Sustainable Investment in Brazil 2009 (April 2009)

IFC Sustainable Investment Country Reports: 
Sustainable Investment in Brazil 2009 
 
Final Report 
April 2009 
      
www.terieurope.org 
IFC Sustainable Investment Country Reports: 
 
Sustainable Investment in Brazil 2009  
 
FINAL REPORT 
 
APRIL 2009 
 
 
Prepared for 
International Finance Corporation (IFC) 
A Member of the World Bank Group 
www.ifc.org 
 
IFC Task Manager 
Brunno Maradei, Project Officer, Environment 
& Social Development Department 
 
Prepared by 
TERI‐Europe 
 
Written and edited by 
Ritu Kumar and Dan Siddy 
 
 
 
 
 
 
 
Copyright © 2009  
 
International Finance Corporation  
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All rights reserved.  
 
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TERI‐Europe 
 
TERI‐Europe is a not‐for‐profit organisation specialising in the links 
between sustainable development in emerging markets and the role of 
business and investment.  TERI‐Europe’s partners and sponsors include 
IFC, the European Commission, the UK Foreign & Commonwealth 
Office, the UK Department for International Development, Unilever and 
the Association of British Insurers.  TERI‐Europe is based in London.   
 
 
The authors 
 
Ritu Kumar is director of TERI‐Europe and a sustainable investment 
advisor with the emerging market private equity firm, Actis: 
 
rkumar@act.is 
www.act.is 
 
Dan Siddy is an associate fellow at TERI‐Europe and director of Delsus 
Limited, a specialist advisory firm on ESG investment in emerging 
markets:   
 
dsiddy@delsus.com 
www.delsus.com 
 
 
 
About IFC 
 
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their 
lives. We foster sustainable economic growth in developing countries by supporting private sector development, 
mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. 
Our new investments totalled US$16.2 billion in fiscal 2008, a 34 percent increase over the previous year. For 
more information, visit www.ifc.org. 
 
IFC’s Sustainable Investing Team 
 
For the past four years, IFC's Sustainable Investing team has delivered technical and financial support for 
projects that aim to mobilize sustainable capital flows into emerging markets. The goal is to increase the volume 
of mainstream investment that uses ESG analysis as a standard practice in their investment decision. 
IFC’s approach is twofold: 
 
 To catalyze capital market flows into sustainable investment, IFC works to (a) promote the business case for 
sustainable investment by drawing lessons from IFC’s own portfolio, (b) establish frameworks to identify 
and assess new sustainable investment opportunities, and (c) develop new financial products (e.g. 
Sustainability indices); and 
 
 To support fund managers investing in sustainable companies, IFC works (a) with private equity funds in 
IFC’s portfolio to assist them to establish ESG analytical processes, and (b) with capital market actors to 
improve the enabling environment for the market to recognize and value sustainability in corporate 
valuation. 
 
IFC is committed to continue its work in partnership with key market actors to improve the enabling 
environment and address barriers to sustainable investment in emerging markets. In order to do this, IFC’s work 
is centered in three areas: policies and standards, knowledge management and investment vehicles.   The 
Sustainable Investing team is part of IFC’s Environment and Social Development Department, and benefits from 
the generous financial support of IFC and the Governments of Japan, the Netherlands, Norway, Canada, South 
Africa and Switzerland.  For more information, please visit the Sustainable Investing website at 
www.ifc.org/sustainableinvesting. 
 
Table of Contents 
ACKNOWLEDGMENTS....................................................................................................................... i 
GLOSSARY OF ABBREVIATIONS .........................................................................................................ii 
EXECUTIVE SUMMARY .....................................................................................................................iii 
1.  INTRODUCTION........................................................................................................................... 1 
Objectives ................................................................................................................................................ 1 
Scope ....................................................................................................................................................... 1 
A snapshot in time................................................................................................................................... 2 
Exchange rates used ................................................................................................................................ 2 
Structure of the report ............................................................................................................................ 2 
2.  COUNTRY OVERVIEW .................................................................................................................. 3 
Summary.................................................................................................................................................. 3 
Brazil’s economy...................................................................................................................................... 3 
The stock market ..................................................................................................................................... 3 
Key industries and companies ................................................................................................................. 4 
Key environmental and social issues ....................................................................................................... 4 
3.  CORPORATE SUSTAINABILITY INDEX ........................................................................................... 5 
History ..................................................................................................................................................... 5 
Objective.................................................................................................................................................. 5 
Management and governance................................................................................................................. 5 
Eligibility .................................................................................................................................................. 6 
Sustainability criteria and methodology.................................................................................................. 6 
Portfolio composition .............................................................................................................................. 7 
Use by investors .................................................................................................................................... 11 
Research into an ISE ‘premium’............................................................................................................. 11 
Corporate buy‐in ................................................................................................................................... 12 
Reaction to and use of the ISE ........................................................................................................... 12 
Non‐inclusion of Petrobras ................................................................................................................ 12 
Questionnaire response rate.............................................................................................................. 12 
Commercial business model.................................................................................................................. 14 
Future directions ................................................................................................................................... 14 
4.  ASSET MANAGERS......................................................................................................................15 
Market overview ................................................................................................................................... 15 
Status of sustainable investment .......................................................................................................... 18 
5.  RETAIL FUNDS ............................................................................................................................19 
Market overview ................................................................................................................................... 19 
6.  PENSION FUNDS.........................................................................................................................25 
Market overview ................................................................................................................................... 25 
7.  FOREIGN INVESTMENT...............................................................................................................29 
Market overview ................................................................................................................................... 29 
8.  OTHER MARKET PARTICIPANTS ..................................................................................................33 
Brazilian Development Bank.................................................................................................................. 33 
Overview ............................................................................................................................................ 33 
Status of sustainable investment....................................................................................................... 33 
High Net Worth Individuals ................................................................................................................... 35 
Overview ............................................................................................................................................ 35 
Status of sustainable investment....................................................................................................... 36 
9.  ENABLING ENVIRONMENT .........................................................................................................38 
Regulatory and policy frameworks ........................................................................................................ 38 
Environmental legislation and enforcement...................................................................................... 38 
Pension fund transparency ................................................................................................................ 39 
Non‐financial disclosure requirements .............................................................................................. 39 
Listing rules and guidelines................................................................................................................ 40 
Voluntary non‐financial reporting ......................................................................................................... 40 
Sustainability reporting ..................................................................................................................... 40 
Carbon Disclosure Project .................................................................................................................. 44 
Global Compact Communications on Progress.................................................................................. 45 
Indices, equity research and ratings ...................................................................................................... 45 
Specialised indices in addition to the ISE ........................................................................................... 45 
Dow Jones Sustainability Index .......................................................................................................... 45 
Independent sustainability research and rating products ................................................................. 46 
Sell‐side equity research on sustainability issues............................................................................... 46 
Networks and associations .................................................................................................................... 46 
Industry bodies .................................................................................................................................. 46 
UNEPFI ............................................................................................................................................... 47 
LASFF ................................................................................................................................................. 47 
UNPRI................................................................................................................................................. 47 
Development finance institutions ......................................................................................................... 49 
Language barriers .................................................................................................................................. 49 
Green consumerism .............................................................................................................................. 49 
10.  BUILDING ON SUCCESS.............................................................................................................51 
Overall market size ................................................................................................................................ 51 
Consolidated estimates of SRI assets under management ................................................................ 51 
Brazilian SRI in a global context......................................................................................................... 52 
Strengths and weaknesses .................................................................................................................... 52 
Strong commitment........................................................................................................................... 52 
Strong business case.......................................................................................................................... 52 
Contribution to sustainable development ......................................................................................... 52 
Strategic challenges and risks............................................................................................................ 53 
Issues on the horizon............................................................................................................................. 53 
The ISE paradox ................................................................................................................................. 53 
Limited research coverage................................................................................................................. 54 
Stagnation in the asset management sector ..................................................................................... 55 
Limited involvement of foreign portfolio investors ............................................................................ 56 
Fragmentation and overlap in market leadership ............................................................................. 56 
Recommendations................................................................................................................................. 56 
Update the ISE’s commercial business model.................................................................................... 56 
Make greater use of ISE data............................................................................................................. 57 
Create a commercial market for ESG research .................................................................................. 58 
Develop human capital ...................................................................................................................... 58 
Implement an international strategy................................................................................................. 58 
Invest in research and development .................................................................................................. 59 
Foster competition and innovation.................................................................................................... 60 
Organising for success ........................................................................................................................... 61 
APPENDIX A: COUNTRY PROFILE .....................................................................................................65 
Profile .................................................................................................................................................... 66 
Millennium Development Goals ............................................................................................................ 69 
Economy ................................................................................................................................................ 70 
GDP growth ....................................................................................................................................... 70 
Value‐added....................................................................................................................................... 70 
Foreign trade ..................................................................................................................................... 70 
Private capital flows .............................................................................................................................. 71 
International context ......................................................................................................................... 71 
Brazil .................................................................................................................................................. 71 
The stock market ................................................................................................................................... 73 
Market size ........................................................................................................................................ 73 
Corporate governance segments....................................................................................................... 75 
Key companies and industries............................................................................................................ 76 
Capital raising.................................................................................................................................... 78 
Performance ...................................................................................................................................... 80 
Market participants ........................................................................................................................... 80 
Key environmental and social issues ..................................................................................................... 81 
Principal issues................................................................................................................................... 81 
New national plan on climate change ............................................................................................... 82 
APPENDIX B: EXAMPLES OF ESG ISSUES IN THE INTERNATIONAL MEDIA.........................................83 
APPENDIX C: SWOT ANALYSIS.........................................................................................................88 
APPENDIX D:  SUSTAINABILITY IN BRAZIL'S PRIVATE EQUITY MARKET ............................................92 
Market overview ................................................................................................................................... 93 
Fundraising Activity ........................................................................................................................... 93 
Investing Trends................................................................................................................................. 95 
Exit Trends ......................................................................................................................................... 95 
Developing Brazil’s venture capital industry...................................................................................... 96 
Mainstream private equity ................................................................................................................ 97 
Clean technology and venture capital ............................................................................................... 98 
Sustainable entrepreneurs................................................................................................................. 99 
 
 
 
 
 
SUSTAINABLE INVESTMENT IN BRAZIL 2009  i 
 
ACKNOWLEDGMENTS 
 
 
 
Particular thanks are due to Brunno Maradei at IFC for his patient and effective management of this 
study, and to Bruno Erbisti (Votorantim), Luiz Maia (TriPod) and Gladis Ribeiro (Pereni) in Brazil who 
provided wise counsel and opened many doors.   
 
 
Actis:  Beatriz Amary and Donald Peck  
AIG Capital:  Cristiano Gioia  
Amazonia:  Gustavo Pimental 
Banco Real:  Pedro Villani and Eugenia dos Santos Buosi 
BM&F Bovespa:  Izalco Sardenberg, Murilo Robotton Filho, Ivan Wedekin, Alvaro Affonso Mendonça 
and Rogério Marques 
CES‐FGV:  Mario Monzoni and Patricia Berardi 
CVM:  Sergio Weguelin 
Delsus Ltd:  Rachel Mew, Joe Roland, Colin Hedges and Dougal Benson 
DGF Investimentos:  Sidney Chameh, Antônio José Duarte, Humberto Casagrande and Frederico Greve 
Ecoinvest:  Carlos Martins 
EcoSecurities Brasil:  Mauricio de Moura Costa 
Greenvest:  Marco Galhardo  
HSBC:  Paula Peirão de Oliveira 
IADB:  Luiz Ros 
IFC:  Euan Marshall, Brunno Maradei, Cecilia Bjerborn, Berit Lauridsen, Maria Delores Hermosillo and 
Miguel Martins 
Mercer Limited:  Danyelle Guyatt and Helga Birgden 
New Carbon Finance:  Camilo Terranova 
Pereni Soluções Sustentáveis:  Gladis Ribeiro 
PREVI:  Sergio Rosa, Luiz Carlos Aguiar and Rafael Soares Ribeiro de Castro 
Rio Bravo:  Fabio Ohara Ishigami, Diogo Caiuby Novaes, Marcelo Romeiro and Anton Castanheira 
Santa Fé Portfólios:  Paulo Battistella Bueno 
Stratus:  Oren Pinsky and Carlos Kokron 
Sustain Capital:  Luzia Hirata 
TriPod Investment:  Luiz Maia and Elisabeth Lerner 
UNPRI:  James Gifford, Narina Mnatsakanian and Marcela Zonis 
Votorantim Asset Management:  Bruno Erbisti 
World Federation of Exchanges:  Thomas Krantz, Peter Clifford and Sibel Yilmaz 
WRI:  Virginia Barreiro and Ella Delio 
 
ii  SUSTAINABLE INVESTMENT IN BRAZIL 2009 
 
GLOSSARY OF ABBREVIATIONS 
 
 
ABRAPP  Brazilian Association of Pension Funds 
ABVCAP  Brazilian Private Equity and Venture Capital Association 
ADR  American Depository Receipt 
ANBID  National Association of Investment Banks 
APIMEC  Association of Capital Markets Analysts and Investment Professionals 
ASRIA  Association for Sustainable & Responsible Investment in Asia 
AUM  Assets under management 
BNDES  Brazilian Development Bank 
CDP  Carbon Disclosure Project 
CES‐FGV  Center for Sustainability Studies at the Fundaçao Getulio Vargas business school, São Paulo 
CVM  Brazilian Securities and Exchange Commission 
DJSI  Dow Jones Sustainability Index 
EMDP  Emerging Markets Disclosure Project 
EMPEA  Emerging Market Private Equity Association 
ESG  Environment, social and governance 
FDI  Foreign Direct Investment 
FBDS  Brazilian Foundation for Sustainable Development 
FINEP  Brazilian Innovation Agency 
GDP  Gross Domestic Product 
GP  General partner (manager of a private equity fund) 
GRI  Global Reporting Initiative 
HNWI  High Net Worth Individual 
IADB  Inter‐American Development Bank 
IBAMA  Brazilian Institute for the Environment and Natural Renewable Resources 
IBGC  Brazilian Institute of Corporate Governance 
ICGN  International Corporate Governance Network 
IFC  International Finance Corporation 
IGC  Bovespa Corporate Governance Index 
IMF  International Monetary Fund 
INOVAR  Venture capital development program operated by FINEP 
IPO  Initial Public Offering 
ISE  Bovespa Corporate Sustainability Index 
LAVCA  Latin American Venture Capital Association 
LASFF  Latin American Sustainable Finance Forum 
LP  Limited partner (investor in a private equity fund) 
MDG  Millennium Development Goals 
MIF  Multilateral Investment Fund (part of IADB) 
N1  Nivel (Level) 1 of Bovespa’s differentiated corporate governance levels 
N2  Nivel (Level) 2 of Bovespa’s differentiated corporate governance levels 
NAV  Net asset value 
NM  Novo Mercado 
OM  Opportunities for the Majority 
P/E  Price/earnings ratio 
PE  Private equity 
PREVI  Pension fund of Banco do Brasil 
ROE  Return on equity 
SEC  United States Securities and Exchange Commission 
SME  Small and medium sized enterprises 
SRI  Socially Responsible Investment 
UKSIF  UK Sustainable Investment Forum 
UNCTAD  United Nations Conference on Trade and Development 
UNEPFI  United Nations Environment Program Finance Initiative 
UNPRI  United Nations Principles for Responsible Investment 
VC  Venture Capital 
WRI  World Resources Institute 
 
SUSTAINABLE INVESTMENT IN BRAZIL 2009  iii 
 
EXECUTIVE SUMMARY 
 
 
This report has been prepared by TERI‐Europe for IFC to (a) provide an up‐to‐date assessment of the 
landscape of sustainable investment in Brazil today, and (b) stimulate discussion on the future 
evolution and needs of this market.  “Sustainable investment” refers to portfolio equity investment in 
publicly listed companies, using strategies that take into account environmental, social and 
governance (ESG) issues and their effect on shareholder value. 
 
