27: Brazil – part of the challenge and solution

Anna-Marie:

Hello and welcome to our latest episode of 30 for Net Zero 30. I'm Anna-Marie Slot, Global Sustainability and ESG partner here at Ashurst, and we're speaking with 30 changemakers around the globe about actions to take now to deliver on 2030 goals. Today, we're very pleased to be joined by José Pugas, a partner and head of Responsible Investments and Engagement at JGP Asset Management. Jose is a political scientist by background, with over 15 years of experience in sustainability and finance, having led different projects in Brazil and LatAm. Currently, Jose is an active member of Think Tanks and International Forums dedicated to discussing regenerative finance, nature-based solutions and just transition.

Jose, thank you so much for joining us today. Can you give us a little bit about your own background and what you do, and then we'll launch into the rest of our questions.

José:

Thank you for invitation to join the conversation, it's always very good for us, mainly for us in South America and Latin America to be part of those global dialogues about ESG, biodiversity, and climate changes. Personally, I lead the sustainable finance projects at JGP Asset Management. JGP is one of the three largest independent asset management firms in Brazil, and a leader in Latin America's sustainable investments.

I'm also honoured to serve as a chairman of the Chapter Zero Brazil committee, where, in addition to mentoring and educating corporate board members on issues related to climate change, we are starting a new project called, "Voices from the South." Its initiative aims to increase the voices of the Global South with debates about the transition to our current economy, and try to restore to asymmetry between the Global North and the Global South. That has been very feasible in collective efforts, should combat climate changes and biodiversity loss on the last years.

Anna-Marie:

So a lot going on for you, I think, on a daily basis, but that's great to hear and I completely echo what you're saying there. It's so good to have everyone in the room talking about these things, rather than coming from one viewpoint. Sitting in Brazil, what's the biggest shift that you've seen over the last 18 months or two years in these conversations that you're having?

Jose:

Well, when I first got into sustainability 25 years ago, I was a harmless tree hugger at best. Climate change debates were still very confined to science fiction, rather than the agendas of corporate groups and public initiatives. The market's attitude towards sustainability has shifted dramatically in the last years, from market divisions to the CEO's agenda, we moved. The incorporation of ESG companies, particularly in the financial market, is one of the most powerful factors of innovation for the global economy, and mainly for countries such as Brazil, transforming entire industries, generating new technologies, and aligning purpose and profits into the same sentence, that something unthinkable just a few years ago.

This does not imply that sustainability has only recently blossomed on the last 18 months. Sustainability as a concept predates the term, "ESG" The market economy is growing and taking on new responsibilities, which includes incorporating sustainability, intuitive strategies, and day-to-day operations. We transition from being filled as a risk or as a compliant issue, to opportunity and new revenue streams. It is no secret that CEOs and investors have become to take a more sympathetic stance towards sustainability issues, wrapping these very arid debates in more familiar cases of our native languages. Environmental economics frameworks, equations were used, and environmental social and governance concerns are now considered to be relevant, though not as on an equal footing with financial indicators yet.

There's still a long way to go, but for of us that lived in sustainability for the last two decades, particularly in peripheral economies such as Brazil, the last few years have been revolutionary.

Anna-Marie:

Interesting. And so, from that viewpoint, I don't think a lot of people understand or can appreciate the movement in places like Brazil. There's a lot of talk around government setting net-zero targets and setting standards, and there's a lot of regulation, for example, coming out of the EU, a lot of focus on asset management in the US. Coming from that particular Brazil perspective, are people seeing it as an opportunity more than a risk? Are people struggling with the same questions around data? Are there regional focus areas that you think are particularly Brazilian in that conversation?

Jose:

Yes. I think that we are still learning the position of Brazil, and when I talk, "We," we are not just talking about Brazilians, but the world is still learning on how to position emerging economies, such as Brazil, in this global dialogue on ESG. But being very transparent, we are the of the world, so when you talk about nature-based solutions, we have to discuss Brazil. We have 30% of the global biodiversity, and we are responsible for over 50% of the global deforestation. So we are part of the problem, yes we are, but we are also an essential part of the solutions.

That's something that is moving us from being very unconcerned about those new international regulations, mainly on the agribusiness sector, there is a large share of our economy, to see that, to face that as an opportunity for us to position ourselves, not as an emerging economy, but as a leading protagonist on this new global economy. And historically, we have always been considered to be an emerging economy, the economy of the future, the new powerhouse, the potential economy that has never fulfilled its whole potential.

