0b_0e5afc146e44459b907f0431b9e3bf21.pdf
9) Finanças Brasileiras Sustentáveis (FiBraS) and Sitawi (2020), Mainstreaming Sustainability in Brazil’s Financial Sector:
http://www.labinovacaofinanceira.com/wp-content/uploads/2020/12/GIZ-Mainstreaming-sustainability-ENG-final.pdf
Brazil Market
References
10) IPEA (2018) Legado do MDL: impactos e lições aprendidas a partir da implementação do Mecanismo de Desenvolvimento Limpo no Brasil.
Retrieved on Jan 2021. From http://repositorio.ipea.gov.br/handle/11058/8854
11) CVM. Serie CVM Sustentatvel. Retrieved on Jan 2021.
From https://www.investidor.gov.br/portaldoinvestidor/export/sites/portaldoinvestidor/publicacao/Serie-CVM-
Sustentavel/serie_sustentavel_vol1_vf.pdf
12) IDB (2020) Financing sustainable infrastructure in Latin America and the Caribbean. Retrieved on Jan 2021. From
https://publications.iadb.org/publications/english/document/Financing-Sustainable-Infrastructure-in-Latin-America-and-the-Caribbean-Market-
Development-and-Recommendations.pdf
13) Ministry of Economy (2020) Letter Infrastructure Debentures. Retrieved on Jan 2021. From https://www.gov.br/economia/pt-br/centrais-de-
conteudo/publicacoes/boletins/boletim-de-debentures-incentivadas
14) JPG (2020) ESG letter. Retrieved on Jan 2021. From http://admin.jgp.com.br/wp-content/uploads/2020/08/JGP-Primeira-Carta-ESG_Julho-2020.pdf
15) NDB (2020) Sustainable Financing Policy Framework governing the issuances of green/social/sustainability debt instruments. Retrieved on Jan
2021. From https://www.ndb.int/wp-content/uploads/2020/05/2020_FC22_AI13_018_b-NDB-Sustainable-Financing-Policy-Framework.pdf
16) SITAWI Green Bond issuances. Retrieved on Jan 2021. From https://docs.google.com/spreadsheets/u/1/d/e/2PACX-
1vRDp7Z82Qovj9VuupGGQGSiBi66hQPdRL5ucb6kZ80HyjtQtVjjtf7Qekh99_DVs2FRG-8ADHE05ASP/pubhtml
17) FGV (2018) Regulação e Infraestrutura: Em busca de uma arquitetura. Retrieved on Jan 2021. From
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18) Ministry of Economy (2019) Finanças Verdes no Brasil. Retrieved on Jan 2021. From https://www.gov.br/economia/pt-br/centrais-de-
conteudo/publicacoes/notas-informativas/2019/2019-04-17_cartilha-financas-verdes-v25r.pdf
6. Stakeholder insights &
recommendations
79
6.1: APPETITE FOR SUSTAINABLE

INFRASTRUCTURE INVESTMENTS
Stakeholder perspectives on:
Infrastructure sectors (1/2)
In which sectors, if any, do you see opportunities arising out of the Covid-19 By how much do you expect the infrastructure
pandemic, its consequences and the government programmes to respond to it? sector to grow its proportion of green assets
relative to total assets in the next two years?
Other
0%
I don't see opportunities arising in any sectors 4%
Transport
28%
Storage facilities (e.g. battery storage, terminals)
Gas, oil and other fossil fuel infrastructure (e.g. petrol stations
etc)
Green infrastructure (e.g. rainwater harvesting)
Hydrogen
Renewable power (e.g. carbon capture storage and utilisation