Brazil is the world’s tenth‐largest economy.  The São Paolo stock exchange (operated by BM&F 
Bovespa) has a market cap of some US$585 billion, having fallen by about 50 per cent over the last 
year in common with most markets around the world.  The stock market is dominated by the financial 
sector, oil & gas, mining and steel.  34 per cent of the benchmark IBOVESPA Index is concentrated in 
just two stocks ‐ the oil & gas company Petrobras and the mining company Vale R Doce.  Domestic 
savings have increased significantly in recent years: the top 40 asset managers in Brazil control about 
US$500 billion in mutual funds and other products, whilst the country’s 278 pension funds have 
combined assets of about US$185 billion.  Foreign portfolio investment has also become increasingly 
important to the economy:  the total stock of such investment stood at about US$232 billion at the 
end of August 2008.  In addition, American Depository Receipts (ADRs) issued by Brazilian companies 
and traded on the New York Stock Exchange have a total ownership value of a further US$110 billion. 
 
Uniquely amongst emerging economies, ESG issues have had a prominent place in the Brazilian 
financial and investment community for nearly a decade.  Bovespa introduced its corporate 
governance‐themed Novo Mercado listing segment in 2001 and in the same year Banco Real launched 
Brazil’s first socially responsible investment (SRI) mutual fund, Fundo Ethical.  A key feature in Brazil’s 
sustainable investment landscape is BM&F Bovespa’s Corporate Sustainability Index, the ISE.  
Launched in December 2005, the ISE was swiftly followed by a dramatic increase in the number and 
size of Brazil’s retail SRI funds and has generally matched the IBOVESPA benchmark in performance.  
Today, ten asset managers offer retail SRI funds with combined assets under management of about 
US$315 million.  Several of these asset managers came together in 2006 to create the Latin American 
Sustainable Finance Forum (LASFF) in association with CES‐FGV, a specialist centre of excellence for 
sustainability studies within Brazil’s leading business school.  CES‐FGV is also the data provider for the 
ISE and designed the index’s ESG methodology.  Seed funding from IFC played a critical role in the 
creation of both the LASFF and the ISE.  
 
Brazil’s pension funds have taken a proactive stance on ESG issues, largely due to the leadership of 
their largest member, PREVI.  18 pension funds have signed the UN Principles for Responsible 
Investment (PRI).  Together they represent combined assets of US$110 billion, or about 60 per cent of 
the country’s total pension fund corpus.  Although implementation is still at a relatively early stage, 
momentum is high and is supported strongly by the UNPRI Secretariat, which has helped to establish 
a PRI Brazil Network aided by a part‐time in‐country coordinator.  The PRI Brazil Network has now 
developed a well‐organised work program focusing on shareholder engagement, ESG integration and 
recruitment of new signatories.  Shareholder engagement on ESG issues is still in its infancy, and 
currently focuses on labour standards in charcoal producers associated with Brazil’s iron and steel 
industry.   
 
This engagement involves cooperation with some international PRI signatories as well as LASFF 
members and Brazil’s pension funds.  In general, though, foreign portfolio investors have thus far not 
been actively engaged in Brazil’s sustainable investment market and have shown little interest in 
using the ISE index, for example.  However, quantitative data on this point are extremely limited; in 
the absence of hard facts, TERI‐Europe has used a working assumption that ESG investment styles 
account for about 1 per cent of foreign portfolio investment and investment in Brazilian ADRs, i.e. 
approximately US$2.2 billion. 
iv  SUSTAINABLE INVESTMENT IN BRAZIL 2009 
 
Other market participants may also be relevant for the future of Brazil’s sustainable investment 
market.  The Brazilian Development Bank (BNDES), for example, has stakes in over 30 publicly listed 
Brazilian companies; this portfolio is worth about US$16 billion.  BNDES follows environmental and 
social policies for its project finance operations, but is unclear whether or how these are applied to its 
equity holdings.  The wealth management market may also be important:  Brazil has 143,000 high net 
worth individuals (HNWIs) constituting a market of about US$1.4 trillion.  About 16 per cent of Latin 
American HNWIs allocate some part of their portfolio to “green investments” such as clean 
technology and alternative energy.  However, more detailed information is not currently available. 
 
The enabling environment for sustainable investment in Brazil is relatively strong compared to large 
emerging economies such as India or China, particularly in terms of voluntary non‐financial reporting 
by companies.  About 60 per cent of companies in the IBOVESPA publish sustainability reports, many 
of which are based on the international good practice guidelines issued by the Global Reporting 
Initiative (GRI).  The number and quality of corporate responses to the annual survey of the 
international Carbon Disclosure Project (CDP) is also improving.   
 
Nevertheless, further progress is needed on ESG related transparency and disclosure, especially in 
relation to regulatory filings and IPO prospectuses.  Furthermore, Brazilian stocks do not receive much 
ESG coverage from international sustainability research firms or equity analysts.  Lack of commercial 
demand on the domestic front also means that Brazil has not yet developed any home‐grown 
infrastructure in this respect, despite the capacity building efforts of organisations such as the 
Association of Capital Markets Analysts and Investment Professionals (APIMEC).  Other Brazilian 
industry associations taking a proactive advocacy position on sustainable investment include the 
Brazilian Association of Pension Funds (ABRAPP) and the National Association of Investment Banks 
(ANBID). 
 
Looking to the future, sustainable investment in Brazil faces some important challenges.  Many of 
these are essentially about adapting to success through a new phase of market evolution.  The key 
issues include: 
 
 Updating the ISE’s commercial business model 
 Making greater use of the underlying ISE data 
 Creating demand for the commercial provision of ESG research 
 Developing human capital 
 More effective outreach and engagement with international investors 
 Investment in research and development 
 Fostering renewed competition and innovation in the asset management industry 
 Building on LASFF and the PRI Brazil Network to increase the effectiveness of national 
cooperation in the sustainable investment community. 
 
The report provides detailed analysis and recommendations on each of these issues, which are inter‐
related and largely inter‐dependent.  A strategic vision is therefore required which combines the long‐
term interests of all stakeholders.  One possible vehicle for “organising for success” could be the 
creation of a fully equipped Brazilian Sustainable Investment Forum (BRASIF) as an evolutionary 
replacement for LASFF.  This new entity – which would complement, rather than duplicate or 
compete with the existing PRI Brazil Network – would serve the common needs of a range of 
organisations, including PRI signatories, non‐PRI signatories and other important institutions in the 
value chain such as BM&F Bovespa and APIMEC.  It would also act as a national focal point for 
sustainable investment in Brazil, including promoting inward sustainable investment from overseas. 
 
Ultimately, the right way forward for Brazil must come from a bottom‐up, demand‐driven process 
rather than through a top‐down blueprint imposed from outside.  The analysis and recommendations 
in this report are offered for consideration and discussion by all participants in Brazil’s sustainable 
investment market.  The final recommendation of this report is therefore to suggest that it might be 
useful for relevant stakeholders to come together in some type of roundtable discussion that takes 
stock of the progress made over recent years, and enables debate on the strategic direction and 
needs of the market over the next five years or so.   
SUSTAINABLE INVESTMENT IN BRAZIL 2009  1 
 
1.  INTRODUCTION 
 
Objectives 
 
Environmental, social and governance (ESG) issues have been a prominent concern and an important 
commercial differentiator in the Brazilian financial and investment community for nearly a decade.  
The commitment, depth and sophistication of this market evolution are probably unique among the 
world’s emerging economies, and in this way Brazil has set examples and pioneered business models 
that have received international attention and adaptation. 
 
Despite the progress that has been made, Brazil’s sustainable investment market is still in its relative 
infancy and faces continued challenges and fresh obstacles to new opportunities, especially taking 
into account the country’s environmental and social problems and the scale of domestic and foreign 
investment in what is now the world’s tenth largest economy.  Against this background, this report 
aims to: 
 
• Determine the current state of development of sustainable investment in Brazil by measuring 
the market on a number of indicators; and 
 
• Stimulate discussion by all market participants and stakeholders on the future evolution and 
needs of the Brazilian sustainable investment market. 
 
The report has been prepared by TERI‐Europe based on comprehensive desk research, extensive 
interviews conducted in São Paulo and Rio de Janeiro in September 2008, and subsequent discussions 
with a number of organisations and individuals.  The study was sponsored by the International 
Finance Corporation (IFC) through the Sustainable Investing Program of its Sustainability Business 
Innovator (a division of IFC’s Environment & Social Development Department) as part of a wider IFC 
project that also covers the markets of India, China and South Africa.   
 
Scope 
 
The term “sustainable investment” can mean different things.  In the interests of clarity, the scope of 
“sustainable investment” as covered in this report is domestic and foreign investment in Brazil’s 
publicly quoted companies using strategies that take environmental and social (sometimes combined 
with governance) issues into consideration.  This includes negative screening, positive screening, best‐
in‐class, shareholder activism and similar “socially responsible investment” styles, together with 
“integrated” approaches such as engagement and non‐financial risk analysis. 
 
Private equity and venture capital funds investing in Brazil are a secondary focus of this study.  
Specifically, the report covers (a) the use of environmental/social due diligence policies and 
procedures by “mainstream” private equity and venture capital funds (b) private equity and venture 
capital funds that are based on sustainability themes such as clean technology and climate change. 
 
The report does not cover other segments of the sustainable finance and investment market such as 
the Equator Principles, ESG‐related banking products or microfinance.  As context, however, it is 
essential to note that (with the possible exception of microfinance) these themes are also a strong 
feature of the Brazilian capital market:  most leading Brazilian banks have committed to implement 
the Equator Principles for project finance and several have successfully introduced innovative 
sustainable lending products, while at the same time pioneering many of the sustainable investment 
initiatives captured in this report as part of the same overarching corporate strategies and ethical 
values. 
2  SUSTAINABLE INVESTMENT IN BRAZIL 2009 
 
A snapshot in time 
 
This report must be seen in the context of the global financial crises that have unfolded during 2008 – 
and will continue to evolve for the foreseeable future ‐ following the emergence of problems in the 
US sub‐prime mortgage market in 2007.   
 
The authors have done their best to present an accurate and balanced ‘snapshot’ of Brazil’s 
sustainable investment market in this fast‐changing and turbulent environment and to frame 
conclusions and recommendations that will hold their currency for the next 6‐12 months.  We have 
sought to use the most up‐to‐date data available, but acknowledge that some of the information and 
corresponding analysis contained in this report may have an unavoidably short shelf life in these 
exceptional circumstances. 
 
Exchange rates used 
 
Unless otherwise stated, the exchange rate used in this report is R$2.315 to the US$ (the rate 
prevailing as of December 31, 2008).  
 
Structure of the report 
 
As important context for the rest of the report, Chapter 2 begins with a brief overview of Brazil’s 
development profile, economy and stock market (the BM&F Bovespa), along with a summary of the 
key industries and companies that are traded on the stock market and a short discussion on ESG value 
drivers in Brazil.  More detailed information on these issues is provided in Appendices A and B. 
 
One of the most important centrepieces of the sustainable investment landscape in Brazil is BM&F 
Bovespa’s Corporate Sustainability Index, the ISE.  Detailed information on the ISE’s methodology and 
impact is presented in Chapter 3. 
 
Chapter 4 provides an introduction to the leading asset managers in Brazil, their market share and 
assets under management, and their current involvement in sustainable investment.  Chapters 5 – 8 
then analyse sustainable investment activity across different types of market participant, focusing 
primarily on Brazilian mutual funds, Brazilian pension funds and foreign institutional investors. 
 
The enabling environment for sustainable investment in Brazil is analysed in Chapter 9 and includes 
public policy and regulation, corporate transparency and disclosure practices, equity indices and 
research coverage.  Chapter 9 also highlights the industry associations and similar networks that play 
a key role in creating the framework conditions for sustainable investment in Brazil, particularly the 
UN Principles for Responsible Investment (UNPRI) and the Latin American Sustainable Finance Forum 
(LASFF). 
 
Finally, Chapter 10 provides a forward‐looking discussion on the current status of sustainable 
investment in Brazil and the future opportunities and risks this market faces.  A “SWOT” analysis is 
also presented in Appendix C.  Chapter 10 concludes with a number of recommendations that 
stakeholders in Brazil’s sustainable investment market may wish to take forward for further 
consideration. 
 
Information on sustainable investment practices in Brazil’s private equity and venture capital market 
(a secondary focus of this report) is provided in Appendix D. 
 
 
2.  COUNTRY OVERVIEW 
 
 
Summary 
 
Sustainable investment trends in Brazil have to be understood in the wider context of Brazil’s overall 
economic and sustainable development.  Appendix A provides detailed information on Brazil’s 
development profile, economy and stock market (the BM&F Bovespa), along with data on the key 
industries and companies that are traded on the stock market and a discussion on ESG value drivers in 
Brazil.  The key points for context are summarised below. 
Brazil’s economy 
 
Based on the IMF’s 2008 estimates of worldwide GDP, Brazil is today the world’s 10th largest 
economy.  Characterized by large and well‐developed agricultural, mining, manufacturing, and service 
sectors, Brazil's economy outweighs that of all other South American countries and is expanding its 
presence in world markets.  Brazil became investment grade at the end of April 2008, when Standard 
& Poor’s upgraded Brazil’s sovereign debt rating to BBB‐ from BB+.   
 
Economic growth in Brazil increased from 3.8 per cent in 2006 to exceed expectations at 5.4 per cent 
in 2007.  This trend continued over the first seven months of 2008 when GDP grew by some 6.1 per 
cent.  As with almost all countries, Brazil has subsequently been impacted by the global financial 
shocks that dominated the global economy since the second half of 2008.  
 
Brazil has a thriving capital market bolstered by significant domestic savings and pension fund assets.  
Foreign portfolio investment has also become increasingly important to the economy and Brazil’s 
share of net portfolio equity flows to all developing countries surged to nearly 25 per cent in 2007. 
Net foreign portfolio investment flows have increased dramatically in the last few years and by 2007 
they reached US$34 billion, almost matching the volume of FDI.   The total stock of foreign portfolio 
investment amounted to some US$214 billion at the end of 2007 and stood at about US$232 billion 
by August 2008, the latest date for which reliable data are available. 
The stock market 
 
th
The São Paolo stock exchange, operated by BM&F Bovespa, is the 13  largest market in the world by 
market capitalization, following a dramatic increase in size over the last two decades.  In common 
with the rest of the world, Brazil’s market capitalisation has experienced a sharp decrease in the last 
12 months as a result of the global economic crisis and the worldwide fall in equity prices.  As of the 
end of November 2008, the market value of BM&F Bovespa listed companies came to R$1,355 billion 
(US$585 billion).    Brazil’s benchmark index is the IBOVESPA. 
 
A vital feature of the São Paolo stock exchange is that it maintains different listing segments for 
companies, based on differentiated levels of corporate governance.  In addition to the Traditional 
Bovespa segment, these include the Novo Mercado (NM) and two further differentiated corporate 
governance categories, Level (Nivel) 1 and Level (Nivel) 2.  Novo Mercado companies represent about 
33 per cent of total market capitalisation. 
 
Brazil has experienced a surge of IPOs and secondary public offerings in recent years.  Some US$35 
billion worth of new deals were completed over the period June 2007 ‐ June 2008.  The majority of 
IPOs are now on the Novo Mercado. 
 
 
 
 
 
Figure 1:  Sectoral breakdown of the IBOVESPA Index 
Other 16.1% Financial

21.6%
Transportation
4.1%
Telecom 4.8%
Electric utilities
7.3% Oil and gas
19.8%
Steel 11.1%
Mining 15.2%
 
   
 
Key industries and companies 
 
As of the end of November 2008, 393 companies were listed on the exchange.  Figure 1 shows the 
sectoral breakdown of the IBOVESPA index, which is dominated by the financial sector, oil & gas, 
mining and steel.  The Brazilian stock market is highly concentrated:  the top ten companies with the 
highest market value make up about 50 per cent of total market capitalisation.   
 
