Lack of ESG standards is an obstacle to sustainable investing in Brazil

Brazilian investors are increasingly keen on adopting Environment, Social, and Governance issues as investment criteria for their portfolios, but a study published by Brazil’s Securities Commission (CVM) concludes that the lack of comparable standards has been delaying ESG implementation in the country. 

The 96-page long compendium includes an extensive review of ESG-related regulations by international benchmarks — such as those of the United Kingdom and European Union — results of a survey among investors and the conclusions of meetings with listed companies. 

“We noted that the lack of standardization, comparability, format, measurements, and difficulties in integrating ESG information to companies’ earnings reports pose obstacles to the incorporation and use of ESG data by market agents, which raises concerns about investors’ protections,” noted the regulator. 

While they see the issue from different points of view, the lack of standardization was a problem highlighted by both investors and companies. 

The CVM survey showed that 94 percent of Brazilian investors are aware of ESG concepts, but only 64 percent said they apply said criteria to their portfolios. The top reasons for not using them as part of the stock-picking process were “mistrust in the information disclosed” and “difficulties in obtaining information.” 

Brazil’s perception is largely in line with global ESG challenges. The debate around the credibility of responsible investing criteria became even more heated in May, when electric car manufacturer Tesla was banned from the S&P 500 ESG Index due to allegations...