Is Petrobras guilty of greenwashing?

. Dec 04, 2020
Petrobras factory in Mata de São João, a city in the state of Bahia. Photo: Joa Souza/Shutterstock Petrobras factory in Mata de São João, a city in the state of Bahia. Photo: Joa Souza/Shutterstock

This newsletter is for PREMIUM subscribers only. Become one now!

Today, Petrobras’ hollow ESG promises. What lies beneath Brazil’s spectacular quarterly growth. And a make-or-break trial for Bolsonaro.

Petrobras goes green. Or does it?

Brazilian state-controlled oil and gas giant Petrobras presented its investment plan for the 2021-2025 period, including an apparently bold pledge to reduce greenhouse gas emissions by 25 percent as of 2030.

While the announcement suggests the company might be coming to terms with the zeitgeist and adopting ESG (environment, social, governance) principles, a closer look indicates that Petrobras could simply be trying to greenwash its brand.</p> <p><strong>Behind the curtain.</strong> Petrobras&#8217; emission reduction goals are based on 2015 data, when it was responsible for 78 million tons of carbon dioxide equivalent. Last year, however, emissions were already down 24.3 percent.</p> <ul><li>Moreover, Petrobras has set aside only USD 1 billion in capital expenditures (CapEx) to fund its green drive — out of an available USD 55 billion. Meanwhile, 84 percent of its CapEx provisions will go to oil and gas exploration and production.</li><li>For comparison&#8217;s sake, Italian oil and gas firm Eni aims to <a href="https://www.cnbc.com/2020/10/04/a-100-billion-big-oil-divestiture-plan-is-coming.html">cut absolute emissions</a> by 80 percent within the next 30 years, while BP aims to be net-zero on the carbon in its upstream oil and gas production by 2050.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/4559027"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Say what? </strong>CEO Roberto Castello Branco told investors that carbon reduction goals are “a fad,” raising red flags about the company&#8217;s ESG commitments. “On this side of the Atlantic we have a different view of climate change,” said Mr. Castello Branco.</p> <ul><li>Fabio Alperowitch, a fund manager at FAMA Investimentos — Brazil’s biggest asset management firm focused on ESG — analyzed Petrobras&#8217; announcement for <strong>The Brazilian Report</strong>. “They are not making new commitments. At most, the company is pledging not to increase emissions. But how does one commit themselves to change without actually making any changes?”</li></ul> <p><strong>Getting a pass.</strong> Perhaps more worrisome than Petrobras&#8217; hollow ESG promises is the fact that São Paulo&#8217;s stock exchange has apparently bought them at face value. Petrobras has just been included in the B3 ISE sustainability index after a 12-year hiatus. The index has already been bashed by ESG experts for listing mining giant Vale (responsible for Brazil&#8217;s two biggest environmental disasters between 2015 and 2019), forcing B3 to announce a review to its methodology.</p> <ul><li>Other ESG listings, such as investment bank BTG Pactual&#8217;s ETF ESGB11, have already blacklisted Petrobras.</li></ul> <p><em>— by Natália Scalzaretto</em></p> <hr class="wp-block-separator"/> <h2>Vaccine for V-shaped recovery</h2> <p>Brazil&#8217;s Q3 2020 GDP growth data brought some relief, with the economy growing 7.7 percent between July and September. President Jair Bolsonaro was quick to <a href="https://www.poder360.com.br/governo/bolsonaro-diz-que-economia-esta-crescendo-em-v-dados-sao-fantasticos/">declare</a> that the country is experiencing a V-shaped recovery, adding that &#8220;the numbers are outstanding.&#8221; However, several question marks linger over the Brazilian economy.</p> <ul><li>The 7.7-percent rally was below expectations — with most market analysts forecasting a growth rate around 9 percent&nbsp;— and it was not enough to offset the losses accumulated throughout the year. The recovery of the services sector has lost steam, with the Services Purchasing Managers Index (PMI) dropping from 52.3 to 50.9 between October and November.</li><li>Agribusiness — which for years has been the best-performing sector of the economy — has also slowed down. A 0.5 percent contraction is not something farmers will lose sleep over, but some signs of uncertainty are beginning to appear. <a href="https://brazilian.report/business/2019/07/07/climate-change-food-prices-brazil/">Climate conditions</a> created by the La Niña phenomenon create a strong probability of below-average rainfall and high temperatures from December through February — right at the heart of the South American growing season.</li><li>The government&#8217;s inability to come up with a new welfare plan to replace the coronavirus emergency salary also raises questions over <a href="https://brazilian.report/power/2020/08/20/what-happens-when-brazils-coronavirus-emergency-aid-ends/">whether people will have money to consume</a>. The decision to halve the benefit in September — from BRL 600 to 300 — already pushed many families to file for cash-transfer program Bolsa Família, which currently has a waiting list of around <a href="https://www1.folha.uol.com.br/mercado/2020/12/fila-do-bolsa-familia-volta-a-1-milhao-apos-reducao-do-auxilio-emergencial.shtml">1 million families</a>. In a recent report, the IMF advised Brazil to abide by austerity controls — but keep the emergency salary in place.