It is particularly important to understand that approximately 25 per cent of the total value of the 
overall market is concentrated in just two companies, Petrobras (oil & gas) and Vale R Doce (mining); 
these two firms also represent 34 per cent of the notional IBovespa portfolio.  The capital structure of 
both Petrobras and Vale R Doce includes preference as well as common shares and thus neither firm 
is listed on the Novo Mercado. 
 
Key environmental and social issues 
 
Corporations and their investors in Brazil face a wide and often complex range of social and 
environmental issues that present potentially significant risks and opportunities to shareholder value 
and corporate reputation.   At the current time there does not appear any single source that 
synthesises this information into an investor‐friendly, comprehensive analysis of key sustainability‐
related business drivers in the industries that make up Brazil’s stock market.  A detailed assessment is 
beyond the current scope of this report, but the principle issues are discussed further in Appendix A 
and are illustrated by examples of recent media coverage that are provided in Appendix B. 
 
One important recent development is the Brazilian Government’s National Plan on Climate Change, 
published in December 2008.  The measures in this action plan may have potentially significant 
implications (both positive and negative) across a number of key Brazilian industry sectors, including 
oil & gas, biofuels, mining, steel, power and pulp & paper.  Further information is provided in 
Appendix A. 
 
3.  CORPORATE SUSTAINABILITY INDEX 
History 
 
Brazil’s Corporate Sustainability Index (the ISE) was created in 2005 by the 
São Paulo stock exchange, Bovespa (now BM&F Bovespa), in response to 
the country’s growing interest in sustainable investment and sustainable 
finance.  The index was developed with technical input from CES‐FGV and 
with grant funding from IFC’s former Sustainable Financial Markets 
Facility.   
 
The index was launched in December 2005 at a major international 
conference on the theme of emerging market sustainable investment, 
organised by CES‐FGV and again sponsored by IFC.  At the time, it was 
only the second emerging market sustainability index in the world.  It is 
still the only index of its kind in Latin America, and has played an 
important role in stimulating the development of other emerging market 
sustainability indices in India, the Middle East, Africa and elsewhere. 
 
Objective 
 
The ISE measures the total return on a theoretical portfolio composed by stocks issued by companies 
highly committed to corporate sustainability and social responsibility.  The maximum number of 
companies that can be admitted to the ISE is 40.  Their stocks are selected from among BM&F 
Bovespa’s most actively traded securities in terms of liquidity, weighted according to the outstanding 
shares’ market value.  The index provides a valuable benchmark for investors and is also intended to 
promote good practices in the Brazilian corporate community.  The ISE index is re‐balanced annually 
in December. 
 
Management and governance 
 
The ISE is operated by BM&F BOVESPA, which is responsible for index calculation and technical 
management.  BM&F BOVESPA has contracted CES‐FGV to undertake the collection and analysis of 
the necessary corporate sustainability data.  The ISE is presided over by an independent Deliberative 
Board composed of representatives from the following organisations: 
 
 Brazilian Association of Pension Funds (ABRAPP) 
 National Association of Investment Banks (ANBID) 
 Association of Capital Markets Analysts and Investment Professionals (APIMEC) 
 BM&F BOVESPA 
 Brazilian Institute of Corporate Governance (IBGC) 
 IFC  
 Ethos Institute of Social Responsibility 
 Brazilian Ministry of the Environment 
 United Nations Environment Programme (UNEPFI) 
 
The Ethos Institute has been temporarily suspended from the Board for leaking information to the 
media about the exclusion of Petrobras prior to the official announcement of the 2008/2009 
portfolio. 
   
 
 
Eligibility 
 
Stocks admitted to the ISE must: 
 
 be among the 150 best classified stocks in the negotiability index, measured in the twelve 
months preceding the beginning of the re‐evaluation process; 
 have a trading session presence of at least 50 per cent, measured in the twelve months 
preceding the beginning of the re‐evaluation process; and 
 meet the sustainability criteria approved by the ISE Board. 
 
Sustainability criteria and methodology 
 
The ISE’s sustainability criteria and methodology were developed by CES‐FGV and approved by the ISE 
Board.  Data for the ISE are collected by means of a detailed questionnaire (around 140 questions) 
sent by CES‐FGV each year to up to 150 of Brazil’s largest and most traded publicly quoted companies. 
 
CES‐FGV designed a set of criteria based on the “triple bottom line” concept i.e. the integrated 
analysis of environmental, social and economical aspects.  In addition, the methodology takes into 
account general issues (for example, a company’s commitment to the UN Global Compact), the 
nature of the company’s product or business activity (for example, risk to consumer health) and 
corporate governance criteria. 
 
The environmental, social and economic criteria are divided into four groups: 
 
 policies (commitment indicators); 
 management (program, target and monitoring indicators); 
 performance; and 
 legal compliance.  
 
Slightly different environmental criteria are applied to companies in the financial sector. Real sector 
companies are weighted differently on environmental criteria depending on whether they are 
classified as “high impact” or “medium impact”. 
 
CES‐FGV carries out cluster analysis of the dataset to identify groups of companies with similar 
performance and to select a group with better general performance.  Subject to the approval of the 
ISE Board, the companies included in the latter group are admitted to the ISE portfolio.  No more than 
40 companies may be included in the ISE.  
 
This process is carried out annually to re‐balance the portfolio.  However, the ISE Board has the power 
to exclude a company from the ISE portfolio at any time if “any event alters significantly a component 
company’s sustainability level”.  
 
The ISE’s methodology does not use an exclusion list of “sin sectors” such as defence, tobacco, 
alcohol, nuclear power or gambling. 
 
In ISE’s first year of operation, companies were not required to present documents to prove their 
sustainability policies.  In the second year, verification began to be carried out only after disclosure of 
the portfolio.  Only companies that provided proof of their practices were selected for the ISE in the 
latest re‐balancing. 
 
 
Portfolio composition 
 
The current ISE portfolio came into effect on December 1, 2008 and is valid until November 30, 2009 
(Table 1).  New admissions to the ISE include Celesc, Duratex, Odontoprev, TIM, Telemar and 
Unibanco.  Aracruz, CCR Rodovias, Copel, Iochpe‐Maxion, Petrobras and WEG were dropped from the 
index.  Figure 2 illustrates the new ISE portfolio weightings and provides a comparison with the 
current IBOVESPA universe of 59 stocks.  Figure 3 illustrates the changes to the new ISE portfolio, 
which – with the addition of Telemar and TIM – now includes telecom stocks for the first time. 
 
Figures 4 and 5 show the industry breakdown of the ISE for the 2007/2008 and 2008/2009 periods 
respectively.  The ISE is now heavily weighted towards banking stocks and in particular towards two 
banks (Bradesco and Itaú) which together make up more than 40 per cent of the notional ISE 
portfolio.  As noted on page 16, the two ‘titans’ of the Brazilian corporate sector are the oil & gas 
company Petrobras and mining firm Vale R Doce.  Vale R Doce has never been a component of the 
ISE.  The decision to exclude Petrobras from the ISE 2008/2009 portfolio means that the re‐balanced 
sustainability index now differs significantly from the IBOVESPA index.   
 
 
Table 1:  ISE portfolio 2008/2009 (source: BM&F Bovespa) 
Market cap US$ 
Company  Industry  IBovespa?  ISE weight (%) 
million 
AES TIETE  Electric utilities  2,236  0.703 
BRADESCO (N1)  Financial intermediaries   27,966  22.302 
BRASIL (NM)  Financial intermediaries   15,969  3.934 
BRASKEM (N1)  Petrochemicals   1,207  0.504 
CELESC (N2)  Electric utilities   663  0.415 
CEMIG (N1)  Electric utilities   6,123  4.883 
CESP (N1)  Electric utilities   1,908  1.339 
COELCE  Electric utilities  708  0.293 
CPFL ENERGIA (NM)  Electric utilities   6,191  2.047 
DASA (NM)  Medical products  552  0.640 
DURATEX (N1)  Wood   773  0.470 
ELETROBRAS (N1)  Electric utilities   12,379  4.847 
ELETROPAULO (N2)  Electric utilities   1,704  1.204 
EMBRAER (NM)  Aerospace   2,791  3.215 
ENERGIAS BR (NM)  Electric utilities  1,536  0.635 
GERDAU (N1)  Steel   8,584  5.278 
GERDAU MET (N1)  Steel   3,430  3.017 
ITAUBANCO (N1)  Financial intermediaries   30,708  20.330 
LIGHT S/A (NM)  Electric utilities   1,908  0.321 
NATURA (NM)  Cosmetics   3,486  1.035 
ODONTOPREV (NM)  Medical products  263  0.248 
PERDIGAO S/A (NM)  Meat, poultry & others   2,634  1.987 
SABESP (NM)  Water utilities   2,706  1.614 
SADIA S/A (N1)  Meat, poultry & others   1,162  0.727 
SUZANO PAPEL (N1)  Pulp & paper  1,627  0.894 
TELEMAR  Telecommunications   5,763  5.403 
TIM PART S/A  Telecommunications   3,628  1.227 
TRACTABEL (NM)  Electric utilities  5,181  1.871 
UNIBANCO (N1)  Financial intermediaries   15,755  7.808 
V C P (N1)  Pulp & paper   1,545  0.810 
 
Figure 2:  Comparison of current ISE and IBovespa index constituents (Source: BM&F Bovespa) 
PETROBRAS
VALE R DOCE
BMF BOVESPA
ITAUSA
USIMINAS
SID NACIONAL
AMBEV
BRASIL TELEC
NET
BRADESPAR
REDECARD
LOJAS AMERIC
ALL AMER LAT
GOL
VIVO
COPEL
NOSSA CAIXA
P,ACUCAR-CBD
CYRELA REALT
CCR RODOVIAS
LOJAS RENNER
SOUZA CRUZ
TAM S/A
GAFISA
JBS
B2W VAREJO
ULTRAPAR
COSAN
TRAN PAULIST
KLABIN S/A
ROSSI RESID
ARACRUZ ISE
TELESP
COMGAS IBOV
ODONTOPREV
COELCE
LIGHT S/A
CELESC
DURATEX
BRASKEM
ENERGIAS BR
DASA
AES TIETE
SADIA S/A
VCP
SUZANO PAPEL
NATURA
ELETROPAULO
TIM PART S/A
CESP
SABESP
TRACTEBEL
PERDIGAO S/A
CPFL ENERGIA
EMBRAER
BRASIL
ELETROBRAS
CEMIG
TELEMAR
UNIBANCO
GERDAU
ITAUBANCO
BRADESCO
0 5 10 15 20 25 % of index
 
 
 
 
 
Figure 3:  Changes in ISE 2008/2009 portfolio compared to 2007/2008 (source: BM&F Bovespa data) 
 
PETROBRAS
ARACRUZ
WEG
CCR RODOVIAS
COPEL
VCP
AM INOX BR
EMBRAER
SADIA S/A
SUZANO PAPEL
IOCHP-MAXION
BRASKEM
SUZANO PETR
CELESC
LIGHT S/A
DASA
AES TIETE
ENERGIAS BR
ODONTOPREV
COELCE
SABESP
ELETROPAULO
GERDAU MET
DURATEX
NATURA
TRACTEBEL
CEMIG
CPFL ENERGIA
BRASIL
GERDAU
PERDIGAO S/A
CESP
TIM PART S/A
ELETROBRAS
BRADESCO
ITAUBANCO
TELEMAR
UNIBANCO
-30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00

 
 
 
 
Figure 4:  ISE 2007/2008 industry breakdown (source: BM&F Bovespa) 
Consumer non-cyclical
3.1%
Electric utilities Water utilities

12.4% Steel 1.3%
7.7%
Oil and gas
25.0% Machines and
Wood and paper equipment
Other 4.4% 1.2%
15.8%
Petrochemicals
0.8%
Financials
39.1% Transportation
5.0%
 
 
Figure 5:  ISE 2008/2009 industry breakdown (source: BM&F Bovespa) 
Telecomms
Steel 6.6% Wood and paper
Electric utilities 8.3% 2.2%
18.6%
Water utilities
Transportation 1.6%
Other 3.2%
12.1%
Petrochemicals
0.5%
Financials
54.4%
Consumer non-cyclical
4.6%
 
 
Performance 
 
Over the three years since its launch, the performance of the ISE has closely matched that of Brazil’s 
main benchmark index, the IBOVESPA (Figure 6).   
 
Both indices made very strong gains in 2007 (partly as a result of several large IPOs) but have fallen 
sharply (by around 40 per cent) over the last six months of 2008 due to the wider effects of global 
economic turmoil.  
 
As a result, cumulative performance over the three years since the ISE’s launch is relatively low at 
around 11 per cent for the period December 2005 – December 2008.    
 
 
Figure 6:  Performance of ISE index compared to IBOVESPA, Dec 2005 – Dec 2008 (source: 
Bloomberg) 
140%
120%
100%
80%
60%
40%
20%
0%
Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08
IBOVESPA ISE
 
 
 
Use by investors 
 
The ISE has been well received by Brazilian investors interested in sustainability issues and has led 
directly to a substantial increase in the number and size of SRI mutual funds available in Brazil (see 
Chapter 5).  The managers of these funds currently use the ISE free of charge.  The ISE is currently the 
main tool used by PREVI and other pension funds that are seeking to implement the PRI across their 
listed equity portfolios.  PREVI has indicated that it is keen to see the development of a more 
sophisticated tool than the ISE, which can only be used for screening purposes and does not enable 
comparison or ranking of companies and industry sectors.  The ISE does not appear to be well used or 
well known by foreign portfolio investors. 
Research into an ISE ‘premium’ 
 
Even though the ISE is a relatively young index, there is already a small but growing body of academic 
research into the possibility that stocks admitted to the ISE trade at a premium as a result of their 
superior sustainability (i.e. environmental, social and governance) performance.  
 
Professor José Luiz Rossi Júnior has used the ISE to assess whether corporate social responsibility has 
1
an impact on the value of Brazilian firms .   Prof Rossi analyzed data from 2005 to 2007 on a sample of 
non‐financial Brazilian companies to assess whether corporate social responsibility (measured using 
ISE inclusion as a proxy) has an impact on firm value.  He showed found that companies included in 
the ISE have a higher market value compared to other publicly traded companies, implying (but not 
proving) that sustainability is the causal factor for this premium. 
 
Bogéa et al conducted an event study to detect unusual changes in the share price of ISE stocks 
2
following the annual announcement of index constituents in 2005, 2007 and 2007 .  They found no 
statistically significant evidence of positive abnormal returns following the announcement of 
companies being included in the ISE.  On the other hand, there was also no evidence of negative 
abnormal returns.  The lack of significant results from this research on the ISE have also been found in 
previous work on international indices such as FTSE4Good, and does not necessarily mean an absence 
of a relationship between good sustainability practices and the creation of shareholder value. 
 
For context, it is relevant to note a number of studies on equivalent questions related to the more 
mainstream and longer‐established subject of corporate governance in Brazil.  A 2003 study 
commissioned by BOVESPA found that companies that moved into higher corporate governance 
levels experienced a positive impact on their stock valuation and increased trading volume and 
3
liquidity .  A 2005 study by Bruno Erbisti (one of Brazil’s leading ESG investment professionals) 
showed that Brazil‐based firms with the best corporate governance ratings garnered 2004 P/E ratios 
4
that were 20 per cent higher than firms with the worst governance ratings . The better‐rated firms 
were also found to have ROEs that were 45 per cent higher and net margins that were 76 per cent 
higher than those with below‐average governance practices.   
 
