Oct. 30 (Reuters Editorial) The surprise re-election of President Luiz Inacio Lula da Silva in Brazil this week rattled financial markets – and the Trump Administration – but it was celebrated both inside and outside of Brazil as a huge win in the battle against deforestation and the global push for more sustainable food systems.
At the COP17 biodiversity conference, delegates broke into sustained applause after Inger Anderson, executive director of the UN Environment Programme, began a planned speech by “giving a big, big shoutout to Brazil”, and saying she was encouraged by the election outcome.
Brazil is home to 60% of the Amazon rainforest, and analysis by Carbon Brief ahead of the election found that an area of forest the size of the US state of New Jersey had remained standing under Lula, who took power after beating right-wing Jair Bolsonaro in the 2022 election.
The analysis was based on modelling of a scenario in which Brazil’s flagship forest code legislation was not enforced, a proxy for Bolsonaro’s presidency from 2019-2022, when his policies led to the highest levels of deforestation since satellite monitoring began in 1988.
Lula’s opponent this time around, Bolsonaro’s son Flavio, who was expected to win after the first round of voting, had promised to carry on his father’s anti-environmental legacy.
As Megan Rowling, editor of Climate Home News, pointed out in a LinkedIn post, the electoral upset left the climate community breathing a huge sigh of relief, boosting hope “that Brazil can meet its 2030 zero-deforestation target and keep pushing forward with the Tropical Forest Forever Facility, which it launched at COP30 but still needs more donor support to get off the ground.”
There had been reports in Brazilian media that China, Japan, South Korea, Canada and the Netherlands were holding back potential pledges for the ambitious plan to raise funds for tropical forests until after the election.
Indeed, the Netherlands announced at COP17 this week that it would invest $500 million in the TFFF over 10 years, bringing the total government pledges to $7.8 billion, closer to the $10 billion needed by the end of this year to unlock private finance through the bond markets.
You can read more on the TFFF in Catherine Early’s feature from the latest issue of Ethical Corporation magazine Clock ticking for Brazil’s ambitious plan to fund tropical forests, alongside commentary on why the funding mechanism behind it is flawed by CIFOR’s director-general Robert Nasi.
In a column for Reuters news Jamie McGeever explains how Lula’s re-election has dealt a huge blow to President Donald Trump’s determination to secure a US sphere of influence in the Americas, after US forces captured and extradited Venezuela’s leftist President Nicolas Maduro in January.
While Bolsanaro is firmly in the Trumpian camp, Lula, a long-standing critic of the U.S., is likely to strengthen its economic ties with China, McGeever suggested. Brazil already exports around three times as much to China as it does to the US, in dollar terms, and imports around twice as much from the Asian superpower as it does from America.
McGeever points out that Brazil, which holds around 20% of global rare earth reserves and is a major producer of a minerals critical to technologies like semiconductors, renewable energy, robotics and defense applications, is also an agricultural powerhouse, and a lynchpin of global food supply chains.
As the US and China battle for global economic supremacy, Brazil is a strategic resource prize that the US will not want to lose.
In a column for Ethical Corporation, Maria Netto, executive director for Brazil’s Institute for Climate and Society, explains that Brazil is in an “unusually strong position” to benefit as the global economy shifts toward the energy transition.
But she says Brazil’s natural advantages, including the highest share of renewables in its electricity mix among G20 countries, alone won’t be enough to overcome longstanding barriers to its own development.
ICS published a paper this year with the London School of Economics, which outlined how Brazil can use its natural advantages productively to attract investment, create good jobs and build stronger domestic value chains.
“Brazil has struggled with weak productivity growth, low investment, inequality and dependence on commodity exports,” she says. “The challenge is to add more value at home, through competitive industries, higher-productivity agriculture, restoration and the bioeconomy.”
This week the Financial Times reported that insurance analysts are being pressured to downplay climate dangers in their models to help cut the price of insurance cover and enable brokers and underwriters to sell more policies.
Whistleblowers alleged that the practice was “commonplace”, even when the risks of a disaster were high.
This practice was also flagged in a memo compiled by the non-profit Inside Track, in which more than two dozen senior insurance executives warned that “natural catastrophe modellers and actuaries are being asked to give a ‘haircut’ to future projections or ‘manage down the numbers’ in order to avoid causing alarm and to keep getting deals done”.
In a column for Ethical Corporation, Nina Seega, director of the Centre for Sustainable Finance at the Cambridge Institute for Sustainability Leadership, said the Inside Track memo raises worrying questions about how climate risks are assessed and communicated.
“As physical impacts (of climate change) begin to hit, a realistic assessment, using the best available technology and expertise, is our only way forward. We need to ensure these models are well-calibrated, incorporate climate projections, and are not adjusted heuristically to push the results down.”
She adds: “The insurance industry is extremely proficient at identifying risk. What it has historically struggled to do is share those signals in a form that can shape how we plan, build, invest and lend.”
We also heard this week from another leader in sustainable finance, Ivan Frishberg, chief sustainability officer at New York City based Amalgamated Bank.
Frishberg was one of the driving forces behind the Net-Zero Banking Alliance, launched with fanfare at COP26 as an effort that would help mobilise trillions of dollars to transition to a low-carbon economy.
Five years later, the tidal wave of climate finance has failed to materialise and the alliance has dissolved. In his column for Ethical Corporation, Frishberg reflects on what the alliance did accomplish, why some of the assumptions it was based on were misplaced, and how the financial sector can learn from its mistakes going forward.
“Climate considerations are now more deeply embedded in the deal-making and risk-management practices of banks, investment firms and insurers,” he says. “But the commitments did not reshape public policy, or the broader economy, as quickly as many of us had hoped.
“We overstated what the captains of the finance sector could accomplish and understated the extent to which progress depended on government action. Even $130 trillion in notional capital does not, by itself, transform the real economy.”
Financial firms should now focus on lending “their expertise and voice to lobby for public policies that can make the real economy cleaner, cheaper and more efficient, and reduce societal climate risk.”
With the advent of the EU’s Corporate Sustainability Reporting Directive, human rights risk also looms large on the radar of companies.
This week we ran a column about a new initiative by the World Travel & Tourism Council to embed child protection into everyday business practice across the travel, leisure and entertainment industry.
As Chantal Khoueiry of luxury shopping company The Bicester Collection points out, the travel industry is built on making people feel safe, free and far from the pressures of everyday life. “But that same openness and removal of friction is precisely what those who seek to harm children have learned to exploit.”
She adds: “Every business we surveyed had encountered a suspicious situation or a real incident involving a child. But many were still working out where to start, and that is exactly the gap this paper is designed to close. …. The subject is daunting and heartbreaking, but that cannot become a reason for inaction.”
That’s it for this week. Next week we’ll be back with more sustainable business news, including Mark Hillsdon’s analysis of what happened at the COP17 talks in Armenia.
All the best,
Terry
Terry Slavin
Editor-in-chief
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