Written By: Miranda Cuevas
Edited By: Ada Collins
The Brazilian Government's environmental program has been on what seems like a roller coaster ride after each new election. The reported interests of the newly elected president, Lula Da Silva, with respect to environmental, indigenous, and social issues seem to boost hope on Brazil’s commitment to its sustainability goals for 2030. In his previous terms as president, 2003-2010, Lula gained worldwide recognition for reducing illegal deforestation in Brazil by 70% (2) and proving the possibility of agricultural growth without environmental destruction (1). Lula started off his term by indicating what looks like Brazil’s reintroduction to international environmental policy with his appearance at COP27 in 2022 after Jair Bolsonaro, the former president, did not show the previous year (4). This neglect is among the many reasons why environmental leaders are happy to say goodbye to Bolsonaro, otherwise known as “Trump of the Tropics” (2). During his term as president, Bolsonaro, whose government motto was “development at all costs”, passed around 400 acts to weaken protection laws for the environment and to hinder progress from the environmental agenda such as cutting funding for environmental protection plans and upfront supporting people to continue with illegal mining and clear-cutting (3). Just last year, he approved a bill for the extension of a coal-power plant whose construction is scheduled to end in 2040, just 10 years before the world is supposed to reach net-zero emissions. Additionally, Bolsonaro has subsidized logging, mining, and cattle industries whose expansion led to a 28% increase per year in forest fires during his mandate. Support for his policies continued as they created the only available jobs in the area.
Looking forward, Lula plans on re-opening the Amazon fund he had created with support from the Norwegian and German governments which was interrupted in Bolsonaro’s rule (4). Additionally, there are also plans on creating an Amazon Forest summit this year to strengthen the Amazon Cooperation Treaty Organization with regional governments to plan for forest protection and foreign investment in sustainable projects (3). Interest from foreign investors in projects in Brazil was resumed with Lula’s re-election since the president is interested in resuming green bond issuance and incorporating Environmental, Social, and Governance factors (ESG) into funding for projects after Bolsonaro paid no attention to these. These could even introduce Brazil to a local green energy market with surrounding South American neighbors like Chile, Colombia, Peru, and Uruguay who have already invested in the market (4).
Due to massive deforestation and fire-clearing in the Amazon Forest by agribusiness companies in Brazil during Bolsonaro’s terms, several food retail companies and investors expressed their disagreement and intentions of boycotting future investments. A large investor for the world’s leading meat processor, Nordea Asset Management, announced its divestment from the company as well as divestment from Brazil in general. European banks have been the most proactive to re-establish their standards in financing for projects in delicate forest areas. Examples of these are requirements to have a verified product certification, plans to increase product traceability to the origin, and the incorporation ESG policies that can mitigate elements such as uncontrolled fires and child labor. Brazilian beef companies that did not comply were withdrawn from bond issues of important investors such as Bank of America, Credit Suisse, and Deutsche Bank. Such large companies like that of beef and soy need international funding so these businesses will likely be more pressured to comply to sustainable standards (5).
Among Lula’s initiatives, he mentions controlling illegal deforestation and mining, supply chain traceability, subsidizing sustainable farming, incorporating a tax system that favors the green economy, among others (4&6). A sustainable supply chain 100% deforestation-free is set to be completed during Lula’s presidency by one of the big food processing companies Marfrig Global Foods (5). His challenge going forward is how he can accomplish notable advancement on his environmental promises while keeping his popularity and public support. The voting results were very closely divided between Bolsonaro and Lula, with the latter receiving immense support from indigenous populations while most urbanized regions of the forest voted for the former. Lula’s desire to impose ESG regulations over economic growth based on business-as-usual methods will be challenged by the need to maintain political support from sectors of the population awaiting this growth (4). Additionally, the power that the agribusiness corporations have is another obstacle in his environmental agenda (6).
Due to the political and economic panorama, predictions say that Lula will try to strengthen environmental regulation in the short term, aiming to attract the attention and reassurance of international investors without scaring off those who would see precipitated climate action as a threat to development (6).
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References:
Andreoni, Manuela. “What Lula's Victory in Brazil Means for Climate.” The New York Times, The New York Times, 31 Oct. 2022, https://www.nytimes.com/2022/10/31/climate/brazil-election-lula-bolsonaro-climate.html. 5
Bhattacharya, Ananya. “Brazil's Election Winner Will Play a Key Role in the Climate Crisis.” Quartz, 28 Oct. 2022, https://qz.com/brazil-s-election-winner-will-play-a-key-role-in-the-cl-1849714303. 4
Chow, Denise. “Why Brazil's Election Is a Major Victory in the Fight against Climate Change.” NBCNews.com, NBCUniversal News Group, 31 Oct. 2022, https://www.nbcnews.com/science/environment/brazils-election-major-victory-fight-climate-change-rcna54860. 3
“Lula’s Win in Brazil’s Election Signals Environmental Policy Shift.” ESG Investing Data Research & Ratings, Sustainable Fitch, https://www.sustainablefitch.com/sovereigns/lulas-win-in-brazils-election-signals-environmental-policy-shift-24-11-2022?sFWebAccessReportValidation=true&mkt_tok=NzMyLUNLSC03NjcAAAGKYQE
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“Financial Sector Confronts Deforestation as a Key ESG Risk.” ESG Investing Data Research & Ratings, Sustainable Fitch, https://www.sustainablefitch.com/corporate-finance/financial-sector-confronts-deforestation-as-key-esg-risk-15-09-2020. 7
“Will Lula Rescue Brazil's Flagging ESG Credentials?” FDi Intelligence – Your Source for Foreign Direct Investment Information - FDiIntelligence.com, https://www.fdiintelligence.com/content/opinion/will-lula-rescue-brazils-flagging-esg-credentials-81630
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