Santana et al have also commented on the impact of governance rules on stock prices in Brazil in a 
5
2008 paper for the IFC’s Global Corporate Governance Forum .  They noted that Bovespa’s index of 
shares with differentiated corporate governance (the IGC) rose 237 per cent between June 2001 and 
June 2006, while the IBovespa index gained 168 per cent during the same period.  Novo Mercado and 
Level 2 companies also obtained higher multiples in their IPOs than the market average. 
                                                                    
1
 Rossi Júnior, José Luiz  What is the value of corporate social responsibility?  An answer from the Brazilian Sustainability Index 
IBMEC Working Paper WPE‐95‐2008 (2008) 
2
 Bogea, Felipe, Campos, Anderson LS and Camino Blasco, David  Did the creation of the ISE create value to companies?  
(September 2008) 
3
 Gledson de Carvalho, Antonio Effects of migration to special corporate governance levels of Bovespa (2003)   
4
 Erbisti, Bruno Corporate governance in Brazil: is there a link between corporate governance and financial performance in the 
Brazilian Market? ABN AMRO Asset Management (July 2005) 
5
 Santana, Maria Helena, Ararat, Melsa, Aleandru, Petra, Yurtoglu, B. Burcin Novo Mercado and its followers: case studies in 
corporate governance reform Global Corporate Governance Forum (February 2008) 
 
Corporate buy‐in 
 
Reaction to and use of the ISE 
 
The ISE appears to have been accepted and welcomed by Brazil’s publicly quoted companies.  The 
majority of companies admitted to the ISE make extensive use of the fact (and the ISE logo) in their 
websites, annual reports, sustainability reports, press releases and other external communications.  
The ISE has a relatively high profile on the internet.  Numerous references to the ISE and companies’ 
inclusion in the index can also be found at Bloomberg and PR Newswire, as well as in the Brazilian 
media. 
 
Many ISE companies use the ISE’s “brand value” in a proactive way in their regulatory reporting as 
well as in their PR and investor relations.  Figure 7 provides an example of one of several Petrobras 
filings with the US Securities & Exchange Commission that refer to the ISE; similar references to 
Brazil’s sustainability index can be found in the SEC filings of numerous other ISE companies. 
Non‐inclusion of Petrobras 
 
The fact that Petrobras has been dropped from the ISE’s 2008/2009 portfolio is a very significant 
development and arguably marks an important milestone in the short life of the Index to date.  
Petrobras’ exclusion from the ISE is linked to controversial issues concerning serious air pollution from 
Brazil’s diesel fleet and delays in the introduction of low‐sulphur diesel fuel necessary for low 
emission vehicles.  The news attracted considerable attention in the Brazilian media (but little 
international coverage).  Petrobras was unhappy about the circumstances surrounding its exclusion 
from the ISE and issued an angry rebuttal alleging that the existence of a defamatory campaign 
against the company led by the Ethos Institute, a member of the ISE Board (Petrobras also resigned its 
membership of the Ethos Institute).  It is too early to tell what the longer‐term fall‐out of this may be 
in terms of future support for the Index by other Brazilian companies and relevant stakeholders. 
Questionnaire response rate 
 
The response rate to the annual questionnaire sent out by FGV‐CES has been falling every year since 
the ISE’s launch (Table 2).  This contrasts sharply with the steady growth in corporate sustainability 
reporting by Brazilian companies, suggesting the type of “questionnaire fatigue” experienced by the 
SRI market in the US and Europe at a similar stage of maturity.   
 
It should also be noted that the Integration Working Group of the PRI Brazil Network is examining the 
ESG indicators that are most relevant and material for investors in Brazil (page 48).  This will include a 
comparison of the most commonly used indicators in Brazil with those provided in the GRI guidelines.  
Based on this selection, PRI pension funds in Brazil may then develop a joint questionnaire that they 
will send to Brazilian companies.  The relationship between this initiative and the ISE is currently 
unclear. 
 
Table 2:  Declining company response rate to ISE questionnaire 
  2005  2006  2007  2008 
No. of companies invited to complete questionnaire  121  120  137  137 
Response rate to questionnaire  52%  50%  42%  37% 
Source:  CES‐FGV, BM&F Bovespa         
 
 
Figure 7:  Example of a company’s use of the ISE in investor relations and regulatory reporting 
(source: SEC) 
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of November, 2007
Commission File Number 1-15106
PETRÓLEO BRASILEIRO S.A. - PETROBRAS

(Exact name of registrant as specified in its charter)
Brazilian Petroleum Corporation - PETROBRAS

(Translation of Registrant's name into English)
Avenida República do Chile, 65

20031-912 - Rio de Janeiro, RJ
Federative Republic of Brazil
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F _______
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No___X____
 
Petrobras’ participation in BOVESPA’S
Corporate Sustainability Index is renewed
(Rio de Janeiro, November 27, 2007). – PETRÓLEO BRASILEIRO S/A - PETROBRAS, [Bovespa:
PETR3/PETR4, NYSE: PBR/PBRA, Latibex: XPBR/XPBRA, BCBA: APBR/APBRA], a Brazilian
international energy company, announces that, for the second consecutive year, it has been included in the
list of companies whose shares compose Bovespa’s Corporate Sustainability Index (ISE) for their high
degree of commitment to sustainability and social responsibility. Petrobras’ common and preferred shares
will have the weights of 11.12% and 13.88%, respectively, totaling 25%, the ISE’s biggest individual
weight.
The ISE’s new portfolio will go into effect on December 01 2007 and remain valid through November 30
2008. It brings together 40 corporate stocks (common and preferred) issued by 32 companies performing in
13 sectors. These companies were selected for their policies, management practices, performance, and legal
obligation fulfillment with regard to economic efficiency, environmental balance, social justice, product
nature, and corporate governance. Jointly, the 32 companies’ market value is R$927 billion, or 39.6% of
BOVESPA’S total capitalization, currently worth R$2.3 trillion.
BOVESPA, ABRAPP, ANBID, APIMEC, IBGC, IFC, the ETHOS institute, and the Ministry of the
Environment, who comprise the index’ Deliberation Board, created the ISE as a benchmark for socially
responsible investments in Brazil. The Board later added PNUMA to its composition. FGV-EAESP
elaborated the methodology used to assess the companies. The 141-question questionnaire was sent to the
137 outfits that issue the 150 most liquid shares traded at the BOVESPA and, ultimately, answered by 62
companies.
The ISE is a pioneering initiative in Latin America, designed to create an investment environment that is
compatible with sustainable development demands imposed by the contemporaneous society and to
encourage ethical corporate responsibility. After undergoing a revision process which involved the
participation of several stakeholders, the ISE is now in its third edition.
The renewal of Petrobras’ participation in the ISE is a major victory for the company and is the outcome of
its efforts to realize its strategic objectives of growing with profitability and social and environmental
responsibility.
 
Commercial business model 
 
All BM&F Bovespa indices, including the ISE, are made available to investors free of charge.   
 
Companies wishing to be included in the ISE pay an evaluation fee of US$2,000; companies admitted 
to the ISE can also purchase a license to use the ISE brand for a fee of US$7,000 per annum.  These 
income streams are the only source of revenue to cover the ISE’s maintenance costs, which are 
largely incurred by CES‐FGV.   
 
Future directions  
 
The ISE Board is currently considering the possibility of changing the ISE methodology to introduce a 
two‐tier system.  The aim behind this concept is to encourage ‘out‐lying’ companies to improve their 
ESG performance (in a similar way to the exchange’s differentiated corporate governance levels) and 
to enhance the value of the index to investors.   
 
BM&F BOVESPA and CES‐FGV are also interested in the concept of creating a regional Latin American 
version of the ISE that might include Chile, Argentina and Mexico (and potentially also Peru and 
Colombia).  
 
 
4.  ASSET MANAGERS 
 
Market overview 
 
Brazil has around 8,300 investment funds with over 11 million shareholders and total net assets of 
around US$700 billion as of Q2 2008, according to data from the Brazilian Securities and Exchange 
Commission (CVM).  The market has grown significantly over the last decade (Figure 8).   
 
At the end of 2007, Brazilian investment funds had around 48 per cent of their total assets in equities.  
Due to sharp falls in the stock market in 2008, re‐allocation and net outflows, as of October 2008 this 
figure had fallen to around 15 per cent, with the balance represented by investments in fixed income 
securities. 
 
Table 3 lists the top 40 Brazilian asset managers in terms of global assets under management as of 
October 2008.  Their client base is diversified across a wide range of investor types (Figure 9).  
Pension fund assets make up around 22 per cent of global assets but it should be noted that this 
figure may be heavily distorted by ‘captive mandates’ i.e. the pension schemes of the parent financial 
institutions.   
 
Between them, these 40 asset managers have equity holdings of around R$178 billion (US$77 billion); 
about 97 per cent of this equity corpus is managed by 20 firms, most notably Banco do Brasil (Figure 
10).    
 
 
Figure 8:  Brazilian investment funds AUM (US$ million) (source: CVM) 
800 743
704
700 633
600
AUM US$ million
500 434
400 326
300 247
176
200 149 148
118 97
100
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 Jul Aug
2008 2008
 
 
 
 
 
 
 
 
 
 
 
 
Figure 9:  Assets under management according to type of investor, Oct 2008 (source: ANBID) 
Pension funds - public

sector companies 10%
Corporate 11% High income retail 9%
Insurers 3%
Middle market 2%
Pension plans 11% Others 2%

Other; 21% Foreigners 5%
Investment funds 1%
Capitalization 1%
Pension funds - private
companies 12% Public authorities 7%
Retail 13%
Private 13%
 
Figure 10:  Top 20 asset managers according to assets under management invested in equities, Oct 
2008 (source: ANBID) 
BANCO DO BRASIL $21,131

BNY MELLON $9,025
ITAU $7,188
BRADESCO $6,072
UBS PACTUAL $5,226
CAIXA $3,155
CREDIT SUISSE $2,925
HSBC $2,677
OPPORTUNITY $2,547
SANTANDER BRASIL $2,448
UNIBANCO $2,367
BNP PARIBAS $1,929
GERACAO FUTURO CORRETORA $1,600
BEM $1,418
BANCO REAL $1,299
CITIBANK $850
ALFA $775
VOTORANTIM ASSET $771
BANCO SAFRA $702
LEGG MASON $671
$0 $5,000 $10,000 $15,000 $20,000 $25,000
US$ million
 
 
 
 
 
 
Table 3:  Ranking of Brazilian asset managers by global assets under management 
SRI 
    R$ million  US$ million  PRI  CDP 2008 
products 
1  BANCO DO BRASIL  237,441.90  102,566.70   
2  ITAU  156,054.50  67,410.15   
3  BRADESCO  146,539.50  63,300.00   
4  CAIXA  69,270.20  29,922.33   
5  SANTANDER BRASIL  60,658.90  26,202.55 
6  UBS PACTUAL  59,436.80  25,674.64 
7  UNIBANCO  58,792.00  25,396.11    
8  HSBC  56,822.70  24,545.44    
9  BNY MELLON  51,643.90  22,308.38 
10  BEM  34,445.20  14,879.14 
11  BANCO REAL  32,991.90  14,251.36    
12  NOSSA CAIXA  27,920.90  12,060.86 
13  BANCO SAFRA  21,174.00  9,146.44  
14  INTRAG  20,195.80  8,723.89 
15  CITIBANK  19,708.30  8,513.30 
16  LEGG MASON  18,208.10  7,865.27  
17  BNP PARIBAS  18,134.20  7,833.35  
18  VOTORANTIM ASSET  18,011.80  7,780.48  
19  CREDIT SUISSE HEDGING GRIFFO  17,337.40  7,489.16 
20  SUL AMERICAN INVESTIMENTOS  11,408.10  4,927.90 
21  OPPORTUNITY  9,108.30  3,934.47 
22  CONCORDIA  4,059.50  1,753.56 
23  ALFA  3,800.70  1,641.77 
24  GERACAO FUTURO CORRETORA  3,705.40  1,600.60 
25  CREDIT AGRICOLE BRASIL  3,332.50  1,439.52 
26  BANCO FATOR  3,153.20  1,362.07 
27  BBM  1,868.90  807.30 
28  DYNAMO ADMINISTRACAO DE RECURSOS  1,043.60  450.80 
29  BANESTES  979.20  422.98 
30  FIBRA  976.70  421.90 
31  BRB  816.20  352.57 
32  MERCANTIL DO BRASIL  441.60  190.76 
33  BANCO DE TOKYO MITSUBISHI UFJ BRASIL  361.80  156.29 
34  PAM ‐ PARANA BANCO ASSET  246.60  106.52 
35  MAGLIANO  115.40  49.85 
36  PROSPER  94.90  40.99 
37  COINVALORES  92.40  39.91 
38  TITULO  89.60  38.70 
39  BANPARA  65.40  28.25 
40  PILLA  14.30  6.18 
  TOTAL   1,170,562.30  505,642.46       
Source: ANBID (data as of October 2008) 
 
 
 
 
 
 
 
 
Status of sustainable investment 
 
The National Association of Investment Banks (ANBID) is actively engaged on sustainable investment 
issues on behalf of its members.  It serves on the ISE Deliberative Board and has also worked with the 
Carbon Disclosure Project (CDP) and the UN PRI. 
 
As shown in Table 3, four of the top 40 asset management firms are signatories to the PRI:  Banco 
Real, BNP Paribas, HSBC and Unibanco.  Between them, they manage US$73 billion or around 14.5 
per cent of total assets under management by all 40 firms.  In terms of equity holdings, the four PRI 
signatories manage US$8.2 billion, which is just under 11 per cent of the total equity corpus of US$77 
billion.  With the exception of BNP Paribas, each of these firms currently offers retail SRI funds 
(Chapter 5).  However, there is limited information on the extent to which these four PRI signatories 
are integrating ESG into their mainstream (non‐SRI branded) products and strategies. 
 
SRI mutual fund products are also offered by Banco do Brasil, Bradesco, Caixa, Itaú, Legg Mason 
Western Asset Management, Safra and Votorantim (Chapter 5).  None of these asset managers have 
signed the UNPRI at the current time.   
 
Seven of the top 40 firms were signatories to CDP Brazil 2008.  They represent combined assets of 
US$326 billion or nearly 65 per cent of total assets under management by all of the firms listed in 
Table 3.  In terms of equity holdings, the CDP signatories manage US$44 billion or 57 per cent of the 
total equity corpus.    
 
None of the asset management firms employs full‐time ESG analysts.  Banco Real, HSBC, Itaú, 
Unibanco and Votorantim each have one full‐time analyst working on ESG issues part‐time. 
 
 
 
5.  RETAIL FUNDS 
 
Retail and ‘high income’ retail customers constitute around 13 per cent and 9 per cent respectively of 
global assets managed by the 40 firms listed in Table 3.  The combined value of these assets is around 
US$109.7 billion; Banco do Brasil and Caixa lead the rankings for retail assets under management 
whilst the two leading managers of high income retail assets are Itaú and Banco Real (Bradesco has 
the third place in both categories) (Table 4). 
 
 
Table 4:  Retail and high income retail investors' assets under management 
RETAIL INVESTORS  HIGH INCOME RETAIL INVESTORS 
Top 10 managers   R$ million   US$ million  Top 10 managers   R$ million   US$ million 
1  BANCO DO BRASIL   45,928    19,840   1  ITAU   26,888    11,614  
2  CAIXA   38,489    16,626   2  BANCO REAL   12,431    5,370  
3  BRADESCO   24,661    10,653   3  BRADESCO   9,737    4,206  
4  ITAU   11,335    4,896   4  SANTANDER BRASIL   8,749    3,779  
5  SANTANDER BRASIL   10,522    4,545   5  BANCO DO BRASIL   7,735    3,341  
6  LEGG MASON   8,249    3,564   6  HSBC   7,658    3,308  
7  HSBC   5,473    2,364   7  UNIBANCO   5,833    2,520  
8  UNIBANCO   5,129    2,216   8  CAIXA   4,284    1,851  
9  BANCO REAL   2,517    1,087   9  BANCO SAFRA   3,440    1,486  
10  NOSSA CAIXA   2,437    1,053   10  BEM   2,276    983  
Total (40 managers)  154,781.5  66,860  Total (40 managers)  99,229  42,863 
 
 
Not counting feeder funds, there are currently 10 retail SRI mutual fund products available to retail 
investors in Brazil, with total combined assets of approximately R$730 million (US$315 million) (Table 
5).  Retail SRI mutual funds therefore represent less than 0.3 per cent of the total retail/high income 
retail investment market of US$109.7 billion.   
 