68%
(CCSU))
Digital infrastructure (e.g fibre, data centres, towers)
Health and social care (e.g. pharma, residential care)
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Below 10% 10-20% 21-30% Above 30%
Source: Data provided by Linklaters (July 2020), survey of 50 Fund Managers and Portfolio Managers who invest in Infrastructure sectors in the UK
81
Infrastructure sectors (2/2)
UK stakeholder perspectives Brazil stakeholder perspectives
Infrastructure as an asset class is growing rapidly in attractiveness globally New investments is essential as Brazil lacks sufficient
infrastructure
► Institutional investors cited the prospect of steady yield in times of historically low interest rates as one
of the driving factors, as well as increased interest from pension funds and insurance companies. ► Investment in infra has been less than 2% of GDP,
insufficient to maintain what is already in place.
► Other demographic and micro-trends are driving interest for infrastructure investments in emerging
markets, such as population growth (particularly in Sub-Saharan Africa and South Asia), and meeting ► The Brazilian Investments Partnerships Program (PPI)
the Sustainable Development Goals, such as clean energy access for all (SDG7). Social infrastructure provides a project pipeline at the federal level with
(particularly health and education) were identified as key growth sectors in emerging markets. infrastructure opportunities across: airports, ports, rail
roads, sanitation, and renewable energy.
Some sectors will pave the way for sustainable infra
There is a wide recognition that infrastructure as an asset class is not homogenous, has an ever
evolving definition, and is context dependent ► Renewable energy is the main sector for green bond
issuance (e.g. BNDES’ recent $1bn bond to finance
► For example, in European countries like France, toll roads are widely accepted, whereas in the UK solar and wind projects)
there is currently only one major toll road (the M6 Toll).
► The privatisation of Eletrobras, as the government cuts
► Data centres, have become a widely accepted type of digital infrastructure that would not have been its stake in Latin America’s largest power utility from
considered previously. 61% to 45%, opens up further investment opportunities
in renewables, as well as cross-border investments
UK stakeholders are generally aligned with their European counterparts regarding infrastructure ► The recently approved Sanitation Bill has created the
sector interests, renewable energy particularly standing out expectation that the waste and water sectors will see
an increase in interest. Investment in these sectors has
► All stakeholders, including investors and service providers, identified renewable energy as a key
a high social impact potential, as 40% of Brazil’s
infrastructure area of growth – particularly offshore wind (due to the UK’s existing capabilities) and
population doesn’t yet have access to clean water.
hydrogen facilities. Interviewees cited their inclusion in the Prime Minister’s 10-point plan for a Green
Industrial Revolution as an expectation for further government support. Nuclear energy is also part of A new wave of infrastructure investment could be
the 10 Point Plan, it was not identified as an area of particular interest. triggered as interest rates collapse
► Energy-from-waste infrastructure is also gaining interest from private equity investors, as it is seen as ► However, incentives through infrastructure debentures
a solution for low-carbon energy production and waste treatment, supporting the circular economy. are still not applied to institutional investors. 82
Defining sustainable infrastructure
Among UK stakeholders there was no uniformly accepted definition for what The categorization in Brazil on what infrastructure is green or sustainable is
sustainable infrastructure is, or even which infrastructure sectors definitely fall in or out still at the early stages of discussion
of the categorisation sector categories fall under it.
► Brazilian asset managers and investors often base their positions on European
► However as per the Inter-American Development Bank (IDB)’s definition used by the
and US definitions. Sustainable infra projects (sewage, renewables, urban
FCDO for this project, there is a broad consensus that categorising an infrastructure
mobility) are qualified to issue incentivized infrastructure debentures.
asset as sustainable is largely dependent on how the various environmental, social,
and governance (ESG) criteria are considered across the asset’s lifecycle (including ► Financial institutions are increasingly becoming actively interested in
planning, designing, construction, operation, and decommissioning), and that there is environmental aspects of a project, whereas previously institutions took a
a net-positive contribution across all categories. reactive minimum compliance approach. However, given the complex legal
► This requires improving asset-level data collection, often through contractors, to requirements for infrastructure projects (such as licensing requirements), it is still
better understand the asset’s sustainability profile, which is often lacking difficult for the private sector to consider criteria beyond what is legally required.
There is a wide recognition for the need for flexibility and to assess each asset for Brazilian stakeholders hold a cautious optimism that increasingly, more
its own merits, taking into account the social context, particularly in emerging infrastructure investments across all sectors will have a sustainable angle to it.
markets
Inter-American Development Bank (IDB) framework for sustainable infrastructure
► Even holding an infrastructure asset within an intuitively ‘sustainable’ sector, such as
renewable energy storage is not fully sufficient to be classified as sustainable. Economic and financial Sustainability Environmental Sustainability
► For example, a lithium ion battery plant may be seen as sustainable for enabling the ► Economic & Social Returns ► Climate and Natural Disasters
electrification of vehicles and therefore displacing fossil fuel consumption, however, ► Financial Sustainability ► Pollution
the plant may still have adverse effects on the surrounding biodiversity, or there may ► Policy Attributes ► Preservation of the Natural
be worker exploitation within its mining supply chain. Environment
► Other assets, such as social infrastructure and roads may be considered sustainable ► Efficient Use of Resources
infrastructure depending on how they are built and managed, given the social value Sustainable
they provide. Infrastructure
Multiple infrastructure investors and service providers have completely abandoned
financing/supporting any new coal-fired power plants Social Sustainability Institutional Sustainability
► However, some are still active in oil and gas activities. A service provider highlighted ► Poverty, Social Impact and ► Global & National Strategies
that they would rather ensure that the oil and gas assets are managed as efficiently Community Engagement ► Governance & Systemic Change
► Human & Labor Rights ► Management Systems &
as possible to minimise their environmental impact than completely abandon the
► Cultural Preservation Accountability
sector. This may change in light of a new company-wide strategy on net-zero.
► Capacity Building
Source: IDB Group (2019), Attributes and Framework for Sustainable Infrastructure
Geographic interest
UK stakeholder perspectives
Which geographies would you be most likely to invest in, in the next two years? (Tick
Country interest will depend on type of investor and lifecycle up to three)
stage
► E.g. investment banks involved at the earlier pre-development UK
phase, where projects are already inherently riskier, may not
have appetite for additional emerging market risk.
US
European investors are most focused on Western Europe and Western Europe (ex. UK)
North America.
► Latin America and Africa are the least popular investment Asia
destinations.
Eastern Europe
UK stakeholders are willing to work in Brazil if opportunities
arise Southern Europe
► Investors and service providers are willing to work in Brazil if
their client demands it, but they are not actively seeking out Canada
new opportunities without an anchor client.
► Approach to Brazil is more reactive than proactive. Australasia / Oceania
Brazil stakeholder perspectives Africa