Well, with these new rules of the games in which diversity and nature are intrinsic part of the wealth generation, no country is better positioned to discuss and to lead the discussion than Brazil. So if you look very closely, Brazil is the most competitive country, the most competitive economy, for this new chapter of the global capitalism. When Brazilian economy and Brazilian investors and the Brazilian government, it starts considering this new perspective, I'm sure that we are going to rock the world.
Anna-Marie: It is about changing that conversation. There's so many places in the world that have the resources that people need for this coming period, and we need to change that dialogue. As somebody suggested to me, and I think it's really funny, that it's like when families go home for, in my case, it would be Thanksgiving dinner, but also for Christmas or any other big family holiday, Eid or whatever, and everybody drops back into their old spot. It doesn't matter, you're 50 years old, but you're still the youngest cousin, so you still have to sit at the end of the table and everybody still thinks you don't know anything. We've got to get rid of that, come to a clean table.

Jose:

 It's terrible to be treated as a child.

Anna-Marie:

Yeah.

Jose:

To be treated as children on the adult table. So for us, it's wonderful to be discussing as grown-ups. It's also amazing when we are invited to international forums, such as Palacio, for work for foundation, or to COP, both diversity and the climate. And the world discovers that, okay, the only ones who has pipelines are those weirdos from South America, because we always discuss there is no pipeline, there's no fund. There is. We have here, our ESG fund has outperformed 95% of the traditional market in Brazil. So we are doing things, we are making things happen without the Global North, but if we have the Global North, we can do it much better, much larger, much faster. So we have to start treating the other as fully grown and fully intelligent adults, and we have to work together, not to have pre-assumed roles on this relation. We have to be open to re-discuss the relationship between us and the world.

Anna-Marie:

No, excellent. Is there a specific action that you think would really ramp that up, and who is it that needs to deliver? Everybody always tends to point to the person sitting next to them as to who needs to take an action, but who do you think is really the one who could change things?

Jose:

There's no silver bullet, for sure. We need a can of silver bullets to solve this challenge. And when we look at the responsibilities, we are all responsible, as individuals, as consumers, as investors, or as human beings. There is no one that doesn't own a share to be blamed on the current situation of the world. When we talk on the last questions about reaching in the market and to achieve the maturity, to be [inaudible], should take responsibilities.

I think there is no responsibility, it's more neglected by the market than the scope free. We live from the Global South are the scope free of the world. So when mainly consumer countries overlook their involvement in deteriorating climate and environmental circumstances in their supply chains, they also disregard the answer to a global climate change in the southern part of the world.

I advocate personally for a change in the attitude of companies and investors, understanding that by making a commitment to be carbon-neutral or regenerative, this involves providing conditions for the production chains to make the transition to regenerative and low carbon production models. It also does not imply nearly modifying our commodity procurement strategies and putting the wage of change on suppliers. Producers, primarily of agricultural commodities, established these production processes under the supervision of the same companies that now pledge the necessary commitments to change their attitude on [inaudible] and climate changes.

To be fully consistent with their public pledges, these corporations must provide resources and technical assistance to the suppliers, they must provide capacity. International development banks are often in charge of planned finance, and this is a huge mistake. They will not be able to handle on their own, and they're not to blame for the predicament that currently demands tremendous investments to transition to a green economy, mainly in countries that are based on agriculture, such as Brazil and most of Latin America and most of the Global South.

Companies must participate in the planned investment of transition finance mechanisms for their supply chains. If this occurs, we may finally have a large scale solution to trade-offs between Global North and Global South, as well as rapid and efficient avenue for emerging nations to obtain green finance. I think that's not the silver bullet, but that will be a large step.

Anna-Marie:

And I think you pick up on something that's super important, I think it is a change in that dialogue between the different people in the system, and to move away from historic of, "Us versus them," in whatever, "Us" is and whatever, "Them" is, to "Who's in my supply chain? Who am I working with? How do we work together? How does what I've learned already benefit what I can hand on to somebody else?" At no real separation between that deliverable in some ways.

So at the beginning, Jose, you did mention that lots of different actors are in the room, so this is the point at which I put you on the spot and say, what is it that you are doing in your own commitment to net-zero in the next year?