For comparison, in the UK there are around 80 SRI products for retail investors, accounting for nearly 
4 per cent (£30 billion, or US$44 billion) of the UK’s £770 billion (US$1.12 trillion) retail investment 
funds market.  In the United States, there are approximately 180 retail SRI mutual funds, which 
together represent about 1.8 per cent of the US$9.3 trillion mutual funds market.   
 
The growth of retail SRI mutual fund assets over time is illustrated in Figure 11.  The first Brazilian 
retail SRI fund was Banco Real’s Ethical Fund, launched in 2001.  It was some three years before a 
second manager, Itaú, entered this niche market.  Further SRI products did not arrive in the market 
until the launch of the ISE in December 2005, which raised the awareness of retail investors and 
prompted several other asset managers to enter the market.   
 
At the peak of the market (December 2007), the combined net asset value of the SRI products 
available at that time was around R$1.6 billion, equivalent to US$691 million at the current exchange 
rate.  The dramatic contraction over the last 12 months appears to be the result of the falling stock 
market rather than redemptions. 
 
 
Despite several new entrants to the market since the launch of the ISE, market share in the SRI niche 
continues to be dominated by the early pioneers, Banco Real and Itaú, who each control about 40 per 
cent of total SRI net assets (Figure 12).    
 
  
 
Table 5:  Brazil's SRI mutual funds 
Launch  NAV  Cumulative Performance 

Fund name (CNJP No.) 
date  R$ m  US$ m  5 yr  3 yr  1 yr 
             
BANCO REAL             
REAL FUNDO DE INVESTIMENTO EM AÇÕES ETHICAL 
Nov 01   276.46  119.15  100.47%  12.66%  ‐37.60% 
II  (04.736.006/0001‐82) 
ITAU             
ITAÚ EXCELÊNCIA SOCIAL AÇÕES ‐ FUNDO DE 
Feb 04   235.00  101.29  ‐  11.56%  ‐43.76% 
INVESTIMENTO (06.069.957/0001‐70) 
BANCO DO BRASIL             
BB TOP AÇÕES ÍNDICE DE SUSTENTABILIDADE 
EMPRESARIAL FUNDO DE INVESTIMENTO EM AÇÕES  Dec 05  23.49  10.13  ‐  14.97%  ‐39.61% 
(05.775.731/0001‐22) 
BRADESCO             
BRADESCO FUNDO DE INVESTIMENTO EM AÇÕES ‐ 
ÍNDICE DE SUSTENTABILIDADE EMPRESARIAL  Dec 05  37.56  16.19  ‐  22.47%  ‐37.22% 
(07.192.379/0001‐28) 
HSBC             
HSBC FUNDO DE INVESTIMENTO AÇÕES 
SUSTENTABILIDADE EMPRESARIAL – ISE  Jan 06  64.39  27.75  ‐  12.66%  ‐44.38% 
(07.535.827/0001‐49) 
SAFRA             
SAFRA ISE ‐ FUNDO DE INVESTIMENTO EM AÇÕES 
Jan 06  5.04  2.17  ‐  ‐  ‐41.98% 
(07.470.273/0001‐49) 
UNIBANCO             
UNIBANCO SUSTENTABILIDADE FUNDO DE 
Mar 07  3.45  1.49  ‐  ‐  ‐35.16% 
INVESTIMENTO EM AÇÕES (08.151.339/0001‐09) 
LEGG MASON WESTERN ASSET             
LEGG MASON AÇÕES SUSTENTABILIDADE  (1) (1) (1)
 (1)  Jun 07    76.63    33.03    ‐  ‐  ‐43.68% 
EMPRESARIAL FI (29.413.945/0001‐17) 
CAIXA             
FUNDO DE INVESTIMENTO EM AÇÕES CAIXA 
SUSTENTABILIDADE EMPRESARIAL – ISE  Nov 07   5.44  2.35  ‐  ‐  ‐41.70% 
(08.070.838/0001‐63) 
VOTORANTIM             
FUNDO DE INVESTIMENTO VOTORANTIM 
SUSTENTABILIDADE EM AÇÕES  Sep 08   2.29  0.99  ‐  ‐  ‐ 
(09.343.566/0001‐90) 
TOTAL    729.76  314.53       
 
Source: CVM Investors Portal (www.portaldoinvestidor.gov.br).  All data as of December 30, 2008. 
(1) 
The Legg Mason Western Asset Management fund was launched in 1986 and did not have any explicit sustainability strategy 
until it was re‐launched in June 2007 as a ‘sustainability’ fund tracking the ISE index.   
 
 
 
 
Figure 11:  Retail SRI fund assets under management in Brazil (source: CVM) 
1,800
1,600
1,400
1,200
1,000
R$ million
800
600
LAUNCH OF ISE INDEX
400
200
0
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Mar-04
 
 
 
Figure 12:  Market share in the SRI niche by NAV (source: CVM) 
100%
90%
80%
70%
VOTORANTIM
CAIXA
60%
LEGG MASON
UNIBANCO
50% SAFRA
HSBC
40% BRADESCO
BANCO DO BRASIL
ITAÚ
30%
BANCO REAL
20%
10%
0%
2002 2003 2004 2005 2006 2007 2008
 
 
Figure 13:  Cumulative Performance ‐ 3 Years (source: CVM) 
BRADESCO
BANCO DO BRASIL
SAFRA
HSBC
BANCO REAL
ITAÚ
ISE
0% 5% 10% 15% 20% 25%

 
 
 
 
Figure 14:  Cumulative Performance ‐ 1 Year (source: CVM) 
UNIBANCO
BRADESCO
BANCO REAL
BANCO DO BRASIL
ISE
CAIXA
SAFRA
LEGG MASON
ITAÚ
HSBC
-50% -45% -40% -35% -30% -25% -20% -15% -10% -5% 0%
 
 
 
 
The six products with three‐year track records all show out‐performance compared to the ISE over 
the same period (Figure 13).  The best performing SRI fund over three years is managed by Bradesco, 
which beat the second‐best performing fund by 750 basis points and delivered a return almost double 
that of the lowest performing fund, managed by Itaú.   
 
All ten funds have recorded significant negative performance over the last 12 months, reflecting the 
falling IBovespa index and market conditions in Brazil as a whole and globally (Figure 14).  Unibanco’s 
SRI fund shows the ‘least worst’ performance over this period, dropping 35 per cent in value 
compared to a fall of 40 per cent in the ISE and beating the bottom performer, HSBC, by 940 basis 
points. 
 
 
 
 
Banco Real’s Ethical Fund is based on its own ESG research and sustainability methodology, including 
an independent ethical advisor on the investment committee.  The fund has always differed 
significantly from the IBovespa and ISE due to the absence (for sustainability/ethical reasons) of 
Petrobras from its portfolio.   
 
All of the other SRI funds on the market use the ISE index to guide their portfolio construction.  Most 
of these funds are passively managed with respect to ESG issues: only HSBC has an active strategy 
with in‐house ESG research.  Shareholder engagement on ESG issues has not been a common feature 
of Brazil’s SRI mutual funds to date.  However, several of the fund managers joined forces in 
September 2008 to launch a shareholder engagement campaign on labour standards (specifically, 
modern‐day slavery in sectors such as charcoal production) under the auspices of the Latin American 
Sustainable Finance Forum (LASFF). 
 
In terms of their ESG strategies and sustainability ‘selling points’, the ten funds are relatively 
homogeneous, especially now that the absence of Petrobras from the ISE’s 2008/2009 portfolio 
eliminates one of the main historical differentiators between Banco Real’s Ethical Fund and the other 
nine products.   
 
The ten funds represent the first generation of SRI mutual fund products in Brazil.  To date, there are 
no ‘second generation’ products.  There has been little or no product innovation (either around alpha‐
seeking ESG strategies or high environmental/social development impact strategies) since Banco Real, 
Itaú and the ISE index provided the ‘blueprint’ for others to follow.  Similarly, retail appetite for the 
existing SRI products appears to have begun to level out in the middle of 2007, although this 
obviously coincides with the decline in retail appetite for variable income products in general 
following the onset of the current global economic downturn.   
 
Figure 15 provides an additional insight into the Brazilian SRI mutual fund market and the importance 
of this niche to the asset managers competing for business in Brazil.  As noted earlier in this chapter, 
investment in equities represents only 15 per cent or so of total assets under management at the 
current time.  Figure 10 presented information on the 20 asset managers who dominate this segment 
in terms of having the largest equity portfolios.   For each of these asset managers, Figure 15 shows 
assets invested in equities through SRI strategies as a proportion of assets invested in equities 
through all strategies.   
 
Although 10 of the top 20 equity managers offer SRI products, these products are a very small (and, 
arguably, commercially insignificant) part of the overall equity management business at most of these 
firms.  Even at Itaú, which has a 40 per cent share of the SRI mutual fund market, SRI accounts for less 
than 2 per cent of total assets in equities. 
 
The exception is Banco Real, which pioneered Brazil’s sustainable investment movement in 2001 and 
today also has a 40 per cent market share.  The analysis shown in Figure 15 implies that SRI has a 
much greater commercial and strategic significance for Banco Real and is perhaps a more integral part 
Banco Real’s asset management business.  
 
 
Figure 15:  SRI funds as % of AUM in equities (source: ANBID, CVM) 
BANCO DO BRASIL 0.05%

BNY MELLON
ITAU 1.41%
BRADESCO 0.27%
UBS PACTUAL
CAIXA 0.07%
CREDIT SUISSE
HSBC 1.04%
OPPORTUNITY
SANTANDER BRASIL
UNIBANCO 0.06%
BNP PARIBAS
GERACAO FUTURO CORRETORA
BEM
BANCO REAL 9.19%
CITIBANK
ALFA
VOTORANTIM ASSET 0.13%
BANCO SAFRA 0.31%
LEGG MASON 4.93%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
 
 
 
6.  PENSION FUNDS 
 
Pension fund assets have grown significantly in recent years (Figure 16) and currently represent about 
18 per cent of GDP.  As of September 2008, total pension fund assets amounted to R$428 billion 
(US$185 billion) with around 32 per cent (R$137 billion, US$59 billion) invested in equities and equity 
investment funds.  Table 6 lists the 25 largest pension funds, which together represent over 75 per 
cent of the total pension corpus.  The three largest funds are:  
 
 PREVI, the US$55 billion pension fund of Banco do Brasil; 
 Petrobras’ US$17 billion pension fund, PETROS; and 
 FUNCEF, the Caixa Economica Federal pension fund, with assets of US$14 billion.   
 
Many pension funds – including PREVI, PETROS and FUNCEF – manage their equity portfolios in‐house 
rather than through external managers. 
 
PREVI, the country’s largest pension fund, is widely acknowledged in the region as a setter of best 
practice standards across a range of fiduciary, pensions administration, investment management and 
corporate governance issues.  It exercises considerable leadership influence over other Brazilian 
pension funds and in Brazil’s economy as a whole. 
 
 
Figure 16: Brazilian pension fund assets, 2001‐2008 (source: ABRAPP) 
500
400
R$ million
300
200
100
-
2001 2002 2003 2004 2005 2006 2007 2008
 
 
18 pension funds – including 9 of the top 25 ‐ are signatories to the PRI.  Together they represent 
combined assets of US$110 billion as of September 2008, about 60 per cent of total pension fund 
assets.  As noted above, on average, Brazil’s pension funds allocate about 32 per cent of assets to 
listed equities.  The total value of PRI pension fund investment on the Brazilian stock market can 
therefore be estimated at around US$35 billion.  Further information on the PRI Brazil Network is 
provided on pages 47‐48. 
 
PREVI was a founding signatory to the UNPRI and the President of PREVI, Mr Sergio Rosa, is one of 11 
elected representatives on the international PRI Board.  PREVI is at the centre of ongoing PRI 
implementation efforts in Brazil’s pension fund community.  Figure 17 provides an overview of 
PREVI’s implementation of the UNPRI.   
 
Table 6:  The 25 largest pension funds in Brazil 
Rank  Pension fund  R$ million  US$ million    PRI   CDP 2008 

1  PREVI    128,388    55,459    
2  PETROS    40,199    17,365    
3  FUNCEF    32,574    14,071    
4  FUNDACAO CESP    15,307    6,612  
5  VALIA    9,975    4,309    
6  ITAUBANCO    9,530    4,116  
7  SISTEL    9,325    4,028   
8  BANESPREV    8,817    3,809    
9  CENTRUS    8,154    3,522   
10  FORLUZ    7,034    3,038   
11  REAL GRANDEZA    6,008    2,595   
12  FAPES    4,995    2,158   
13  FUNDACAO COPEL    4,473    1,932  
14  POSTALIS    4,219    1,822  
15  HSBC FUNDO DE PENSAO    3,839    1,658  
16  TELOS    3,698    1,598  
17  VISAO PREV    3,676    1,588   
18  FUNDACAO ATLANTICO    3,374    1,458   
19  ELETROCEEE    3,337    1,442  
20  CX EMPR USIMINAS    3,260    1,408  
21  IBM    3,166    1,368  
22  ECONOMUS    3,050    1,318    
23  FACHESF    2,860    1,235  
24  CBS    2,747    1,186   
25  FUNBEP    2,669    1,153  
Total (top 25 pension funds)  324,674  140,248 
Total (278 pension funds)  427,485  184,659 
Source: ABRAPP, September 2008 
 
 
 
The ISE index is currently used by PREVI as a proxy indicator for companies’ environmental and social 
performance, although it should be noted that the permitted investment universe extends across the 
entire market.  PREVI has indicated that it is keen to see the development of a more sophisticated 
tool than the ISE, which can only be used for screening purposes and does not enable comparison or 
ranking of companies and industry sectors.   
 
PREVI has recently been involved in a PRI‐wide engagement campaign focusing on modern‐day 
slavery in the Brazilian charcoal production sector which supplies pig iron to the iron and steel 
industry in Brazil and abroad.  PREVI is also involved in engagement at other levels, including dialogue 
with boards and promoting GRI to Brazilian companies under the framework of the international 
Emerging Markets Disclosure Project (EMDP). 
   
PREVI and other leading pension funds are increasing their portfolio allocations to private equity and 
are participating in several new funds in the infrastructure, ‘greentech’ and climate change arenas:  
unlike listed equities, these private equity mandates are managed by external firms and PREVI is 
actively engaging with such general partners on the incorporation of ESG factors into the investment 
cycle.   
 
29 pension funds – including 11 of the top 25 – were signatories to CDP Brazil in 2008.  Their 
combined assets are about 60 per cent of the total pension fund corpus. 
 
 
It is important to note that PREVI and most other pension funds use in‐house managers for their 
investment in listed equities.  There is therefore little or no know‐how transfer between the pension 
funds and asset managers such as Banco Real that have pioneered SRI in Brazil and developed in‐
house research capacity.  PREVI itself does not appear to have any in‐house ESG analysts and does not 
out‐source ESG research.   
 
Although the commitment of PREVI and other leading PRI signatories in Brazil is strong, 
implementation by those pioneers is still at a relatively early stage.  Other pension funds that have 
followed PREVI’s example in a more passive way are likely to still be at the internal awareness raising 
stage.   
 