► Local investors are home-biased. Some asset owners and
managers do invest abroad, but mostly in Latin American Not most likely to invest in any particular geographies
economies.
► Due to interest rates differentials, in the past, local investments Latin America
were safer and delivered higher returns. With the collapse of
0% 10% 20% 30% 40% 50% 60% 70% 80%
interest rates, some investors are seeking diversification.
Source: Data provided by Linklaters (2020), survey of 50 Fund Managers and Portfolio Managers who invest in 84
Infrastructure sectors in the UK
Barriers to sustainable investing in Brazil
The Sustainable Infrastructure Investment Opportunities in Brazil report had identified multiple barriers to investment, both in the form of factors rendering Brazil unattractive to investors when assessed
against other countries (Table 3), as well as the limitations of foreign investors and local financial institutions (Table 4). Our stakeholder interviews have provided further insights across those factors.
Interviewed stakeholders identified general barriers to investing in Brazil before touching on infrastructure or ESG-focused barriers, particularly highlighting language
skills and regulatory complexity.
► International investors mentioned language as a barrier to operating in Brazil, both in terms of their limited Portuguese language capabilities, as well as the English proficiency of
their Brazilian counterparts. However, an investor that has been active in Brazil for decades noted that there has been a promising increase in English-speakers in Brazil recently,
which may further facilitate future interactions.
► The complexity of employment laws and project regulations means that foreign investors need to find local partners to navigate the regulatory landscape, and even then face
delays and uncertainty in obtaining environmental and/or operating permits. Therefore, without existing connections or introductions to local companies who can navigate the
complex regulatory regime, it is difficult for UK investors to enter the Brazilian infrastructure market.
Other institutional challenges such as governance issues, corruption, political influence, and lack of transparency in infrastructure concessions have also been
highlighted as particularly relevant for infrastructure projects, as well as a lack of a nationally harmonised standard for infrastructure assessment and long-term planning
► International investors singled out how the UK (and Australia’s) history of private infrastructure investment stems from the strength of their state institutions, legal services, soft
skills, and political stability. This gives investors comfort in the long-term returns of their investments, and they know that any legal issues will be solved in a timely and fair manner.
► International investors have raised concerns about institutional apparatus of Brazil, particularly since the Lava Jato scandal. Infrastructure investors are particularly keen to fairly
negotiate key project terms with authorities (e.g. PPPs and other concessions) and want to see rules and regulations being fairly and duly enforced.
► Another challenge to infrastructure investing is the lack of a single federally harmonised standard for infrastructure assessments. This means that requirements may vary across
states, further adding to the already complex regulatory environment.
International investors need to grapple with the general challenges in Brazil and the infrastructure sector in the first instance, before even considering the specific
challenges of identifying a pipeline of bankable and sustainable infrastructure projects
► There is a limited portfolio of bankable infrastructure projects with credible socio-environmental standards. Even when there is liquidity and the willingness to invest, foreign
investors find it difficult to identify the relevant projects, or even local partners that can.
► ESG investing in Brazil requires more active management and due diligence from international investors as a lot of the data is not measured, tracked, or readily available, even if
certain ESG measures are being implemented.
► The tone on sustainable finance, and the peeling back of environmental regulations in general, from the highest levels of government is not conducive of a positive ESG investing
context. However, some stakeholders regularly engaging with government officials have expressed encouragement in the willingness they have received by key officials to85push
the ESG agenda in private. However, this willingness is not reflected in the government’s general rhetoric.
Case study: international infrastructure investor in Brazil
► Macquarie Infrastructure and Real Assets (MIRA) is one of the world’s leading alternative asset managers and is the world’s
largest infrastructure manager, according to Infrastructure Investor’s latest rankings. MIRA manages GBP £113.2b in assets on
behalf of clients and its team of 947 people across 39 offices in 32 countries invests in businesses that underpin economies
and communities and that are relied on by more than 100 million people each day (as of September 2020).
► Solví Participações S.A. (Solví) is one of the largest waste management platforms in Latin America, focused on the Brazilian
market, with additional operations in Peru, Bolivia and Argentina. Solví’s operations primarily focus on waste treatment and
disposal through its 35 landfills located near highly populated areas. Its operations also include landfill gas-to-energy facilities
with ~60MW of generation capacity as well as other innovative technologies co-located at its landfill sites.
► In November 2019, Macquarie Infrastructure Partners IV, a MIRA-managed fund with a mandate to invest in the Americas
acquired a significant minority interest in Solví, with governance rights over all key strategic decisions of the business.
► A key part of MIRA’s investment decision was based on its belief that it could use its expertise to drive not only financial
performance but also continual improvements to Solví’s ESG framework. During 2020, MIRA supported Solvi’s participation in
the GRESB assessment for the first time. This is a global sustainability benchmark assessment, allowing Solví to better
understand what stage it is at in the sustainability maturity process and to identify improvement areas.
Brazilian Waste Market and Solví’s ESG Contributions All of Solví’s landfills are built to high environmental
standards in order to provide the highest quality disposal
► Despite Brazil being the fourth largest waste market in the world according to the World Bank, only ~60% of waste is disposed and treatment solutions for the communities it serves.
of properly based on the latest industry data from ABRELPE. Poorly treated waste creates pollution and health risks with
estimates suggesting that US$1 invested in proper waste management delivers US$3.75 - 7.50 in social and health benefits3.
Beyond its focus on providing treatment solutions to the communities where it already exists, Solví intends to build modern
landfill sites to replace some of the ~3,000 open dumps that exist in Brazil today.
► Solví had captured methane emissions and converted them to almost 400GWh of energy last year. In its history, Solví has
created more than 20mn tonnes of UN certified carbon credits.
► With nearly 15,000 employees/contractors (almost 100 dedicated safety staff) and labour-intensive operations in busy urban
areas, workplace health and safety is a core value for Solví, which has invested heavily in training, processes and technology to
ensure the safety of its employees.
► Solví plays an important role in all of the communities in which it operates and its charitable foundation has donated more than
R$3.3mn per annum on sponsorships, charitable contributions, educational programs and volunteer hours to foster health,
environmental awareness and social development. Termoverde Caieiras, one of the largest landfill gas to
► Throughout the Covid-19 pandemic Solví continued to perform its essential services with enhanced PPE, public education, energy plants in operation in the world (~30MW capacity),
cleaning, social distancing and shift management, winning national recognition. located at Caieiras landfill, the final destination of ~60% of
São Paulo’s waste (Brazil’s most urban and densely
populated city)
Source: Case study developed in collaboration with MIRA and Solví
ESG drivers (1/2)
UK stakeholder perspectives Importance of factors in ESG integration

