Main discussions of Davos 2020 are subject of an article by “Escolhas” in Estadão newspaper

Gabriel Kohlmann, Product and Project Manager at Escolhas, listed some takeways from the biggest debates stage between public and business managers for Brazil, in an article published in the newspaper O Estado de S.Paulo this Friday (Jan 31).

This year’s edition of the World Economic Forum, for the first time, brought the environmental banner as the main theme of the event and did not count on the official Brazilian presence, but with public and private agents, such as Governor João Dória Jr., the Minister of Economy, Paulo Guedes, the CEO of Banco Itaú Unibanco, Cândido Bracher, and the chairman of Bradesco, Luiz Carlos Trabuco.

Kohlman, in his text, highlighted the Global Risk Report 2020, produced by the Forum, which this year brought the leadership of themes linked to the climate agenda in its results.

Read the full article below:

Davos takeaway for Brazil

Financial agents already include climate risk and green policies in investment decisions

The annual meeting of the World Economic Forum, held in Davos, Switzerland, is, in general, a showcase for governments and businessmen to show the world their best products: investment opportunities, robust economies, growth of consumer markets and pro-business public policies, in addition to presenting business and entrepreneurial trends.

This script was carried out by some of the Brazilian representatives at the event – both political agents (among them the Minister of Economy, Paulo Guedes, and the governor of São Paulo, João Dória) and financial (the CEO of Itaú Unibanco, Cândido Bracher, and the president of Bradesco, Luiz Carlos Trabuco). However, the question remains: what did these same representatives bring from Davos?

There was a special component in the 2020 edition. For the first time in 50 years, the central banner of the conference was the environmental issue, treated as a climate crisis. The Forum showed that the environment is already changing economic, market and social dynamics, thus representing risks for business.

The Global Risk Report 2020, presented in Davos, allocated the following elements as the most likely and most impactful risks: extreme weather events, failure of climate measures, natural disasters and loss of biodiversity.

It has long been evident that the world has been suffering from these problems. In Brazil, in particular, periods of prolonged and more severe droughts, fires and deforestation in the Amazon, excessive rain in urban environments, among others, are recurrent events. Some of these events impact, for example, the electric energy sector (availability of water for hydro and thermal generation) and agribusiness – the flagship of the Brazilian economy -, directly affected by the scarcity of water resources, land occupation and other factors. daily weather conditions of production.

The Electric Sector study: how to price water in a scarcity scenario, recently launched by the Escolhas Institute, priced the water scarcity in some important hydrographic basins in the country. In the Xingu River basin, a loss of R$ 2 billion per year is estimated in the loss of firm energy from the Belo Monte hydroelectric plant, motivated by water conflict, while in the São Francisco River basin the cost of scarcity can reach R$ 2, 5 billion, between energy and agriculture, with impacts on the privatization process of Eletrobrás.

There is a perception that these costs and risks are not adequately priced by financiers, entrepreneurs, producers and government officials in planning and approving business, regulations, investments and public policies.

Brazil’s financial leaders who went to Davos could have returned imbued with the determination to have their institutions formulate new cost and environmental risk methodologies for ventures that will be affected by climate change, such as energy, agriculture, mining and infrastructure in general, among others . They could also adopt new portfolio and credit management policies, conditioning the institutions’ investments to pre-established environmental commitments, according to the broad debate on green financing held in Davos.

There are many examples presented in the Forum. International financial agents already use climate risk calculations and green investment portfolio management policies. The French bank BNP Paribas, for example, generates a “temperature metric” in its operations and may decide to refuse the investment if the project does not contribute to climate change mitigation actions. Similar methodologies are applied by the French insurers AXA and Scor.

In this new context, the most impactful announcement in the financial sector came from asset manager BlackRock, one of the largest in the world, when it announced that it will limit investments in ventures that do not comply with climate policies and will only allocate resources to green businesses. Larry Fink, the institute’s CEO, commented that he is on the verge of fundamental and structural changes in global finance.

On the government side, Economy Minister Paulo Guedes could hear more. Climatic costs and risks tend to be borne by the National Treasury or by society, via the Brazil cost – this is the case of costs in the energy sector, which are paid by consumers. British and French regulators, in addition to the Bank of England, are already studying specific pricing rules for these elements in their public policies and investment rules.

To assimilate and implement these discussions locally, the most advanced examples, businesses and policies to deal with the main risk factor, climate change, should be the central commitment of those who spent those days in the Swiss snow. Homework!

GRADUATED IN INTERNATIONAL RELATIONS, MASTERS IN INTERNATIONAL ECONOMY AND DEVELOPMENT BY THE UNIVERSITY OF APPLIED SCIENCES OF BERLIN, PROJECTS AND PRODUCTS MANAGER OF ESCOLHAS INSTITUTE