ABRAPP, the Brazilian Association of Pension Funds, is actively engaged on sustainable investment 
issues on behalf of its members.  As well as serving on the ISE Deliberative Board, it acts as one of the 
main Brazilian partners for the Carbon Disclosure Project (CDP) and works closely with the UNPRI. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 17:  Responsible investment in focus: PREVI 
Following its signing the UNPRI in 2006, PREVI is in the    Engagement 
process of developing a socio‐environmental   
responsibility policy that, alongside its corporate  PREVI will frequently assign a representative to attend the 
governance policy, will apply to all investment  board meetings of companies in which it has significant 
activities.  The main elements of PREVI’s responsible  holdings. This practice is driven by issues relating to 
investment strategy are as follows:   performance, business strategy, returns and dividends, 
  long‐term value, corporate governance and, most recently, 
  Voting  the management of ESG issues.  PREVI will meet with 
  board representatives to raise any concerns it might have 
PREVI votes shareholder resolutions in accordance  with a company and discuss possible risks and areas for 
with its corporate governance code. It views the code  improvement. The representative’s role is to transmit 
as a crucial instrument in guiding the relationships  PREVI’s view to the board and accordingly seek 
among agents operating in the companies in which it  improvements in the company’s behaviour.  
has interests. The code states the behaviours and   
practices that PREVI expects from invested companies.   PREVI has a process in place to assess the performance of 
  its board representatives, and currently employs 28 people 
  Transparency, disclosure and accountability  to undertake this activity internally. Employees monitor 
  and assess the performance of 177 representatives in 90 
A company’s corporate governance framework must  companies. All PREVI representatives meet on an annual 
promote the timely and accurate disclosure of  basis, and a training process has been put in place to better 
financial and non‐financial information to allow the  align them with ESG issues. 
interested parties to obtain a fully integrated   
understanding of a company’s performance.    Divestment 
Disclosure should be in accordance with the directives   
presented in the Global Reporting Initiative (GRI) and  In instances where PREVI is concerned about the impact of 
Brazilian CSR groups the Ethos Institute and IBASE.    a company’s activities on society, it may take the decision 
  to disassociate itself from that company, adopting a 
In addition to financial statements, PREVI encourages  negative screening approach. 
companies to submit annually:   
    External investment manager requirements 
 A statement indicating adopted corporate   
governance practices.  PREVI is in the process of selecting five new external 
 The policies applied to the management of  private equity investment managers. The consideration of 
insurance agreements and the result of systematic  ESG issues is a mandatory part of the RFP. PREVI will 
risk management including, but not limited to,  monitor its external investment managers on the basis of 
equity, environmental, technological and  their implementation of a responsible investment strategy 
regulatory risks.  and it intends to participate in the investment decision‐
 Performance indicators for corporate social  making process by sitting on its fund managers’ investment 
responsibility.  committees. 
 Policy on and the global amount of compensation   
paid to directors and executive officers, including    Socio‐environmental responsibility policy 
variable compensation and stock option plans.   
 Shareholder rights.  PREVI is currently developing a socio‐environmental 
  responsibility policy that will apply to all its activities.  The 
A company’s corporate governance framework must  Pension Fund intends to implement the policy in 2007.  The 
guarantee the rights and interests of all shareholders  policy will include the consideration of environmental and 
and be aligned with the rights of clients, employees,  social issues in investment decision‐making, including 
suppliers, the government and community in general.  engagement and corporate governance activities.  PREVI’s 
  goal is for ESG issues to be fully integrated into its stock 
  Corporate ethics and social responsibility  selection process. In addition, the Pension Fund is 
  developing methodologies and tools to measure the social 
PREVI invests in profitable and socially responsible  and environment impact of its investments. 
companies that, in addition to fulfilling their legal   
obligations, promote actions to the benefit of the  Furthermore, PREVI will review its investment policy in an 
communities in which they operate, offer their  attempt to further align it with each of the Principles of the 
workers adequate safety, health and development  UNPRI. 
conditions and care for environmental preservation   
and social and economic development.  PREVI expects  www.previ.com.br 
the boards of invested companies to engage with 
stakeholders to establish corporate ethics and 
standards of behaviour that must be then approved 
and implemented. 
Reproduced and adapted from the 2007 report Responsible Investment in Focus by UNEPFI & UKSIF 
 
7.  FOREIGN INVESTMENT 
 
 
 
Foreign portfolio investment in Brazil has increased approximately ten‐fold in the last decade.  The 
country’s total stock of foreign portfolio investments as of the end of August 2008 stood at about 
US$232 billion, with around two‐thirds of this corpus (about US$120 billion) invested in publicly 
quoted companies (Table 7). 
 
A significant number of Brazilian companies issue American Depository Receipts (ADRs) which are 
traded on the NYSE or other US markets.  The 25 largest such ADRs are listed in Table 8 and have a 
total value of US$110 billion: the leading issuers of ADRs include Petrobras, Vale, Unibanco, Bradesco 
and Itaú.  Ten companies in this list are in the current ISE portfolio.  Table 9 identifies some of the 
main US and non‐US investors that hold the ADRs of Brazilian companies.  Investors include JP 
Morgan, Fidelity, BlackRock, Templeton and AllianceBernstein (the latter being one of CalPERS’ three 
emerging market managers). 
 
 
Possibly the most significant development in recent years has been the April 2006 launch of the ABN 
AMRO Asset Management Brazil Equity Fund, a Luxembourg‐incorporated vehicle for European 
investment in Brazilian stocks.  The investment strategy included an extensive set of sustainability 
standards (e.g. environmental, social, ethical, corporate governance) applied to individual companies 
in order to assess their socially responsible characteristics and select or exclude them or their relevant 
sector.   
 
By May 2008, the Brazil Equity Fund had assets of nearly US$400 million.  However, following the 
break‐up of the ABN AMRO Group and the acquisition of its investment management business by 
Fortis, the Brazil Equity Fund was absorbed into the Fortis L Equity Brazil Fund in November 2008.  
The prospectus for the Fortis fund suggests that sustainability criteria no longer form a part of the 
investment strategy (although it should be acknowledged that Fortis is a signatory to the UNPRI). 
 
There are insufficient data to estimate what proportion of foreign portfolio assets in Brazil are 
currently managed under ‘sustainable’ or ‘socially responsible’ mandates.  In the absence of hard 
data, it may be legitimate to make a conservative educated guess that investors who take 
environmental, social and/or governance (ESG) issues into account in a formal way represent less 
than 1 per cent of the US$120 billion corpus, i.e. about US$1.2 billion.   
 
Anecdotal evidence indicates that most foreign portfolio investors are focusing on the governance 
element of ESG by, for example, investing only in stocks listed on the Novo Mercado and/or by 
shareholder engagement as illustrated by F&C’s involvement in a recent case involving the rights of 
owners of preference shares in relation to VCP’s acquisition of Aracruz.   Nevertheless, some foreign 
investors have recently begun to join forces on environmental and social issues in Brazil under the 
auspices of the UNPRI.  A recent example is the recent engagement led by the UK’s Hermes on labour 
standards in the iron and steel industry (see box, page 32). 
 
With regard to ADRs, some of the fund managers listed in Table 19 are signatories to the UNPRI.  
However, in the absence of hard facts on the actual policies of specific funds, an educated guess that 
ESG strategies account for less than 1 per cent of total portfolio suggests that the stock of sustainable 
investment in Brazilian ADRs might be in the order of US$1 billion. 
 
Table 7:  Foreign portfolio investment in Brazil, 1999‐2008 (source: CVM) 
Period  Stock of Assets (US$ m)  % in Stocks  % in Fixed Income  Net Flows (US$ m) 
1999  23,110  99.0  ‐  1,100 
2000  18,528  91.9  7.0  ‐1,835 
2001  15,532  88.5  9.3  ‐728 
2002  10,373  74.7  21.5  ‐336 
2003  20,120  86.8  11.6  2,421 
2004  29,066  90.1  8.3  270 
2005  53,439  91.0  6.8  707 
2006  101,601  81.7  16.9  8,585 
2007  214,111  77.4  19.0  33,878 
2008 (Jan‐Aug)  232,280  67.3  29.8  12,205 

 
   
 
Table 8:  Top 25 Brazilian ADRs as of Dec 31, 2008 (source: adr.com) 
Ownership value (US$  ISE 
ADR 
million) 
PETROBRAS ‐ PETROLEO BRASILEIRO SA [PBR]   25,057.08 
PETROBRAS ‐ PETROLEO BRASILEIRO SA [PBR A]   21,767.39 
CIA VALE DO RIO DOCE [RIO PR]   13,917.62 
CIA VALE DO RIO DOCE [RIO]   10,938.46 
UNIBANCO ‐ UNIAO DE BANCOS BRASILEIROS SA [UBB]   6,985.41  
BANCO BRADESCO SA [BBD]   5,154.56  
BANCO ITAU HOLDING FINANCEIRA SA [ITU]   4,473.93  
EMPRESA BRASILEIRA DE AERONAUTICA SA [ERJ]   2,846.40  
VIVO PARTICIPACOES SA [VIV]   2,362.24 
TELE NORTE LESTE PARTICIPACOES SA [TNE]   2,248.32 
CIA DE BEBIDAS DAS AMERICAS [ABV]   2,244.69 
CIA SIDERURGICA NACIONAL SA [SID]   1,864.28 
GERDAU SA [GGB]   1,630.17  
CIA ENERGETICA DE MINAS GERAIS [CIG]   1,458.40  
ARACRUZ CELULOSE SA [ARA]   1,373.37 
TAM SA [TAM]   938.73 
BRASIL TELECOM PARTICIPACOES SA [BRP]   874.06 
TIM PARTICIPACOES SA [TSU]   737.31  
GAFISA S.A. [GFA]   736.10 
CIA DE SANEAMENTO BASICO DO ESTADO DE SAO PAULO [SBS]   709.92  
VOTORANTIM CELULOSE E PAPEL SA [VCP]   601.46  
CIA BRASILEIRA DE DISTRIBUICAO GRUPO PAO DE ACUCAR [CBD]   478.62 
SADIA SA [SDA]   304.71  
NET SERVICOS DE COMUNICACAO SA [NETC]   293.55 
ULTRAPAR PARTICIPACOES SA [UGP]   255.09   
TOTAL (top 25)  110,251.87   
 
 
 
 
 
 
Table 9:  Key investors in Brazilian ADRs (source: adr.com) 
Value  % of  Filing 

TOP 10 HOLDERS OF BRAZILIAN ADRs  PRI 
 (US$ m)  portfolio  date 
Fidelity Management & Research  US  6,253.92  1.21  31‐Oct‐08 
Barclays Global Investors, N.A.  US  5,079.43  0.86  31‐Oct‐08 
Capital World Investors  US  4,097.64  1.16  30‐Sep‐08 
BlackRock Investment Management (UK) Ltd.  UK  3,544.87  4.31  30‐Sep‐08  
Baillie Gifford & Co.  UK  3,497.31  12.05  30‐Sep‐08  
AllianceBernstein L.P.  US  3,104.38  1.33  31‐Mar‐08 
T. Rowe Price Associates, Inc.  US  2,968.97  1.33  30‐Sep‐08 
Wellington Management Company, LLP  US  2,897.78  1.14  31‐Oct‐08 
J.P. Morgan Investment Management Inc. (New 
US  2,879.29  2.74  31‐Oct‐08  
York) 
Templeton Asset Management (Singapore) Ltd.  Singapore  2,397.09  10.54  30‐Sep‐08 
TOTAL    36,720.68       
TOP 10 US MUTUAL FUND HOLDERS OF BRAZILIAN ADRs  PRI 
(US$ m)  portfolio  date 
BGF Latin American Fund  US  2,809.84  45.26  29‐Feb‐08  
iShares MSCI Emerging Markets Index Fund  US  2,338.97  13.86  31‐Oct‐08 
American Funds EuroPacific Growth Fund  US  1,860.26  2.45  30‐Sep‐08 
Fidelity Latin America Fund  US  1,790.49  48.61  30‐Sep‐08 
American Funds Growth Fund of America  US  1,379.52  1.09  30‐Sep‐08 
CGM Focus Fund  US  1,224.37  16.89  30‐Sep‐08 
Fidelity Low‐Priced Stock Fund  US  1,133.93  4.39  31‐Jul‐08 
American Funds New Perspective Fund  US  1,025.25  2.73  30‐Sep‐08 
Dodge & Cox International Stock Fund  US  772.11  2.09  30‐Sep‐08 
iShares S&P Latin America 40 Index Fund  US  758.07  61.81  31‐Oct‐08 
TOTAL    15,092.81       
TOP 10 NON‐US MUTUAL FUND HOLDERS OF BRAZILIAN ADRs  PRI 
(US$ m)  portfolio  date 
BGF World Mining Fund  UK  1,381.70  8.52  29‐Feb‐08  
JPMorgan Funds ‐ Emerging Markets Equity Fund  UK  1,200.75  18.36  30‐Jun‐08  
Templeton Emerging Markets Investment Trust  Singapore  1,125.47  26.5  30‐Apr‐08 
T. Rowe Price Latin America Fund  UK  906.40  40.64  30‐Sep‐08 
Templeton BRIC Fund  Singapore  672.30  25.73  30‐Jun‐08 
DWS Invest Bric Plus  Germany  627.08  14.81  30‐Jun‐08  
Schroder Intl Selection Fd Bric  UK  584.93  23.63  30‐Jun‐08  
Templeton Latin America Fund  Singapore  577.25  23.69  30‐Jun‐08 
Harbor International Fund  Bermuda  568.88  2.54  30‐Sep‐08 
Vanguard International Growth Fund  UK  509.04  3.17  31‐Aug‐08 
TOTAL    8,153.80       
 
 
 
 
 
 
 
 
 
 
 
JOINT INVESTOR ENGAGEMENT ON SLAVE LABOUR IN 
THE BRAZILIAN IRON & STEEL INDUSTRY   
 
In late 2006, allegations surfaced about slave labour practices in the iron and steel industry in Brazil. The 
operations involved were potentially part of the supply chains of the largest manufacturers and users of iron and 
steel in the world, companies in which, jointly, the signatories had sizeable holdings. The allegations were that 
these large global users of steel were inadvertently supporting the use of forced labour at charcoal plants in 
Brazil. Charcoal is an important raw material used in the manufacture of pig iron. 
 
PRI signatory Hermes used the PRI Clearinghouse to bring together a group of fellow signatories (including PREVI 
and other Brazilian pension funds) for a collaborative engagement. The investor group identified a list of target 
firms, and then jointly wrote to those companies setting out their concerns, focusing on the negative impact on 
reputation due to any association with inappropriate labour practices. Follow up telephone calls and meetings 
were also conducted with the companies. 
 
There was a wide range of responses. A number of companies had already put into place an audit system to 
ensure they were not sourcing steel from these operations. However, there were also companies that had not 
considered the impact of such allegations on their business and were surprised by shareholder interest in this 
area. These firms undertook to examine the investors’ concerns, and the group had further conversations with 
these companies to ensure they had addressed the issue. 
 
Source: UNPRI 
 
 
8.  OTHER MARKET PARTICIPANTS 
Brazilian Development Bank 
Overview 
 
The Brazilian Development Bank (BNDES) plays a key role in the country’s sustainable development, 
including support for private sector development through its equity investment arm (BNDESPAR), 
infrastructure and SME financing, and management of the recently announced US$21 billion Brazil 
Amazon Fund.   
 
BNDESPAR owns sizeable equity stakes in many of Brazil’s leading publicly quoted companies in 
strategic industries such as oil & gas, railroads, mining, energy, iron & steel, pulp & paper and 
agribusiness.  Table 10 lists these holdings as of June 30, 2008 based on BNDESPAR’s published 
financial statements for the first six‐month reporting period of 2008. 
 