Infrastructure investors and developers hold (8 = Most relevant; 1= Least relevant)
the view that given the long lifetime of
infrastructure assets, they need to be
Asset value/financial return 7.3
sustainable to maintain consistent, long-
term returns
► ESG considerations provide greater access ESG risk management 6.1
to finance, for example new funding sources
becoming available for special projects, e.g.
Brand reputation 5.8
LED retrofitting and solar panel
implementation
► A service provider mentioned that Impact on credit ratings 4.4
infrastructure developers may get more
favourable terms when they meet ESG
Investor/counterparty preference 4
criteria and many clients are looking to be
vetted to get better access to finance
► Asset managers are under a huge amount Government guidelines/regulations 3.8
of pressure from investors, particularly high
net worth individuals (HNWIs), who are Inclusion into financial and non-financial indices 2.5
demanding their investments be made
sustainable assets, including infrastructure
Behaviour of competitors 2.2
0 1 2 3 4 5 6 7 8
Source: Oliver Wyman & WWF (2020), Incorporating Sustainability into Infrastructure; Survey response from over 30 global infrastructure investors
87
ESG drivers (2/2)
COP26 has been a large driver of ambition for UK International investors have been piling pressure on Brazilian financial institutions and
stakeholders infrastructure developers in response to high-profile environmental disasters
► This has resulted in announcements of new corporate ► Following the 2019 Brumadinho dam disaster, in which 270 people died as a result of the
sustainability targets and initiatives in the lead up to COP dam’s collapse, various international investors divested from Vale (the mining company that
(e.g. the Bankers for Net Zero, and the Race to Zero) owned the dam), depressing its shares by a fifth in the ensuing month. This triggered a
renewed interest in ESG among Brazilian investors and developers, particularly in regards to
Increasingly, UK public procurement contracts include a project safety and working conditions
sustainability element in their evaluation criteria so
► In June 2020, a group of 29 global investment firms that manage US$3.7 trillion sent an open
developers are taking ESG seriously to win government
letter to Brazilian embassies requesting the government to stop soaring deforestation in the
contracts
Amazon. This followed seven European firms that owned $5 billion in investments linked to
► UK government’s procurement policy already includes Brazil threatening divestment for the same reason. This type of investor activism over the
clauses for ‘improving construction procurement’, for Amazon rainforest has increased the general profile of ESG investing in Brazil.
which common minimum standards have been set out
since 2012. These include alignment with the Greening ► In February 2021, Brazil’s Treasury announced plans for a sovereign bond issuance linked to
Government Commitments, as well as maximising the Brazil’s ESG credentials, to increase foreign investors' federal debt holdings.
efficiency of energy, water and waste management, Investors’ perceptions about ESG projects have changed over the past 5 years.
enhancing positive impacts on biodiversity, and taking
► Previously investors felt that ESG considerations might sacrifice returns, however increasing
into account the likely impact on staff, transport systems
evidence has proven otherwise, particularly in the long-term, e.g. the MSCI Brazil ESG
and local communities.
Leaders Index outperforming the MSCI Brazil Index on a 10-year annualised rate
► In November 2020, HM Treasury published a review of
the Green Book, the government’s guidance on ► COVID has also accelerated the change in rhetoric, making ESG one of the top priorities
government options appraisal for all proposals that ► Every major financial conglomerate is announcing they will look at their portfolio for ESG, and
concern public spending, taxation, and changes to large asset managers and owners are already beginning to integrate ESG analysis
regulations. It recommends that all project proposals take
Public authorities are showing interest in integrating ESG principles into infrastructure
into consideration whether they will act as a relevant
constraint to achieving the UK’s net-zero target. ► BNDES is very engaged in ESG, and the Ministry of Infrastructure is designing green bond
structures for upcoming infrastructure projects 88
Landscape of sustainable infrastructure and ESG
assessments and guidance
ESG Evaluation of infrastructure ESG Valuation of infrastructure Portals or platforms supporting

(rating/score/certification) (financial impact assessment) sustainable infrastructure
Matchmaker
Sector specific
Infrastructure related Relevant international agreements Other sustainability frameworks &

