Brazil rates well in green stakes

Brazilian companies have less than half the environmental impact of emerging-market peers, a survey has found, strengthening the case for green investment in the world’s eighth-largest economy.

“Brazil’s electricity mix is 10 times more efficient than the global average, meaning that its energy companies stand out, and that large electricity-users also rank highly,” said Neil McIndoe, of data provider Trucost, authors of the research. “That gives investors sustainable options in a variety of sectors.”

The survey, commissioned and published by Brazil Confidential, a new premium Financial Times service, used corporate data to measure the economic value of companies’ greenhouse gas emissions, resource use and other impacts. It estimated that environmental costs are equivalent to 4.9 per cent of the turnover of Brazil’s biggest companies – compared to an average of 10.5 per cent in other emerging markets, and 7.3 per cent for the FTSE 100.

Better environmental performance opens up stocks to socially-responsible investment. Globally, investment institutions responsible for $22bn, a 10th of the world’s total assets under management, have signed a UN-backed pledge to incorporate environmental, social and corporate governance criteria into their decisions.

“In Brazil’s case, it’s European investors who are the most interested,” said Sonia Favaretto, sustainability director of the BM&F Bovespa stock exchange, which recently launched a low-carbon index of companies. “Brazil has a strong position in international negotiations over climate change and biodiversity, and that catches investors’ attention.”

Two-thirds of the 49 Brazilian companies analysed have lower impact than the global average for their sector. The top-ranked four companies were electricity generators and distributors, reflecting the fact that more than 70 per cent of the country’s electricity comes from hydropower. Brazilian consumer and telecoms companies also performed strongly, due to their use of renewable electricity.

But environmental restrictions on new dams – and transmission lines to cities thousands of miles away – are pushing the country towards other sources, in order to meet growing demand for electricity. Gas and coal-fired power stations, associated with higher greenhouse gas emissions, are expected to represent 12 per cent of the country’s installed capacity in 2030, compared with 6 per cent today.