</li><li>Multiple cities are bringing restrictions back as a second coronavirus wave approaches. While lockdowns are unlikely to happen, the impact of new measures on the economy remains to be seen.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/4559049"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/4559217"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Bottom line.</strong> We can only talk about a sustainable recovery once the pandemic is controlled. And that will only happen after a vaccine is ready and available.</p> <hr class="wp-block-separator"/> <h2>Supreme Court ready to allow Congress to bend the Constitution</h2> <p>The Supreme Court begins a trial today on whether or not both congressional houses can amend the Constitution to allow their heads — House Speaker Rodrigo Maia and Senate President Davi Alcolumbre — to run for another two-year stint within the same legislature. As Brasília correspondent Débora Álvares <a href="https://brazilian.report/power/2020/09/02/bending-the-rules-to-counter-rule-bending-bolsonaro/">revealed back in September</a>, justices believe Messrs. Alcolumbre and Maia “can control the president’s authoritarian impulses” and would help Brazil “uphold democracy.”</p> <p><strong>Behind the curtain.</strong> President Jair Bolsonaro&#8217;s crass and authoritarian way of doing politics has given other political actors in Brazil a form of carte blanche to bend the rules to their own interests, providing they are doing so to “counter Jair Bolsonaro.”</p> <p><strong>Why it matters.</strong> The elections for the heads of each congressional house are highly consequential processes, as the Speaker and Senate President both have agenda-setting powers. Moreover, the Speaker is the sole person who can initiate impeachment proceedings against a sitting president.&nbsp;</p> <ul><li>They can be a government’s best friend — or its worst enemy.</li></ul> <p><strong>Verdict.</strong> Justices have until December 11 to submit their votes to the Supreme Court&#8217;s online voting system. The first two opinions — by Justices Gilmar Mendes and Dias Toffoli — went in favor of Messrs. Alcolumbre and Maia.</p> <ul><li>A third vote, by newcomer Justice Nunes Marques, caters to the wishes of Mr. Bolsonaro — who wants to replace Mr. Maia in the House with an ally. While he greenlit Mr. Alcolumbre&#8217;s ambitions for a new stint in charge of the Senate, he claims that Mr. Maia is already in his second consecutive two-year term and could not push for a third. According to the rules, speakers can only be re-elected if both terms come in different legislatures.</li></ul> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Environment. </strong>A new study using satellite data mapped the impact of wildfires in Brazil over the past two decades. A whopping 18 percent of the national territory was impacted in that period — or three times the <a href="https://brazilian.report/environment/2020/09/28/brazil-forests-lost-an-area-almost-the-size-of-spain-in-18-years/">size of Spain</a>. In most cases, burned areas were located on private properties and rural settlements — suggesting the widespread use of fire to <a href="https://brazilian.report/podcast/2019/08/28/amazon-fires-whatsapp-brazil-bolsonaro-macron/">clear space for pastures and crops in recently-deforested areas</a>.</li><li><strong>5G. </strong>The Central-West state of Goiás — an agricultural powerhouse — rolled out a pilot project on Thursday to increase productivity and take fast action against crop diseases by using 5G technology, with equipment provided by Huawei. As the federal government has yet to decide on whether the Chinese telecom giant will be allowed to participate in the upcoming 5G auction, states are making their own deals — likely to make a nationwide ban even more difficult. Goiás is the home state of Huawei&#8217;s <a href="https://brazilian.report/power/2020/12/02/shunned-by-bolsonaro-huawei-has-friends-in-brazils-congress/">biggest supporters within the Brazilian Congress</a>, as Brasília correspondent Débora Álvares explained this week.</li><li><strong>PIX.</strong> According to the Central Bank, Brazilian banks have registered over 100 million &#8220;keys&#8221; (or ID numbers) in the country&#8217;s <a href="https://brazilian.report/podcast/2020/11/04/explaining-brazil-podcast-banking-instant-payment-pix-up-steam/">new instant payment system, PIX</a>. Each individual can have up to five keys, and each company, 20. Registration started on October 5 and the system was fully launched on November 16. Since then, over 36.6 million transactions have been made — amounting to BRL 36.8 billion.</li><li><strong>Election.</strong> Macapá, the capital city of the northern state of Amapá and the only part of Brazil that didn&#8217;t hold municipal elections in November, will finally go to the polls on Sunday. The vote was postponed after the city was disrupted by <a href="https://brazilian.report/society/2020/11/10/cut-off-amapa-state-endures-week-without-electricity/">power outages</a> that lasted for weeks and sparked violent protests. The most recent poll shows Senate President Davi Alcolumbre&#8217;s brother, Josiel Alcolumbre, leading the race with 28 percent. Three candidates fight for the right to face him in the runoff stage.

Read the full story NOW!

Our content is protected by copyright. Want to republish The Brazilian Report? Email us at contact@brazilian.report