standards and principles reporting standards
ESG Corporate sustainability
Infrastructure Investor
EU Taxonomy Principles for Responsible Investment
Quality Due Diligence
Infrastructure Questionnaire
Investment
89
ESG standards (1/2)
Due to the lack of a uniform definition of sustainable infrastructure, international standards and ESG assessments are a reliable
means of identifying and clarifying the ESG requirements that need to be met at the project level
► ESG evaluation methodologies such as the GRESB Assessment are useful to get a bottom-up view of the ESG characteristics of funds and
individual assets
► However, investors warned against treating these “like ratings agencies”, trying to maximise the score without real changes, but instead a
collaborative approach between asset owners and managers to improve long-term sustainability
International standards are important to give institutional investors confidence about any sustainability claims and the bankability of
projects
► Institutional investors that wish to allocate ‘sustainable investments’ without carrying out complex due diligence rely on international
standards and certifications
► Up-and-coming initiatives like the FAST-Infra label, as well as established certifications like Global Infrastructure Basel’s SuRe Standards will
make the identification of sustainable infrastructure assets easier
► Investor demand is largely driving the greater adoption of these standards, rather than the infrastructure developers themselves
Applying international standards in emerging markets can often be difficult due to a lack of data and other factors
► Applying some standards are very complex, e.g. the EU taxonomy for sustainable activities’ Technical Annex is almost 600 pages long and
some aspects such as ‘do no significant harm’ may be conceptually challenging for investors.
► As most standards are developed in Europe or North America, they may take for granted some social safeguards which are more difficult to
achieve in some emerging markets (e.g. supply chain working conditions and human rights)
► Investing in sustainable projects in emerging countries shouldn’t inherently disadvantage local stakeholders for not having advanced ESG
capabilities. An equity investor pointed out that they identify the best-in-class in the target market and actively work with them to improve
their sustainability metrics over time.
ESG standards (2/2)
Many investors have simultaneously adopted various standards and tools, while Brazilian financial institutions are subscribed to several
some have developed their own tools, often based on existing principles. international ESG standards and practices
► Private Equity investors are often UN Principles for Responsible Investment (PRI)
► Popular standards include the UN PRI, TCFD, IFC
signatories, adopt the Equator Principles’ risk management framework (particularly
Performance Standards, GRI, CDP, Equators Principle, and
for emerging markets as these were originally based on the IFC Performance
the UN SDGs. For green bonds, the Climate Bonds Initiative
Standards), and may track their portfolios against the Sustainable Development
is widely recognised and used in Brazil.
Goals (SDGs).
► However, investors expressed concern for ‘SDG washing’ in which the goals are ► However the application of some standards is not always
reverse engineered into existing portfolios, defeating the purpose of actively seeking uniform and international stakeholders have questioned how
projects aligned with the SDGs. truly committed the signatories actually are
► For capital market transactions, CBI’s Climate Bond Standard and ICMA’s various In turn, ESG standards are not usually considered in
principles (for Green Bonds, Social Bonds, and Sustainability-linked Bonds) are infrastructure project development as local environmental
dominant licensing and permitting regulations are already very
stringent
Given the proliferating landscape of ESG standards, stakeholders expressed hope ► Most infrastructure developers have little or no incentive to go
for harmonised definitions and methodologies going forward beyond legal requirements, particularly if international
► The International Organization for Standardization’s ISO/TC 322 currently under investors are not involved in the project
development will standardise definitions in the field of sustainable finance by ► Brazilian stakeholders identified how international NGOs can
integrating sustainability considerations, including ESG practices, in the financing of have a large influence on international investors and
economic activities. corporate value chains, which can in turn influence Brazilian
► The September 2020 statement of intent to work together by the leading disclosure infrastructure developers to adopt more sustainable practices
frameworks – CDP, CDSB, GRI, IIRC and SASB – is another promising development ► The main source of pressure to maintain high socio-
to standardise sustainability reporting environmental standards often comes from the Public
► The EU taxonomy was identified as a key methodology that will likely determine Prosecutor's Office, which is a powerful body of independent
environmentally sustainable activities beyond Europe’s borders, and public prosecutors at both the federal and state level that
► Reporting on the TCFD’s recommendation’s is also being integrated into various uphold justice.
other platforms, such as GRESB and CDP. 91
Gender and social inclusion
There was a growing recognition of the importance of gender and social Some stakeholders recognized how infrastructure projects have a high toll
inclusion across all UK stakeholders, though acknowledging that more on gender (e.g. in the form of sexual violence towards women) and child
needs to be done health. However, there is usually a lack of indicators or extensive assessment of
► Many companies have their own gender and social inclusion strategies and social issues.
initiatives, such as hosting ‘Women in Finance’ or ‘Women in Business’
► If any non financial issues are included, most project’s contracts are focused
events, disability training, and LGBTQ+ Pride celebrations
on environmental issues. Some projects may have requirements on social
issues, but that is generally in the form of community engagement.
There was a broad consensus that it is easier to promote gender and
► Stakeholders highlighted specific organisations actively working on
social inclusion at the organisational level of infrastructure companies (e.g.
promoting gender and social equality that relate to infrastructure, such as the
promoting a diverse board of directors), than at the infrastructure project level
Women’s Group of Brazil, who are particularly active in the sanitation sector,
► Project-level engagement is more difficult as it may involve dealing with third- as well as Childhood Brasil, focusing on tackling abuse and sexual
party service providers or contractors who are not tracking gender metrics. exploitation against children on Brazilian highways and waterways.
And even if they were, project-level metrics may not be reflective of the
overall company’s gender and social diversity.
► Some equity investors have asked subcontractors to put in place gender and Brazilian investors are beginning to look at gender equality, with some
social inclusion policies, however these are difficult to implement and monitor financial institutions adopting voluntary policies such as tracking gender in the
on the ground and depend on the level of influence the investor has hiring process.
► However, there is not yet a similar approach towards LBTQ+ inclusion or
Some infrastructure investors pointed out that as important as it was, they other forms of social inclusion
found it difficult to integrate gender and social inclusion alongside other ► In addition to gender; other forms of discrimination, poverty, and race are
environmental, governance and social criteria, feeling that they are trying to also important for infrastructure projects.
integrate too many indicators at once.
► It was suggested that gender bonds could be relevant to promote gender
► They mentioned that infrastructure projects cannot realistically be expected
equality, particularly around local small holdings and serving indigenous
to solve or address every social issue in a given country’s context.
peoples.
► Often times, this results in paying greater attention to avoiding gender-based
malpractice, rather than actively supporting gender equity in a project
92
Brexit
Most stakeholders believed that Brexit is not relevant in relation to their engagement with Brazil, and if Brexit was not a topic that regularly registered with
anything, will increase the appetite for cooperation Brazil stakeholders, and all agreed that Brexit has
► Brexit provides an impetus to strengthen trading ties with non-EU countries, though which Brazil could be a key not negatively affected the UK-Brazil relationship
target market
► Local service providers even noted that they have
► This is also marked by an increase in bilateral ties over multilateralism. For example in December 2020 the UK and been seeing a rise in opportunities (such as projects,
Brazil announced intensifying preparations for a future Free Trade Agreement grants and tools) coming from the UK government
► They expressed hope that Brexit might result in
However, multiple stakeholders identified the risk of the UK losing out on its leadership in sustainable better trade opportunities, as Brazil has been
