The Brazilian coffee exporter segment is increasingly aware of acronyms that influence investment and trade flows. ESG (Environmental, Social, and Governance) and SDG (Sustainable Development Goals) have different meanings but complement each other and are growing in importance as credit, investment, and demand drivers.
ESG guides and measures companies’ performance in the environmental, social, and governance areas. The SDGs are the 17 sustainable development goals defined by the UN, which address social, economic, and partnership issues in their 169 targets, focusing on the most critical challenges for humanity.
There is alignment between the SDGs and the strategies of the economic sectors when the stakeholders adopt the best ESG practices. This condition tends to be increasingly valued in the top Brazilian coffee importer markets, such as the European Union, and in the decision-making process for investment allocation and credit-granting to economic activities.
The ESG market is growing. According to XP Investimentos, the value of assets under management (AuM), managed worldwide by funds with sustainable strategies, is about USD 35.3 trillion, or 36% of the total AuM.
In Brazil, investments in projects with commitments aligned to global sustainability goals are growing, consolidating the country as the most significant green bond market in Latin America.
According to a recent report by Climate Bond Initiative, the YTD value of Brazilian transactions of these bonds since 2015 is USD 10.3 billion, representing 34% of the Latin American market (USD 30.2 billion).
Brazilian agribusiness and the renewable energy and infrastructure sectors are the champions of green bond issuances. Adding to this market, the Cédula de Produto Rural Verde (CPR) was launched in early October. The bond connects investors interested in environmental services, such as forest conservation, biodiversity, carbon sequestration, among others, to the rural landowners that provide them, ensuring their well-deserved compensation.
Prospects for growth in the green bond market are positive, given the trend of government spending on agriculture, infrastructure, and the National Treasury’s signaling the drawing of a regulatory framework for the issue of sovereign bonds aligned with ESG criteria.
On the official rural credit concession side, ESG is also gaining strength, as demonstrated by the Central Bank’s sustainability agenda, published in September. The new sustainable finance regulation seeks to encourage greater alignment of agribusiness with international best practices, reinforcing the impediments to contracting rural credit based on environmental, climate, and social issues already addressed by strict national legislation.
Aware of these trends, the Brazilian Coffee Exporters Council (Cecafé) works pre-competition phase with strategic partners to develop projects in line with ESG criteria. The objective is to strengthen and expand awareness about the contributions of Brazilian coffee farming to the achievement of the SDGs.
Among the various actions connected to sustainable goals, the following projects are worth mentioning: Low-Carbon Coffee Production; Social Well-Being in Coffee Production; Informed Producer; and Coffee Children in School, respectively aligned to SDG 13 (Climate Action); 8 (Decent Work and Economic Growth); 2 (Zero Hunger); and 4 (Quality Education).
Disclosing to international consumers indicators that show the connection of the Brazilian coffee industry to sustainable goals is one of Cecafé’s priorities. When celebrating the International Coffee Day on October 1st, the Council showed, in the largest importer markets of national beans, the high rates of preservation of native vegetation on coffee farms and the very positive correlation between human development in producer municipalities and the area planted with coffee.
These positive indicators result from an organized production chain and highly specialized export activity, which generate income and development in the grower regions.
Efficient logistic processes allow for one of the highest Free on Board (FOB) price transfers to growers. The advanced commercial structure is fundamental for resilience to external and climatic shocks.
The result is an alignment between production, environmental preservation, and human development, connecting Brazilian coffees with the global sustainable development goals.
CECAFÉ Sustainability Manager