Social tracking system, operations veto and risk matrix: learn about the Instituto Escolhas’ contributions to the Central Bank of Brazil’s public consultation

The Instituto Escolhas has already submitted its contributions on risk management and financial institutions’ social, environmental and climate responsibility policies as part of the Central Bank of Brazil’s public consultation process.

For the Instituto Escolhas, all operations associated with violations or non-compliance of an environmental and social nature should be denied by financial institutions. This is the only way to ensure they are not financing the destruction of the environment and crimes such as slave and child labor. In addition, all operations with social, environmental and climate risks should receive a “risk” or “high risk” alert label, depending on the events involved, and be duly justified.

Another important recommendation is the incorporation of an environmental and social traceability system within the risk management framework. This system should prove that those who receive resources are not linked to the invasion and exploitation of Indigenous Lands and traditional communities, nor to practices that infringe on labor rights, nor to the pollution or irregular use of water and soil resources, nor to the destruction of biodiversity, among others.

The adoption of an Environmental Risk Matrix methodology was also recommended, in order to be able to identify, evaluate, classify and measure social, environmental and climate risks based on consistent criteria.

With regards to the transparency and monitoring processes of operations and responsibility policies, it was recommended that the Central Bank should publicly disclose reports, including detailed information about any operations denied due to environmental and social violations and non-compliance, as well as flagging any operations classified as containing “risk” and “high risk” social, environmental and climate risks. The Central Bank should also establish a Monitoring Committee for Social, Environmental and Climate Responsibility Policies, as well as for institutions’ social, environmental and climate risk management, in order to oversee the implementation of the policies and their effectiveness.

Contributions from the Instituto Ecolhas can be accessed via the Central Bank website or accessed directly here.