Using these June 30, 2008 shareholding data and the average quotation by share for the January 23, 
2009 trading session of the São Paolo stock exchange, the market value of BNDESPAR’s equity interest 
in listed shares can be estimated at R$37.4 billion (US$16.2 
billion).   
 
For comparison, this is 50 times the combined net asset value 
of Brazil’s SRI mutual funds and is in the same order of  BNDES SUPPORTS SETUP OF 
magnitude as PREVI’s listed equity portfolio, illustrating the  THE LARGEST EUCALYPTUS 
relative significance of the development bank’s role as a  PULP COMPANY IN THE WORLD  
January 20, 2009 (BNDES press release) 
market participant and its potential influence in corporate   
boardrooms.  BNDES entered an Investment Agreement 
with Votorantim Celulose e Papel S.A. (VCP) 
Status of sustainable investment  and its controlling companies, which expect 
the support of BNDESPAR to the corporate 
 
reorganization in the acquisition of Aracruz 
BNDES has not adopted the Equator Principles (as the  Celulose S.A. by VCP, for the face value of R$ 
country’s main commercial banks have done), although  5.4 billion.  
projects financed by BNDES are subject to environmental and   
social policies and procedures including environmental impact  This operation will allow the incorporation of 
the largest short fiber pulp company in the 
assessment and verification of compliance with national  world. BNDESPAR may invest nearly R$ 2.4 
legislation.  BNDES is a long‐standing member of UNEPFI and  billion in the new company, of which R$ 1.8 
an active participant in UNEPFI’s Latin American Task Force.    billion represent preferred stock issued by 
VCP and R$ 580 million in debentures issued 
 
by Votorantim Industrial S.A. (VID – VCP’s 
Exactly how BNDES’s environmental and social policies and  controlling company), exchangeable into 
procedures are applied to the portfolio illustrated in Table 10  common stock issued by VCP. BNDESPAR’s 
is unclear.  For example, there is little or no readily available  interest in the new company may reach one 
information on how BNDESPAR integrates ESG considerations  third of the total capital stock. 
 
into active share ownership and voting.  BNDES is not a  According to a Material Event disclosed by 
member of the ISE Advisory Board and, other than UNEPFI,   VCP, VCP’s acquisition of Aracruz 
does not appear to be directly involved with key sustainable  shareholding control will depend on 
Arainvest, one of Aracruz’s shareholders, 
investment initiatives in Brazil such as the UNPRI, CDP and 
exercising its tag along rights. 
LASFF.   
  The new company will be a global leader in 
A number of the companies listed in Table 10 are constituents  short fiber pulp, with production capacity of 
5.8 million tons and 680 thousand hectares 
of the ISE.  Together they represent 25 per cent of the total 
of planted area. It will employ 15 thousand 
estimated market value of the BNDESPAR listed equity  people and will deliver estimated annual 
portfolio.  revenues of R$ 7 billion. 
 
 
 
Table 10:  BNDESPAR equity interests in publicly listed companies 
BNDESPAR equity  Estimated market value based on average share price 
2
Company  ISE  interest as of  for January 23, 2009 trading session   
1
June 30, 2008   
(%)   R$ million  US$ million 
ALL AMER LAT  11.4  655.50  283.15 

ARACRUZ  5.51  711.58  307.38 
BANCO DO BRASIL   2.52  997.21  430.76 
BEMATECH  8.21  25.23  10.90 
BRASIL TELECOM PART  3.51  250.00  107.99 
BRASKEM   5.42  164.82  71.20 
CEG  34.56  484.52  209.29 
CEMIG   1.7  263.46  113.81 
CESP   5.71  243.06  104.99 
COPEL  23.96  1,401.93  605.58 
COTEMINAS  10.35  48.52  20.96 
CPFL ENERGIA   5.72  825.63  356.64 
ELETROBRAS   11.81  3,469.68  1,498.78 
EMBRAER   5.05  365.15  157.73 
GERDAU   3.38  638.39  275.76 
INDUSTRIAS ROMI  6.78  37.52  16.21 
JBS  13  852.23  368.13 
KLABIN  20.25  613.34  264.94 
LIGHT S/A   33.69  1,535.65  663.35 
MARFRIG  2.94  41.40  17.88 
METALFRIO  7.59  20.68  8.93 
PARANAPANEMA  7.06  42.69  18.44 
PETROBRAS  7.62  16,089.01  6,949.90 
REDE ENERGIA  21.07  385.42  166.49 
SID NACIONAL  3.77  1,046.39  452.00 
SPRINGS GLOBAL  4.28  12.54  5.42 
SUZANO PAPEL   1.89  69.37  29.96 
TELEMAR   1.63  182.99  79.05 
TRACTEBEL   2.8  335.18  144.79 
USIMINAS  1.73  251.14  108.48 
VALE R DOCE  4.1  5,231.05  2,259.63 
VCP   3.1  89.03  38.46 
TOTAL ESTIMATED MARKET VALUE  37,380.33  16,147.01 
Sources: 
 1
 BNDESPAR Financial Statements for the Six Month Periods Ended June 30, 2008 and 2007 and Independent Auditors’ Report 
2
 BM&F Bovespa trading data for January 23, 2009 
 
 
High Net Worth Individuals 
Overview 
 
High Net Worth Individuals (HNWIs) are defined as those holding at least US$1 million in financial 
assets, excluding collectibles, consumables, consumer durables and primary residences.  A further 
distinction is often made at the upper end of this market, where Ultra‐High Net Worth Individuals 
(Ultra‐HNWIs) are those holding at least US$30 million in financial assets.  The World Wealth Report 
2008 by Cap Gemini/Merrill Lynch highlights the 
following headlines: 
 
 10.1 million individuals worldwide held at least  Main wealth management 
US$1 million in financial assets, an increase of 6.0  companies operating in the 
per cent over 2006.   Brazilian market 
 Global HNWI wealth totalled US$40.7 trillion, a   
Amicorp do Brasil 
9.4 per cent gain from 2006, with average HNWI 
Banco Alfa de Investimento 
wealth surpassing US$4 million for the first time.  
Banco Banif Primus 
 The Ultra‐HNWI wealth band experienced the  Banco BNP Paribas Brasil 
strongest growth, gaining 8.8 per cent in  Banco Bradesco 
population size and 14.5 per cent in accumulated  Banco Citibank 
wealth.   Banco de Investimentos Credit Suisse 
 Emerging markets, especially those in the Middle  Banco do Brasil 
East and Latin America, scored the greatest  Banco do Estado do Rio Grande do Sol 
regional HNWI population gains.   Banco Fator 
Banco Itaú Europa International 
 India, China and Brazil had the highest HNWI 
Banco Itaú 
population growth at the country level in 2007.   
Banco J Safra 
 HNWI financial wealth is projected to reach  Banco J P Morgan 
US$59.1 trillion by 2012, advancing at an annual  Banco Safra 
growth rate of 7.7 per cent.  Banco Santander Banespa 
  Banco UBS Pactual 
The market in 2008 and outlook for the next 1‐2 years  BBM Gestao de Recursos 
may not be as robust as suggested by the above  Ciano Investimentos Gestao de 
observations and forecasts, given the global financial  Recursos 
Credit Agricole Brasil 
crisis, market uncertainty and investors’ flight to low‐risk 
Deutsche Bank ‐ Banco Alemao 
portfolios. 
Fabiano Calil ‐ Gestao Financeira Pessaol 
  Gavea Gestao de Investimentos 
Amongst these global headlines are some interesting  GWI Consultoria Participacoes e 
data on Latin America and Brazil.  The HNWI population  Servicos 
in Brazil grew an impressive 19.1 per cent in 2007, up  Hedging‐Griffo Corretora de Valores 
significantly from 10.1 per cent growth in 2006.  There  HSBC Bank Brasil – Banco Multiplo 
are now some 143,000 HNWIs in Brazil.  Forecasts in the  Itaú Private Bank 
World Wealth Report 2008 were made before the onset  Maua Investimentos 
Merrill Lynch Representacoes 
of the current global financial and economic downturn, 
Opus Gestao de Recursos 
although it may still be useful to note that the HNWI 
Rio Bravo Investimentos 
forecast for Latin America by the year 2012 was US$10.3  Safdie Dristribuidora de Titulos e 
trillion, compared to US$6.2 trillion in 2007.    Valores 
  Votorantim Asset Management 
Information from Private Banking World Brasil 2009 
suggests that the HNWI market in Brazil is currently 
worth around US$1.4 trillion. 
 
Between them, the 40 asset management firms listed in Table 3 manage assets of R$152 billion 
(US$66 billion on behalf of private (HNWI) clients.  The ten leading firms (by size of assets) are shown 
in Table 11 and represent over 80 per cent of this US$66 billion corpus. 
 
Table 11:  Private (wealth management) assets under management 
Top 10 managers   R$ million   US$ million 
1  ITAU   33,962  14,670 
2  UNIBANCO   17,387  7,510 
3  CREDIT SUISSE HEDGING GRIFFO  12,552  5,422 
4  UBS PACTUAL   12,430  5,369 
5  BNY MELLON   11,712  5,059 
6  SANTANDER BRASIL   9,458  4,086 
7  BRADESCO   8,412  3,634 
8  OPPORTUNITY   6,761  2,920 
9  BANCO DO BRASIL   6,150  2,657 
10  VOTORANTIM ASSET MANAGEMENT  5,178  2,237 
Total (40 managers)  152,058  65,684 
 
 
 
  
There are no readily available data on the sustainability segment of the Brazilian wealth management 
industry. 
 
The Merrill Lynch/Cap Gemini survey identified that, globally, HNWIs and Ultra‐HNWIs have a large 
and growing interest in “green investing”.  Roughly 12 per cent of HNWIs and 14 per cent of Ultra‐
HNWIs around the world allocate part of their investment portfolio to green technologies and 
alternative energy sources (Figure 18).   
 
Regionally, the most environmentally attuned HNWI and Ultra‐HNWI populations, as measured by the 
percentage of affluent investors allocating to green investing, were found in the Middle East and 
Europe—with participation rates ranging from around 17 per cent to 21 per cent in 2007, all 
exceeding global averages.   
 
Latin American participation rates were also relatively high, at 15‐17 per cent (the report does not 
provide more detailed data specifically on Brazil).  By comparison, only 5 per cent of HNWIs and 7 per 
cent of Ultra‐HNWIs in North America allocated part of their portfolio holdings to green investing.    
 
Further insights can be gleaned indirectly from Eurosif’s 2008 report, High Net Worth Individuals and 
Sustainable Investment.  Eurosif estimates that sustainable investments represent approximately 8 
per cent of European HNWIs’ portfolios as of December 2007.  Overall European HNWI financial 
wealth in 2007 was estimated at €6.7 trillion (US$8.6 trillion at current exchange rates), which 
translates into an EU HNWI sustainable investment market of €540 billion (US$690 billion). For 
context into the significance of this size, the HNWI sustainable investment segment corresponds to 
between 20 to 30 per cent of the European institutional SRI market.  Eurosif predicts that by 2012 the 
share of sustainable investments in HNWIs’ portfolios will have increased to 12 per cent.  
 
Based on the above, it may be reasonable to guess that the potential stock of sustainable investment 
(in a variety of asset classes) by Brazilian HNWIs is about 5 per cent of the country’s total HNWI 
market i.e. in the order of US$70 billion.  
 
 
 
Figure 18:  HNWI investment in green technologies and alternative energy 
Percentage of HNWIs who allocate part of portfolio to green technologies and alternative energy sources
Percentage of Ultra-HNWIs who allocate part of portfolio to green technologies and alternative energy sources
21%
20% 20%
17% 17%
15%
14% 14%
13%
12%
7%
5%
Global North America Asia-Pacific Latin America Europe Middle East
Source: Capgemini/Merrill Lynch Financial Advisor Survey, April 2008

 
 
 
9.  ENABLING ENVIRONMENT 
 
Regulatory and policy frameworks  
Environmental legislation and enforcement 
 
Brazil has an advanced framework of environmental legislation and inspection at both the federal and 
state levels (see box).  However, enforcement standards vary from state to state and between federal 
and state agencies for reasons ranging from lack of resources to the influence of corruption.  In 
addition to federal and state environmental protection agencies, federal and state public prosecutors 
are able to take independent action to deal with environmental problems, and do so frequently and 
effectively. 
 
 
ENVIRONMENTAL LAW IN BRAZIL 
 
Under the Federal Constitution, the federal government and the states have the power to legislate concurrently 
on (i) the protection of the natural environment, which includes forests, hunting, fishing, wildlife, conservation of 
nature, protection of the soil and natural resources and pollution control; (ii) the protection of the cultural 
environment, involving protection of historical, artistic, touristic and landscape heritage; and (iii) liabilities for 
damages to the environment.  
 
Those public bodies and institutions responsible for protecting and improving the quality of the environment 
make up the National Environmental System (SISNAMA). Some of the most important components of SISNAMA 
are: (i) the National Council for the Environment (CONAMA), a decision‐making and consultative body 
empowered to establish environmental rules and standards; (ii) the Brazilian Institute for the Environment and 
Natural Renewable Resources (IBAMA), whose purpose is to execute governmental policy and directives aimed at 
the environment, to impose the penalties set forth by law on those that violate federal environmental legislation 
and to license activities that could cause environmental damages on a regional or national level or in areas under 
federal domain; (iii) state environmental agencies; and (iv) local environmental inspection and control agencies.  
 
Although they are not part of SISNAMA, the Federal and State Ministries of Public Prosecution have institutional 
powers under the Federal Constitution to initiate civil inquiries and to bring public civil actions with respect to 
environmental damages, as well as penal actions for crimes against the environment.  Public prosecutors 
(Ministério Público) file enforcement lawsuits independently of environmental agencies based on civil and 
criminal investigations of environmental harms. In addition to enforcing environmental laws, public prosecutors 
have become a primary actor in other areas of public interest law such as disability rights, consumer protection, 
and anti‐corruption. 
 
Under the Federal Constitution, environmental liability may occur in civil, administrative and criminal levels.  Civil 
liability for environmental damages is strict (i.e. it occurs irrespective of fault or intent by those that have caused 
the damage) and the law also provides for joint and several liability.  Penalties for administrative violations can 
include fines of up to R$50 million (approximately US$20 million).    Criminal liability extends to both individuals 
and legal entities with penalties including fines, imprisonment and facility closure. 
 
Environmental licensing requirements and procedures include Environmental Impact Assessment (EIA) for major 
developments and conditions and restrictions for the installation and operation of licensed activities and 
facilities. 
 
 
 
 
 
Pension fund transparency 
 
Internationally, a number of countries have taken public policy measures to promote sustainable 
investment thorough government legislation on pension fund transparency.  For example, a July 2000 
amendment to the UK Pensions Act now requires UK occupational pension funds to disclose the 
extent to which they take account of social, environmental or ethical issues in their investment 
decisions.  Many other countries in Europe and the Asia‐Pacific region have followed the example set 
by the UK.   Brazil has not taken steps in this direction.  However, it should be noted that 60 per cent 
of the country’s pension fund assets are already managed by UNPRI signatories. 
Non‐financial disclosure requirements 
 
At the international level, policy‐makers, regulators, institutional investors and other key stakeholders 
in many countries are placing an increasing emphasis on non‐financial information in management 
reports (including, where relevant, environmental issues such as climate change).  In December 2008, 
for example, the International Corporate Governance Network (ICGN) ratified the ICGN Statement 
and Guidance on Non‐financial Business Reporting, which encourages companies to disclosure 
information on potentially material issues such as climate change; matters affecting employees, 
customers, suppliers and host communities; and ethics.   
 
