Brazil among the worst in environmental, social, and governance (ESG) rankings – survey

RIO DE JANEIRO, BRAZIL – International investors and large companies are increasingly concerned with indicators that extend beyond employment and inflation in a given country, but Brazil is among the worst emerging countries in these other criteria as well, which include social, environmental and governance performance.

According to an exclusive survey by MB Associados consulting company, in a list with 19 countries, Brazil ranked 3rd worst, with a score of 60% (the closer to 100%, the worse). Only the Philippines and South Africa performed worse, while South Korea (2%) and Chile (24%) were at the top.

It is the first time that MB produces a list of this kind, which points to ESG criteria (Environment, Social and Governance) and uses the environmental ranking from Yale University in the United States, the Gini index (an inequality measure) and World Bank data to map governance indicators such as political stability, government efficiency and corruption control.

On social and governance criteria, Brazil fares worst, with 71% and 72% on these indicators, respectively. The country does well only in compliance with environmental rules, with 39%.

“However, the Bolsonaro administration has been so precarious in handling the environmental issue that it will be very likely to see the country’s position worsen next year,” says Sergio Vale, MB’s chief economist.

In April, during a speech at the Climate Summit, President Jair Bolsonaro made a twist in his discourse, pledging to double resources for environmental enforcement, highlighting Brazil at the “forefront of the fight against global warming,” and calling for international contributions for preservation.

“Everyone knows how to deliver speeches, what investors want are specific actions,” says Vale. He points out that there is no effort on the government’s part to change environmental practices. “Precisely because of this, the risk of Brazil being embarrassed in the Yale environmental indicator is high, unless the country changes the trajectory of the past two years.”

The economist also considers that the worsening of inequality indicators during the Covid-19 pandemic and the country’s worsening governance in recent years should persist, which should also retain Brazil in the worst positions among emerging countries in the ESG ranking.

“We are not undertaking the necessary effort to change this trajectory. On the contrary, the Bolsonaro government has systematically worsened these variables.”

Vale alerts to an important obstacle for Brazil, particularly at a time of economic recovery after the damaging effects of the pandemic: the difficulty in attracting investment due to the poor ESG performance. These indicators can even be used to reverse important trade agreements for the country.

A report published by Folha de S.Paulo newspaper pointed out that the agreement between MERCOSUR (the bloc Brazil is part of) and the European Union is at risk. According to European legislators and members of the governments involved, the agreement, celebrated by the Brazilian government, has become a “scarecrow” and is stalled while waiting for complementary environmental commitments.

“The agenda of the candidates for president in 2022 should focus on these criteria: improvement in macroeconomic and social indicators, improvement in environmental ranking (particularly after the image damage caused over the past two years), and improvement in governance,” says Vale.

He considers that these topics do not feature in the speeches of the 2022 presidential candidates that stand out in the polls today – ex-president Luiz Inácio Lula da Silva (PT) and president Jair Bolsonaro -, but a third way name could support environmental and governance commitments.

In relation to the other BRICS countries (a group comprising Brazil, Russia, India, China, and South Africa), the main challenges are divided among the different indicators. While South Africa fails in income inequality and India fails in environment, Russia has serious governance shortcomings.

The Chinese are virtually tied with the Brazilians in the ranking, with 60%, having governance (due to the country’s authoritarian government system) and the environmental issue as weak points.

Source: Folha