Brazilian banks still financing fossil fuels despite climate change impacts

Amidst a water and energy crisis, Brazil’s financial institutions do not have measurable targets for reducing fossil fuel investments. 

Insufficient social and environmental actions, and continued investment in fossil fuels and their derivatives, remain major features of the latest annual and sustainability reports from Brazil’s nine largest banks. 

For Brazil’s vulnerable communities, the impacts of climate change are becoming more and more intense, mainly due to deforestation and carbon emissions from the burning of fossil fuels. Extreme weather events are also becoming more frequent, such as thunderstorms which cause landslides, and extreme droughts which devastate food production and water supplies. 

A recent study, Climate Change and Urban Health - Impacts and Opportunities to Brazilian Cities, conducted by Disclosure Insight Action with 55 million Brazilians in 92 cities, showed that at least 83 municipalities identified 307 climate dangers, including floods, droughts and plagues of insects. In addition, 32 cities identified 400 different risks to the health system due to climate change and air pollution, caused by Amazon fires and greenhouse gas emissions, at a cost of more than US$ 1,7 billion per year to Brazil.

However Brazil’s banks are continuing to finance climate-changing fossil fuels, despite the urgent need to implement more sustainable investment strategies. (See Fair Finance Guide Brazil's latest assessment of Brazil's banks' actions on climate change-in Portuguese)

FFG Brazil reports that BB, BNDES, BV, Caixa and Safra banks still do not disclose sufficient data about their fossil fuel investments. Meanwhile Itaú bank’s reporting lacks transparency, as their figure of R$ 20 billion in investments includes both fossil fuels and other sectors. Bradesco actually invested almost 8 times more in fossil fuels (R$ 21,8 billion) than in renewable energy (R$ 2,8 billion), whilst BTG Pactual invested R$ 5,4 billion in fossil fuels and only R$ 964,6 million in transition and renewable sources. Santander Brazil is the only bank, of those disclosing data in 2020, to invest more in renewable energy (R$ 9,6 billion) than in fossil fuels and derivatives (R$ 5,6 billion) (These figures refer to Brazilian investments only.)

Overall the nine largest banks in the country - BB, BNDES, Bradesco, BTG Pactual, BV, Caixa, Itaú, Safra and Santander - scored only 14% on their climate change policies in FFG Brazil’s policy assessment earlier this year. Even this insufficient result was an improvement on 2018, when the average was just 10%. 

The improvement came about in part due to the adherence of some banks to the Task Force on Climate-Related Financial Disclosures. (This initiative covers banks, insurance companies, asset and pension funds managers, entrepreneurs and credit rating agencies.)

The Brazilian Central Bank also opened two public consultations to integrate climate risks in banks' social environmental policies and to regulate sustainability rules, based on the TCFD framework. 

However despite this, much progress is still needed in the National Financial System in Brazil. Five of the nine largest banks do not disclose data on investments in fossil fuels. All the banks do much less than they could to demand the disclosure of data on climate risks and opportunities from the companies they finance. Information on financial risks related to climate impact is also not required.

In May, the Brazilian Chamber of Deputies approved a bill deregulating environmental licenses to 13 types of activities with high environmental impact, including large hydro dams. Although it is required that all banks are aligned with the Task Force on Climate-Related Financial Disclosures (TCFD), this legislative setback has now opened up opportunities for the profit interests of financial institutions.

Although Brazil’s banks did increase their investments in clean energy, and improve their guidelines with respect to protecting the Amazon biome between 2018 and 2020, their investments in fossil fuels continue to far outweigh those in renewables. Greenwashing is still common practice, and financial institutions need to do much more to take their sustainability commitments seriously.

This article is published in Portuguese on Envolvorde.com and is written by:

Ione Amorim, Economist, coordinator Fair Finance Guide Brazil and Idec’s Financial Services Program, and Ilan Zugman, Director, 350.org Latin America.