finance, particularly if the UK pursues deregulation, in light of the EU’s role as a standard-setting regulatory struggling with EU trade negotiations, partly due to
regime European campaigners piling pressure to not ratify
► The EU Taxonomy is seen as a leading authority in defining what constitutes sustainable investment activities not the EU-Mercosur trade agreement until more
just within Europe but across the world. stringent action is taken by Brazil to halt
► It was also noted that the Technical Advisory Group which created the Taxonomy was composed of multiple British deforestation
nationals (e.g. James Baldwin) and UK-headquartered companies (e.g. Climate Bonds Initiative), hence the UK’s ► Brazilian asset owners and managers do not see a
influence will likely be diminished in shaping such key frameworks relevant impact on their operations, in part due to
► There is little appetite for major divergence and the UK is expected to replicate many initiatives in parallel, e.g. their bias towards local and Latin American markets.
reflected by the UK’s announcement to establish a UK Green Taxonomy and UK Green Technical Advisory Group.
There was also a recognition that Brexit could affect the UK’s domestic infrastructure sector by limiting the However, there was a recognition that Brexit might
steady supply of workers and the loss of European Investment Bank (EIB) funds undermine London’s long-term ambition to be a
major green finance centre
► Infrastructure developers highlighted how the construction sector employs many Eastern European, and the supply
of workers could be put at risk as freedom of movement is limited ► It is already common for Brazilian institutions to
► However, this risk may be offset by other advancements in construction, such as offsite modular construction sites, issue green bonds in Luxembourg
which are highly digitised, requiring fewer workers onsite, while increasing safety and improving product quality ► The EU Taxonomy was identified as an important
► The hole left by EIB funding, which is increasingly focusing on sustainable infrastructure and is now dubbed framework being monitored by Brazilians active in
‘Europe’s climate bank’, will mostly be plugged by the new National Infrastructure Bank, which is expected to play ESG.
a large role in low-carbon and sustainable infrastructure financing in the UK 93
Covid (1/2)
Has Covid affected your approach to management of risk attached to high-impact, long-term
unpredictable events (such as pandemics and extreme climate-related weather events?)
6% 4%
6%
84%
Effected to a great extent Effected a fair extent Effected slightly No effect at all
Source: Data provided by Linklaters (2020), survey of 50 Fund Managers and Portfolio Managers who invest in Infrastructure sectors in the UK
94
Covid (2/2)
Investors highlighted how Covid had some immediate short-term operational impact on their project All interviewees considered that Covid has pushed the ESG
timeline agenda forward in Brazil
► This was mainly as a result of social distancing restrictions at construction sites, investors citing delays of
► Covid has increased the focus on ESG of financial institutions, with
around 2-3 months for their greenfield energy projects to move ahead
analysts and managers highlighting C-level interest in ESG issues.
► However, an equity investor even highlighted that the economic impact form Covid provided an opportunity to
acquire businesses and assets at a cheaper prices, for example, having purchased assets in solar energy from ► Multiple asset managers have publicly expressed their views on
a company that was struggling from Covid ESG, announcing dedicated funds, and creating new roles
dedicated to sustainability and impact investment.
Long-term impacts of Covid on the infrastructure sector are unknown, but there is already a shift in asset
preferences across sectors The pandemic reinforced the importance of managing ESG themes
► The transport sector was identified as the sector that will likely suffer in the medium to longer term due to the in a way that develops more robust risk management in the face of
cashflow troubles for the rail/underground since the lockdown, as well as consumer behaviour shifts away from new epidemics and contagious diseases18
regular commuting ► Covid exposed general failures in adequate infrastructure and
► Digital infrastructure, such as broadband cables and data centres, are expected to receive further investment awareness of the social dimensions of infrastructure, particularly in
after the lockdown highlighted the importance of digital access to keep economic activity running regards to access to water and sanitation, and employee safety.
The impact of Covid on government finance has been highlighted as a key issue for emerging markets Despite the economic downturn, stakeholders felt that the
► The bankability of infrastructure projects requires some sort of guarantees, which may not be viable if they infrastructure sector was not critically affected
increase fiscal constraints
► In fact, the telecom sector benefited from an increased use of IT
► There may also be a short-term capacity constraints in some ministries to focus on new infrastructure projects technologies and digital infrastructure.
The ‘Build Back Better’ agenda and calls for a green recovery are promising signs that the UK and
international governments will promote more sustainable infrastructure and ESG integration in general ► However, besides infrastructure companies, Covid has had
adverse effects on investment performance and on the credit
► However, actions have not always matched the rhetoric. For example, even though the UK has announced
quality of companies.
funding for cycling infrastructure, digital infrastructure and renewable energy projects, they have also approved
a £27bn road investment programme; and Cumbria council approved plans to build the UK’s first deep coal Stakeholders expressed a worry about attempts to further loosen
mine in 30 years, before pausing the project for reconsideration following public outcry environmental regulations as a result of Covid
Covid has triggered a re-appreciation of value, amplifying the growth curve in ESG investing ► In May 2020, Brazilian Environment Minister Ricardo Salles called
► ESG funds have generally outperformed the market throughout the Covid crisis on the government to push through further deregulation of
► Investors suggested that Covid exposed the limitations of not considering social, environmental and environmental policy, which prompted a backlash from international
governance issues, and highlighted the fragility of existing supply chains and business practices investors warning against 'dismantling' of environmental policies
► Climate change has been a particular issue of interest 95
6.2: RECOMMENDATIONS
Recommendations to develop Brazil’s sustainable finance and
infrastructure attractiveness
1. Set out a cross-government, long-term, green finance policy strategy to provide clarity to the financial industry, act as a market signal, and demonstrate to
international investors Brazil’s strong commitment to green finance from the highest levels of government. This could for example be modelled after the UK’s
2019 Green Finance Strategy, draw from the recommendations of the 2020 report ‘Mainstreaming Sustainability in Brazil’s Financial Sector’ endorsed by the Financial
Innovation Laboratory (LAB), and build on the Ministry of Economy’s 2019 publication on the state of green finance in Brazil.
2. Establish independent bodies to assess Brazil’s infrastructure needs across all infrastructure sectors, with a climate change/sustainability lens, or
reinforce the climate/sustainability mandates of existing bodies and coordinate activities between the sector-level bodies (e.g. EPE and EPL). This could
draw inspiration from the UK’s National Infrastructure Commission (NIC), which regularly conducts impartial analysis of the UK’s infrastructure needs and provides
recommendations to the government, as well as the Climate Change Committee (CCC), which has a similar role in assessing the actions required by the government
to meet its long-term net-zero target.
3. Establish a national, harmonised standard to assess and approve infrastructure projects which integrates sustainability principles across federal, state
and municipal agencies. This approach could be modelled on the UK’s Five Case Model, for which the Association of Brazilian Development Banks (ABDE) have
already received training, and is also being adopted across Colombia and other emerging markets through the Prosperity Fund’s Global Infrastructure Programme.
Such a harmonised standard could be led by the recently announced Brazilian inter-ministerial committee on infrastructure or the Ministry of Infrastructure (MInfra).
4. Integrate a consistently applied and comparable sustainability lens across the existing pipeline of investable infrastructure projects developed by the
Brazilian Investments Partnerships Program (PPI). This could allow for filtering and categorising by international standards and third-party verification, as well as
relevant ESG metrics (such as avoided greenhouse gas emissions, water use, stakeholder engagement, gender & social inclusion etc.). It could also bring benefits
such as reducing information asymmetries on sustainability risks, increasing transparency, and limiting greenwashing.
