- As a delivery partner within the UK-Brazil Green Finance Programme, the Carbon Trust has led on the research and analysis in producing two crucial reports that seek to unlock sustainable infrastructure investment opportunities in Brazil.
- The reports have found that out of eight sectors reviewed, low carbon energy and telecommunications present the largest investment opportunities.
- The Sustainable Infrastructure Investment Opportunities in Brazil report estimates that the sustainable infrastructure investment opportunities in Brazil will total £495 billion over the next 20 years, and has identified the potential to create over two million jobs with a gross value added (GVA) of £603 billion in this period.
- The Brazil-UK Green Finance & Infrastructure Ecosystem Review compares the green finance ecosystems (including key policies & regulations, stakeholders, and initiatives) in Brazil and the UK, with a particular focus on sustainable infrastructure. It identifies several key learnings that could be applied in Brazil in order to make the investment opportunity more attractive to foreign investors, such as: long-term policy and market signals; consistent assessment and monitoring of sustainable infrastructure projects; integration and coordination between planning and concession authorities; and promoting partnerships and collaboration between local project developers and international investors.
- A bilateral partnership between the Brazilian and British governments seeks to boost sustainable investments in infrastructure and support the development of initiatives for inequality reduction and gender inclusion.
As a delivery partner within the UK-Brazil Green Finance Programme, the Carbon Trust has played a leading role in the research and analysis in producing two crucial reports that seek to unlock sustainable infrastructure investment opportunities in Brazil.
Sustainable Infrastructure Investment Opportunities in Brazil
The Sustainable Infrastructure Investment Opportunities in Brazil report has identified that the investment opportunity in Brazil’s sustainable infrastructure sector could reach £495 billion between 2020 and 2040.
The report includes a detailed study on the needs and factors that determine future investments in key sustainable infrastructure sectors in Brazil. It also provides a review of historical data and future forecast of investment scenarios in eight potentially sustainable sectors that will contribute to the achievement of Brazil’s Paris Agreement target and for the country’s development to be aligned with UN’s Sustainable Development Goals (SDGs).
Among the analysed sectors, those with the greatest potential for investment opportunities (54%) are low carbon energy and telecommunications, a result of the rapid development of wind and solar power projects and the expansion of the fibre optic telecommunications network. According to the study’s analysis and forecasts, the fibre optic network covered 19% of Brazilian households in 2019, but is estimated to reach 95% of households in 2040.
Other highlighted sustainable infrastructure sectors are sanitation and clean urban transportation, representing 14% and 13% of total investment opportunities in the studied period respectively. This is due to the universal need for these services and the intensive capital requirements for their construction and operation.
In sanitation, forecasts from Brazil’s National Sanitation Plan indicate that by 2033, the access to potable water will reach 99% of the population, and sewage services will reach 93%. For clean urban transportation, the report highlights an increase in cycleways (from 3,291 km in 2018 to 48,423 km in 2040), electric and hydrogen buses (a 2% annual increase over 20 years), and subways and urban trains (a 2.6% annual increase between 2020 and 2040).
Brazil-UK Green Finance & Infrastructure Ecosystem Review
The Brazil-UK Green Finance & Infrastructure Ecosystem Review compares the green finance ecosystems (including key policies & regulations, stakeholders, and initiatives) in Brazil and the UK, with a particular focus on sustainable infrastructure. It identifies several learnings that could be applied in Brazil to render the sustainable infrastructure investment opportunity more attractive to foreign investors, such as: long-term policy and market signals; consistent assessment and monitoring of sustainable infrastructure projects; integration and coordination between planning and concession authorities; and promoting partnerships and collaboration between local project developers and international investors.
The study conducted in-depth interviews with 22 organisations across the UK and Brazil with expertise in infrastructure and green finance, including banks, investment funds, government and state agencies, and academic & research organisations. The interview findings noted a broad agreement among respondents that UK and Brazilian investors are increasingly interested in pursuing opportunities in sustainable infrastructure (i.e., infrastructure assets that integrate environmental, social, and governance [ESG] considerations across their lifecycle). However, institutional challenges associated with Brazil and its infrastructure sector in general must be resolved before a greater flow of international finance can be expected into sustainable infrastructure. Namely, corporate governance issues, the complexity of infrastructure concession processes and lack of transparency, and the absence of long-term planning were identified. Once these risks are overcome, investors highlighted the challenges specific to sustainable infrastructure – such as identifying a pipeline of bankable projects aligned with their investor profile and ready to receive financing, and consistent national standards for the assessment of infrastructure sustainability.
Brazilian investors and stakeholders identified a variety of factors that have led to a steady increase in interest in the topics of ESG and sustainable infrastructure in recent years. These include high-profile environmental disasters caused by infrastructure failure (such as the 2019 Brumadinho dam disaster); international investor pressure (particularly relating to Amazon deforestation); anticipated regulatory pressures (e.g., the Central Bank of Brazil’s commitment to mandatory climate related disclosures for financial institutions by 2022); the growing evidence of the positive returns that can be achieved through ESG integration (e.g., the performance of the MSCI Brazil ESG Leaders Index); and the COVID-19 pandemic, which has exposed the need for robust risk management systems in the face of new health epidemics, as well as fragilities in the country’s infrastructure systems (e.g. in sanitation).
This increasing interest in the green finance ecosystem has been matched by greater numbers of Brazilian financial institutions adhering to various international ESG standards and practices, such as the UN PRI (United Nations Principles for Responsible Investment), TCFD (Task Force on Climate-related Financial Disclosures) recommendations, and the Performance Standards of the IFC (International Finance Corporation).
These two reports present a promising horizon for sustainable infrastructure investment in Brazil if the identified challenges can be overcome. The unlocking of a potential £495 billion of investment opportunities over the next 20 years in Brazil, through a combination of international and domestic investors increasingly driven by ESG considerations, presents a positive and encouraging outlook.