Jose:

Well, first of all, we are assuming our own responsibilities. We are part of the problem, and so we need to try to understand how we can be part of the solution. First of all, we are expanding our transition finances funds. This year, we will launch more than $150 million in investments for protect restoration projects, that is reforestation with agroforestry in Brazil. There will be more than 40,000 hectares of degraded areas that we plan to invest in the coming years, and transform them into areas that produce wealth, biodiversity, social inclusion, and help us on the fight against hunger. We can't forget that, to make the transition fair and inclusive, we need to think about everyone. It's not just on how to combat carbon emissions or GHG emissions, but how to make this the new opportunity for impoverished regions, and to include everyone, every stakeholders, no one must be left behind.

We will also be increasingly transparent in our investment impacts, and we are adopting the CFT this year. On the next year, we are going to submit our plan to the SPTI. We will be one of the first Latin American asset managers to do so. And we are also pilot programme for the TNFD for emerging markets, so we are also talking TNFD in our reporting practises. And most of all, we are increasingly invest in education for investment ecosystems in Brazil. There is no, to write encyclopedias for the literates, it's not a solution. We have to provide education, have to provide climate and environmental literacy for our investors, our wealth manage, our ultra-high wealth individuals, our institutional investors, pension funds, and so on.

Finally, we want to be increasingly vocal in the global debates, demonstrating that Brazil and the Global South have most of the solutions to the global problems. We are not just part of the problem, we are an essential part of the solution. But that, we need financial innovation, we need to be creative, we need to be there and helping everyone. Not blaming, but helping to work together towards a transition and towards a new economy.

Anna-Marie:

And it's interesting in how you talk about all the different work that you're working on at once. I think one of the key things there is the multifaceted nature of the focus. And I think that there is a big drive to focus on a metric, or create an overriding metric for these kinds of conversations, but as you rightly said, you have to keep multiple things in mind. It's sustainable development, it's regenerative agriculture, it's thinking about what's happening socially at that level within the community in which you're working. There's so many aspects that I think have to be kept in mind at the same time. A difficult job, but there are a lot of smart people in the world, including yourself. And so, that's a really interesting way that you are approaching that really holistically, as opposed to, "Oh, we're going to focus on one part of this or one part of that."

In our last few minutes, if you could provide the listeners with an action. There's a fair bit of talk going on, but what we really want to focus on is action and delivery and implementation of getting to net-zero. What would it be, if you could say, "Okay, listeners, go off and do this one thing." Or it could be more than one thing if you've got lots of good ideas.

Jose:

There are so many things but we have such a few minutes. First of all, I think they have to stop discussing the obvious. So stop discussing anti-ESG agendas, for God's sake. The world is in a very bad situation. Not for the world alone, but for us, most of all, so let's start acting and stop discussing politically or economically the obvious.

Second thing is that we have to stop discussing what is more important, if the E, the S, or the G. All those letters are equally important. There is no environmental sustainability without social inclusion. There is no social inclusion without environmental sustainability. And they are both not temporarily sustainable. They're not perpetuous if there is no confidence to sustain that, so we need to treat those three letters with the same level of importance.

And finally, we are passing through a generational disruption. The next 10 years will be so different for the last 2000 years. We are the lucky ones to be alive and leading on this move, this shift of times, of era more than the important just times. And these new rules, and those new rules of the game, of the new green economy, we have to stop thinking as old economy. So we have to stop thinking about emerging countries versus developed countries, we have to stop thinking about Global North against Global South and vice versa, and we start considering that we have different positionings, we have different rankings that worked previously will not work now. So if Brazil, for example, has always been an emerging country, well, for the new economy are not emerging, we can be the leaders. At the same time, that what happens in Brazil affects Europe. What have happens in Europe affects Brazil. So we are intertwined, so we have to start working together, financially speaking and politically speaking.

So I think that the final message for our listeners is that, okay, we truly understand what the problem is, we have a lot of diagnostics about the problem, so let's start acting and providing solutions to together. You'll not be perfect, you'll be the first trench of solutions. We will be very embarrassed of the solutions that we are going to provide, but much better than just wait for the perfect diagnostics of the situation, and develop the state-of-art solutions. When you do that, you'll be too late.

Anna-Marie:

No, great points. So get moving on what we have today in a concerted and coordinated way. Just brilliant points. Thank you so much Jose for joining us today. Thank you for sharing the insights that you've brung to us and to the rest of the world, and really appreciate your time.

Jose:

A pleasure, thank you very much. I'll keep as a listener and I hope that your time wasn't wasted listening to us.