5. Ensure that the risk allocation between private and public sector is well apportioned in infrastructure projects to overcome the perception by international
investors that the private sector is overburdened with managing risks (e.g. relating to permitting and allowance). The Global Infrastructure Hub (GIH)’s PPP Risk
Allocation Tool, which has also been launched in Portuguese with the support of the Inter-American Development Bank (IDB), could provide this framework across
various sectors.
6. Coordinate the partnership and collaboration between Brazilian project developers and UK and international investors to facilitate deal identification and
financing. This could be jointly coordinated by the FCDO (e.g. through Intervention 3 of the BGFP), Infrastructure Exports UK (IE:UK) and UK Exports Finance
(UKEF).
97
ANNEX A: UK GREEN FINANCE
STAKEHOLDER LIST
UK green finance stakeholder list:
Investors
Diversified asset Infrastructure/ESG Asset owners and pension Commercial and global
Investment banks
management (AM) specialised AM/investor funds services banks
Aberdeen Standard Investment 3i Group Aviva Staff Pension Scheme Canaccord Genuity Capital Markets ABN AMRO Bank
Allianz Investment Management Amber Infrastructure Group Barclays Bank UK Retirement Fund Cantor Fitzgerald Bank of America
Aviva Investors Arcus Infra Partners BBC Pension Trust ClearlySo Barclays Bank
Baillie Gifford ATLAS Infrastructure BP Pension Fund Credit Suisse BNP Paribas
BlackRock Bluefield Partners British Airways Pensions Evercore Citibank UK Ltd
Bluebay Asset Management Brookfield Asset Management British Steel Pension Scheme FinnCap Credit Suisse
BNP Paribas Asset Management Earth Capital Partners BT Pension Scheme Goldman Sachs Deutsche Bank
Columbia Thredneedle Investments Foresight Group Electricity Supply Pension Scheme Green Investment Group (GIG) HSBC Bank
Dalmore Capital Glennmont Partners Greater Manchester Pension Fund Investec ING Bank
Equitix Global Infratructure Partners HBOS Final Salary Pension Scheme J.P. Morgan JP Morgan
Fidelity International Gravis Capital HSBC Bank Pension Trust (UK) Ltd. Jefferies Lloyds Bank
Hermes Investment Management Greencoat Capital Lloyds Bank Pension Scheme Lazards Natixis
HSBC Global Asset Management IFM Investors National Grid UK Pension Scheme Liberum Natwest
Insight Investment Infracapital Partners Railways Pension Scheme Morgan Stanley Royal Bank of Scotland
Investec Infrared Capital Partners RBS Group Pension Fund N + 1 Singer Santander Group
Janus Henderson Investors John Laing Shell Contributory Pension Fund Numis SEB
Legal & General Investment Macquarie Infrastructure and Real
Strathclyde Pension Fund RBC Capital Markets Société Généralé
Management Assets (MIRA)
M&G Investments NextEnergy Capital Universities Superannuation Scheme Rothschild & Co Standard Chartered Bank
Royal London Asset Management Quinbrook Infrastructure Partners West Midlands Pension Fund Stifel Financial Corp Triodos
Schroders Sustainable Development Capital West Yorkshire Pensions Fund UBS Investment Bank UBS
99
Indicative (non-exhaustive) list of prominent stakeholders with a UK office by sector; based on size, revenue, or distinct green finance offering
Diverse service providers
ESG Data & Ratings Insurance (incl. insurers,
Sustainability consulting Engineering consulting Law firms
providers brokers, syndicates)
3Keel Aecom Acclimatise Allen & Overy AIG
Accenture Arcadis Apex Group Ashurst Allianz
AccountAbility Arup Arabesque Baker McKenzie Aon
Baringa Atkins Bloomberg BCLP Aviva
BDO Costain Ecovadis Bird & Bird AXA Insurance
The Carbon Trust ERM Factset Clifford Chance Bupa Insurance
Deloitte Consulting Faithful+Gould FTSE Russell Clyde & Co Chubb
EY Consulting Jacobs IHS Markit CMS Direct Line Group
KPMG Consulting JLL Impact-Cubed Dentons FM Global
McKinsey & Company London Bridge Associates ISS DLA Piper Hastings
Oliver Wyman Mace Moody's DWF Hiscox
Ortec Finance Mott MacDonald MSCI Eversheds Sutherland Legal & General
PA Consulting Pell Frischmann Qontigo Freshfields Bruckhaus Deringer Liverpool Victoria
PwC Consulting Ramboll Refinitiv Herbert Smith Freehills Lloyds of London
Roland Berger Ricardo Reprisk Hogan Lovells Nephila
Sustain Value Royal HaskoningDHV Robeco Latham & Watkins NFU Mutual
Vivid Economics Skanska S&P Linklaters Parhelion
Volans Stantec Sustainalytics Norton Rose Fulbright RSA Insurance Company
BCG Turner & Townsend Trucost Pinsent Masons Willis Towers Watson
Globalfields WSP Vigeo Eiris White & Case Zurich
100
Research and government
NGOs & think tanks Universities, research centres & professional bodies Regulators, gvmt. & public bodies
2° Investing Initiative (2°Ii) Cambridge Institute for Sustainability Leadership (CISL) Bank of England (BoE)
Carbon Tracker Centre for Climate Change Economics and Policy City of London Corporation (CoLC)
CDP Centre for Greening Finance and Investment (CGFI) Climate Change Committee (CCC)
Department for Business, Energy & Industry Strategy
Chatham House
Centre for Sustainable Finance, London Institute of Banking & Finance (BEIS)
Department for Environment Food and Rural Affairs
ClientEarth
CFA Society UK (DEFRA)
Climate Bond Initiative (CBI) Chartered Banker Institute Department for International Trade (DIT)
Climate Policy Initiative (CPI) Chartered Institute for Securities & Investment (CISI) Department for Work and Pensions (DWP)
E3G Edinburgh Climate Change Institute (ECCI) Environment Agency
Green Alliance Exeter Sustainable Finance Centre (ESF) Financial Conduct Authority (FCA)
Influencemap Grantham Institute – Climate Change and the Environment, Imperial College Financial Reporting Council (FRC)
IIED Grantham Research Institute on Climate Change and the Environment, LSE Forestry and Land Scotland
ODI Green Finance Institute (GFI) HM Treasury (HMT)
International Centre for Corporate Social Responsibility (ICCSR), Nottingham Foreign, Commonwealth & Development Office
People & Planet
University (FCDO)
Preventable Surprises Smith School of Enterprise and the Environment (SSEE), University of Oxford Marine Scotland
Principles For Responsible Investment (PRI) SOAS Centre for Sustainable Finance National Infrastructure Commission (NIC)
Shareaction Sustainable Financial Innovation Centre (SFiC) Natural England
CCCEP The Alan Turing Institute Prudential Regulatory Authority (PRA)
The SustainAbility Institute The Centre for Climate Finance & Investment, Imperial College Business School Scottish Environment Protection Agency (SEPA)
Transition Pathways Initiative (TPI) Tyndall Centre for Climate Change Research The Pensions Regulator (TPR)
UK Sustainable Investment And Finance Association UK-China Green Finance Centre UK Export Finance (UKEF)
ANNEX B: BRAZIL GREEN FINANCE
STAKEHOLDER LIST
Brazil green finance stakeholder list:
Investors
Diversified asset Infrastructure/ESG
Asset owners Investment Banks Commercial Banks
management (AM) specialised AM/investor
ARX Investimentos Brookfield Economus ABC Brasil Banco do Brasil
BB DTVM Constellation Fapes Bocom BBM BANCOOB
BlackRock Brasil Infra Asset Management FUNCEF Banco Caixa Geral Brasil Banco Safra
BNP Paribas AM JGP Fundação Itau Unibanco Banco Daycoval Banco Modal
Bradesco Asset Management Patria Investimentos Infraprev BTG Pactual Banco MUFG Brasil
BRL Trust Investimentos Pragma Néos Banco Fibra Banco Votorantim
BTG Pactual Asset Quasar Petros Banco Original Banrisul
Caixa Econômica Federal Asset Sparta Previ Banco Pine Bradesco
Capitânia Real Grandeza SMBC Caixa Econômica Federal
Credit Agricole Indosuez Valia Voiter (former Indusval) Itaú Unibanco
Itau Asset Management Vivest Santander
Kinea Tribanco
Perfin
Santander Asset Management
Vinci Partners
Vitreo
Votorantim Asset
Western Asset
Wright Capital
XP Asset Management
103
Indicative (non-exhaustive) list of prominent stakeholders with a Brazil office by sector; based on size, revenue, or distinct green finance offering
Diverse service providers
Engineering & ESG Data & Ratings
Sustainability consulting Law firms Insurance firms
Construction firms providers
Boston Consulting Group Andrade Gutierrez Bloomberg Demarest Allianz
Carbon Trust Camargo Correa Fitch Ratings Felsberg Advogados BB Seguros
Deloitte Queiroz Galvão IHS Markit Machado Meyer Bradesco Seguros
Ernst & Young Novonor (former Odebrecht) Moody's Mattos Filho Itaú Seguros
Granito Group S&P Global Pinheiro Neto Liberty Seguros
KPMG Brasil Sustainalytics Tozzini Freire Mongeral Aegon Seguros
McKinsey & Company Vigeo Eiris Trench Rossi Watanabe Porto Seguro
Proactiva SulAmérica
PwC Brasil Swiss Re
Resultante
SITAWI
WayCarbon
104
Research and government
Universities and professional Regulators and government
NGOs & Think tanks Development Banks
bodies bodies
Arapyaú BRASFI ANBIMA AFAP
Carbon Disclosure Project COPPE-UFRJ Central Bank of Brazil AgeRio
CEBDS COPPEAD-UFRJ Conselho Monetário Nacional (CMN) BADESC
Climate Bonds Initiative GVCes Comissão de Valores Mobiliários (CVM) BADESUL
Climate Policy Initiative PUC-Rio Empresa de Pesquisa Energética (EPE) BANDES
Empresa de Planejamento e Logística
ITDP Brasil UFBA BANESTES
(EPL)
RAPS Financial Innovation Lab (LAB) Banpará
SEBRAE Ministry of Agriculture BASA
WRI Brasil Ministry of Economy BDMG
Ministry of Environment BNB
Ministry of Infrastructure BNDES
Ministry of Regional Development BRDE
SUSEP Cresol Confederações
PREVIC Desenbahia
Desenvolve SP
Fomento Paraná
Goiás Fomento
Piauí Fomento
SICOOB
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Brazil Green Finance programme (BGFP)

Milestone 2.1: The Brazil-UK Green Finance &

4. UK green finance market Joao Lampreia

4.2 Policy context: Green finance & infrastructure 39 Nick Harris

Annex B: Brazil Green Finance Stakeholder list 102

Environmental Social Governance Economic

Insurance Asset management and Insurance

Service providers Regulators, Government

Economic and Financial Universities, Professional

Funds Project finance Capital markets Funds

Sectors Products Sectors Products

Data synthesis and peer review

At least 1 female interviewee? Gender of all interviewees

No, 11, Male

Some interviews had more than one interviewee,

4.1: CAPABILITIES: SECTORS &

4.2: POLICY CONTEXT: GREEN FINANCE

and co-finances infra projects Directly

Institutional investors Insurance and other service providers

Financial Conduct Authority Competitively and co-finances infra projects infrastructure.

Institutional investors Insurance and other service providers

and co-finances infra projects Directly

Institutional investors Insurance and other service providers

Financial Conduct Authority Competitively and co-finances infra projects

Trade Foreign Direct Investment (FDI) Development Aid

5) HM Treasury and BEIS (2019), Green Finance Strategy: https://www.gov.uk/government/publications/green-finance-strategy

6) Investment Association (2020), Investment Management in the UK 2019-2020, https://www.theia.org/sites/default/files/2020-09/20200924-imsfullreport.pdf

10) City of London (2020), Sustainable and green finance: https://www.theglobalcity.uk/resources/green-finance

12) LMG (2020), London Matters, https://lmg.london/wp-content/uploads/2020/05/London-Matters-2020-Digital-1.pdf

14) HM Treasury (2020), Net Zero Review: Interim Report,

18) HM Treasury (2021), Policy Design of the UK Infrastructure Bank, https://www.gov.uk/government/publications/policy-design-of-the-uk-infrastructure-bank

20) National Infrastructure Commission (2018), National Infrastructure Assessment, https://nic.org.uk/studies-reports/national-infrastructure-assessment/

21) HM Treasury (2020), National Infrastructure Strategy, https://www.gov.uk/government/publications/national-infrastructure-strategy

23) HM treasury (2020), Infrastructure Finance Review, https://www.gov.uk/government/consultations/infrastructure-finance-review

25) National Audit Office (2018), PFI and PF2, https://www.nao.org.uk/report/pfi-and-pf2/

27) DFID (2020), International Development Infrastructure Commission Recommendations Report,

5.1: CAPABILITIES: SECTORS &

► Large asset managers associated with banks (Itau, Bradesco

► Access to individual investors is increasing to ESG funds, both

5.2: POLICY CONTEXT: GREEN FINANCE

Financing policies Competitively awarded

Competitively (ANATEL); sanitation and wasteDirectly infrastructure is

Financing policies Competitively awarded

Financing policies Competitively awarded

4) ANBIMA (2018) 2ª Pesquisa de Sustentabilidade. Retrieved on Jan 2021. From

6.1: APPETITE FOR SUSTAINABLE

I don't see opportunities arising in any sectors 4%

Storage facilities (e.g. battery storage, terminals)

Green infrastructure (e.g. rainwater harvesting)

Renewable power (e.g. carbon capture storage and utilisation

Digital infrastructure (e.g fibre, data centres, towers)

Health and social care (e.g. pharma, residential care)

Brazil stakeholder perspectives Africa

UK stakeholder perspectives Importance of factors in ESG integration

ESG Evaluation of infrastructure ESG Valuation of infrastructure Portals or platforms supporting

Infrastructure related Relevant international agreements Other sustainability frameworks &

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