In some cases, the approach has included legislative measures in addition to voluntary momentum. 
Denmark, for example, has recently amended its Financial Statements Act to require an estimated 
1,100 of the largest Danish companies, both listed and state owned, to include information on their 
corporate responsibility policies and practices in their annual financial reports.  Sweden, China, 
Malaysia and South Africa are among other countries that have introduced similar regulations and 
directives, often referencing the GRI guidelines. 
 
Brazilian companies have a relatively long tradition of non‐financial disclosure.  The current emphasis 
in Brazil is on voluntary GRI reporting (see overleaf).  Mandatory sustainability reporting is not on the 
political or legislative agenda.  Brazil does not currently have any legislation specifically concerned 
with non‐financial reporting and assurance related to potentially material environmental and social 
issues. 
 
Arguably, a sound framework for sustainable investment includes disclosure and discussion of 
potentially material sustainability issues in IPO prospectuses.  There is no published research on the 
extent and quality of this kind of disclosure in recent Brazilian IPOs.  However, it is probable that, in 
common with the rest of the world, this is an important gap in Brazil. 
 
Around 35 of Brazil’s largest companies – including Vale R Doce and Petrobras – are listed in New York 
with the US Securities & Exchange Commission (SEC) and are subject to the SEC’s transparency and 
disclosure rules.  Items 101 and 103 of SEC Regulation S‐K require disclosure of relevant 
environmental issues.  Again, there is no published research on the extent and quality of this kind of 
disclosure by Brazilian companies.  However, selective sampling of Form 6‐K filings suggests that 
Brazilian companies are proactive in filing positive environmental news (such as winning awards or 
being included in sustainability indices); but rather less forthcoming with information on issues such 
as environment‐related law suits, major pollution incidents, plant closure or project delays due to 
community protests, and major capital expenditure to meet environmental standards for production 
facilities and end‐products. 
 
Developments in the US are increasing pressure for climate change disclosure under SEC regulations.  
Actions over the last several years by the New York State Attorney General and by coalitions of 
institutional investors, environmental groups and state government agencies with regard to climate 
change disclosure have received considerable media coverage.  Other recent developments in the US 
include the issuance of draft standards for climate change disclosure by ASTM International and 
proposed revisions by the Financial Accounting Standards Board (FASB) to its FAS 5, Accounting for 
Contingencies.    
 
 
Changes in the interpretation or letter of SEC regulations and/or financial accounting standards in the 
US could therefore have important implications for Brazilian firms listed in New York; in turn this 
could also have implications for sustainability disclosure in general in Brazil.  
Listing rules and guidelines 
 
It is important to note that, like most of the world’s stock exchanges, BM&F Bovespa is not a 
regulator.  The regulator in Brazil is CVM, together with other government agencies and departments 
dealing with matters such as company law.  Nevertheless, exchanges can and do play an important 
role in improving company standards and increasing access to information, either by issuing 
guidelines to companies and/or by setting listing rules that go beyond the regulatory baseline.  A 
powerful example of the latter in Brazil is provided by the 2001 introduction of the Novo Mercado, 
which has been very successful in raising corporate governance standards, market profile and investor 
confidence. 
 
Internationally, a small but growing number of exchanges are taking measures to improve non‐
financial disclosure, including disclosure of environment‐ and social‐related business issues such as 
climate change and community relations.  In rare cases – such as the Johannesburg Stock Exchange 
(JSE) – this is being done though listing rules.  The majority of exchanges that are leading such 
improvements are doing so via corporate governance guidelines, which are strongly promoted and 
monitored, often on a “comply or explain” basis as in the case of the Australian Securities Exchange 
(ASX). 
 
BM&F Bovespa’s listing rules do not expressly mention non‐financial reporting or sustainability issues, 
and the exchange has not currently issued formal guidance on these matters. 
 
Voluntary non‐financial reporting 
Sustainability reporting 
 
A growing number of Brazilian companies are producing annual sustainability reports, many using the 
Global Reporting Initiative (GRI) guidelines (Figure 19).   Publicly listed companies account for over 
half the sustainability reports published in Brazil in 2007 (the latest year for which a reasonably 
complete dataset is available). 
 
This increase in sustainability reporting in recent years coincides with the 2005 launch of the Bovespa 
ISE Index; adoption of the Equator Principles by Brazil’s banks and the Principles for Responsible 
Investment (PRI) by Brazil’s pension funds; the extension of the Carbon Disclosure Project (CDP) to 
Brazil; and the on‐going efforts of numerous non‐governmental organisations and other advocates 
including GRI, the Ethos Institute, FGV‐CES and several consulting firms.   
 
Overall, the supply of awareness raising and capacity building initiatives for sustainability reporting, 
along with the local availability of consulting expertise on this topic, appears to at least match the 
current level of demand from companies.    
 
About 60 per cent of the 59 companies in the current IBovespa Index publish sustainability reports 
(Table 12).   Almost all of these reports are available in English as well as Portuguese.  Most 
companies produce stand‐alone sustainability reports, although a sizeable minority are integrating 
this information into their annual reports.  18 companies make use of the GRI guidelines (including 
the latest G3 guidelines). Seven IBovespa companies publish sustainability reports that are subject to 
some form of external assurance. 
 
Outside of the IBovespa index, few listed companies currently publish sustainability reports. 
 
 
 
 
Table 12:  Sustainability reporting by IBOVESPA companies 
Company  Industry  ISE  Report  English  GRI  Verification 

ALL AMER LAT (N2)  Railroads 
AMBEV  Beer & soft drinks    
ARACRUZ (N1)  Pulp & paper     
B2W VAREJO (NM)  Retail 
BMF BOVESPA (NM)  Diversified financial services 
BRADESCO (N1)  Financial intermediaries      
BRADESPAR (N1)  Holdings ‐ diversified 
BRASIL (NM)  Financial intermediaries     
BRASIL T PAR (N1)  Telecommunications     
BRASIL TELEC (N1)  Telecommunications 
BRASKEM (N1)  Petrochemicals    
CCR RODOVIAS (NM)  Toll roads & highways    
CELESC (N2)  Electric utilities  
CEMIG (N1)  Electric utilities     
CESP (N1)  Electric utilities  
COMGAS  Gas utilities    
COPEL (N1)  Electric utilities   
COSAN (NM)  Sugar ‐ alcohol 
CPFL ENERGIA (NM)  Electric utilities     
Residential building 
CYRELA REALT (NM) 
construction 
DURATEX (N1)  Wood     
ELETROBRAS (N1)  Electric utilities  
ELETROPAULO (N2)  Electric utilities     
EMBRAER (NM)  Aerospace  
GAFISA (NM)  Residential construction 
GERDAU (N1)  Steel    
GERDAU MET (N1)  Steel   (see GERDAU)   
GOL (N2)  Airlines   
ITAUBANCO (N1)  Financial intermediaries     
ITAUSA (N1)  Financial intermediaries  (see ITAUBANCO)   
JBS (NM)  Meat, poultry & others 
KLABIN S/A (N1)  Pulp & paper   
LIGHT S/A (NM)  Electric utilities   
LOJAS AMERIC  Retail 
LOJAS RENNER (NM)  Retail 
NATURA (NM)  Cosmetics      
NET (N2)  Cable TV 
NOSSA CAIXA (NM)  Financial intermediaries 
P.ACUCAR‐CBD (N1)  Retail   
PERDIGAO S/A (NM)  Meat, poultry & others    
PETROBRAS  Oil, gas & biofuels     
REDECARD (NM)  Diversified financial services 
ROSSI RESID (NM)  Residential construction 
SABESP (NM)  Water utilities     
SADIA S/A (N1)  Meat, poultry & others    
SID NACIONAL  Steel   
SOUZA CRUZ  Tobacco    
TAM S/A (N2)  Airlines 
TELEMAR  Telecommunications  
TELEMAR N L  Telecommunications 
TELESP  Telecommunications    
TIM PART S/A  Telecommunications    
TRAN PAULIST (N1)  Electric utilities 
ULTRAPAR (N1)  Holdings ‐ diversified   
UNIBANCO (N1)  Financial intermediaries    
USIMINAS (N1)  Steel    
V C P (N1)  Pulp & paper     
VALE R DOCE (N1)  Mining     
VIVO  Telecommunications 
 
The consulting firm SustainAbility has recently published independent research on sustainability 
6
reporting by Brazilian corporations .  This included a ranking of ten leading reports using a 
standardised scoring methodology, the results of which are reproduced in Table 13.   They identified 
several areas for improvement.  In particular, the report concluded that Brazilian companies need to 
deepen the strategic value of reporting and demonstrate how sustainability is being embedded 
throughout the business.  Weaknesses in reporting include a lack of information on: 
 
 Governance:  Board level leadership and governance structures to deliver on sustainability 
aspirations 
 Materiality:  Methods to identify and prioritize material issues being used to help focus 
reports on priority topics 
 Targets:  Specific, measurable and comparable targets (rather than qualitative statements of 
intent). 
 
©
Figure 19:  Corporate sustainability reports in Brazil (source:   CorporateRegister.com) 
100
90
Number of companies reporting
80
70
60
50
40
30
20
10
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
LISTED NON-LISTED
 
 
 
Table 13:  Top 10 sustainability reports (SustainAbility/FBDS survey) 
Rank  Company  Industry  Year 
1  Natura  Personal care products  2007 
2  Suzano Petroquimica  Chemicals  2006 
3  Ampla  Electric utilities  2007 
  Coelce  Electric utilities  2007 
5  Banco Real  Financial services  2007 
6  Energias do Brasil  Electric utilities  2007 
7  Sabesp  Water utilities  2007 
8  Bunge  Food processing  2007 
  Celulose Irani  Forestry & paper  2007 
10  Banco Itaú  Financial services  2007 
Source:  The Road to Credibility: a survey of sustainability reporting in Brazil SustainAbility, FBDS & UNEPFI (2008) 
                                                                    
6
 The Road to Credibility:  a survey of sustainability reporting in Brazil  SustainAbility (2008) 
 
Table 14:  CDP6 disclosure by IBOVESPA companies (omits companies not included in CDP6) 
Company  Industry  ISE  Response   GHG data disclosed 

ALL AMER LAT (N2)  Railroads  AQ  
AMBEV  Beer & soft drinks  AQ  
ARACRUZ (N1)  Pulp & paper  AQ  
B2W VAREJO (NM)  Retail  AQ 
BRADESCO (N1)  Financial intermediaries   AQ  
BRADESPAR (N1)  Holdings – diversified  (see CPFL ENERGIA)
BRASIL (NM)  Financial intermediaries   AQ 
BRASIL T PAR (N1)  Telecommunications  (see BRASIL TELEC)
BRASIL TELEC (N1)  Telecommunications  AQ  
BRASKEM (N1)  Petrochemicals   AQ 
CCR RODOVIAS (NM)  Toll roads & highways  AQ  
CELESC (N2)  Electric utilities   AQ 
CEMIG (N1)  Electric utilities   AQ  
CESP (N1)  Electric utilities   AQ 
COMGAS  Gas utilities  AQ  
COPEL (N1)  Electric utilities  AQ 
COSAN (NM)  Sugar – alcohol  NP 
CPFL ENERGIA (NM)  Electric utilities   AQ  
CYRELA REALT (NM)  Residential building construction  AQ 
DURATEX (N1)  Wood   AQ  
ELETROBRAS (N1)  Electric utilities   AQ  
ELETROPAULO (N2)  Electric utilities   (see AES)
EMBRAER (NM)  Aerospace   NP 
GAFISA (NM)  Residential building construction  DP 
GERDAU (N1)  Steel   AQ  
GERDAU MET (N1)  Steel   (see GERDAU)
GOL (N2)  Airlines  NP 
ITAUBANCO (N1)  Financial intermediaries   AQ  
ITAUSA (N1)  Financial intermediaries  (see ITAUBANCO)
KLABIN S/A (N1)  Pulp & paper  NP 
LIGHT S/A (NM)  Electric utilities   NR 
LOJAS AMERIC  Retail  AQ 
LOJAS RENNER (NM)  Retail  DP 
NATURA (NM)  Cosmetics   AQ  
NET (N2)  Cable TV  AQ 
PERDIGAO S/A (NM)  Meat, poultry & others   NP 
PETROBRAS  Oil, gas & biofuels  NP 
ROSSI RESID (NM)  Residential building construction  DP 
SABESP (NM)  Water utilities   AQ 
SADIA S/A (N1)  Meat, poultry & others   AQ  
SID NACIONAL  Steel  DP 
SOUZA CRUZ  Tobacco  AQ  
TAM S/A (N2)  Airlines  NP 
TELEMAR  Telecommunications   AQ 
TELEMAR N L  Telecommunications  AQ 
TELESP  Telecommunications  NP 
TIM PART S/A  Telecommunications   AQ 
TRAN PAULIST (N1)  Electric utilities  AQ 
ULTRAPAR (N1)  Holdings – diversified  NP 
UNIBANCO (N1)  Financial intermediaries   AQ 
USIMINAS (N1)  Steel  DP 
V C P (N1)  Pulp & paper   AQ 
VALE R DOCE (N1)  Mining  AQ  
VIVO  Telecommunications  AQ 
AQ – answered questionnaire;  NP – answered questionnaire but response not made publicly available;  DP – declined to participate;  NR – no 
response 
 
 
 
Carbon Disclosure Project 
 
The international Carbon Disclosure Project (CDP) has been increasing its focus on Brazil in recent 
7,8
years with the support of its local partners, ABRAPP and Banco Real .  The CDP questionnaire went 
to 50 of Brazil’s largest quoted companies in 2006 (CDP4).  In 2007 (CDP5) this increased to 60 
companies, and 75 companies were surveyed in 2008 (CDP6). 
 
The response rate of Brazilian companies is high (Figure 20).  Nevertheless, 27 per cent of companies 
in the current IBovespa index that were surveyed by CDP 2008 either did not respond, declined to 
participate or answered the questionnaire but withheld permission for their responses to be made 
publicly available.  In terms of index weighting, this gap in public disclosure represents about 33 per 
cent of the current IBovespa notional portfolio and notably includes companies such as Petrobras, 
Klabin and Usiminas, where climate change business issues might be expected to be important 
factors.  A detailed breakdown is provided in Table 14. 
 
Figure 21 summarises some of the key trends picked out by CDP’s analysis of the 2008 survey.  
Overall, the results paint a largely encouraging picture of corporate activity and management quality 
in relation to climate change, although further progress is needed.  Areas identified by CDP for further 
improvement and development in 2009 include: 
 
 Improving the extent of qualitatitive information in companies’ responses, particularly in 
relation to supply chains 
 Formulation of emission reduction targets 
 Maturing climate change governance among Brazilian companies 
 Inclusion of climate change policy in short, medium and long‐term sustainability strategies. 
 
 
Figure 20:  CDP response rates 
100%
90%
80%
70%
60%
CDP4 (2006)
50%
CDP5 (2007)
40% CDP6 (2008)
30%
20%
10%
0%
Brazil India China Global
 
 
 
 
                                                                    
7
 Carbon Disclosure Project Report 2008 – Brasil CDP (2008) 
8
 Carbon Disclosure Project Report 2008 – Global 500 CDP (2008) 
 
Figure 21:  Trends revealed by company responses to CDP6 (Brazil) 
See regulatory risks 49%
See physical risks 77%
See regulatory opportunities 83%
See physical opportunities 57%
Disclose GHG emissions data 49%
GHG emissions data externally verified 19%
GHG emissions reduction plan 43%
Board Committee for climate change 60%
Participation in emissions trading 21%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
 
Global Compact Communications on Progress 
 
Many pension funds and asset managers that are members of the PRI are now communicating their 
expectation that the companies they invest in should be committed to the Global Compact principles.   
 
One of the explicit commitments that a company makes when it participates in the Global Compact is 
to produce an annual Communication on Progress (COP).  In 2000, the year when the UN Global 
Compact was launched, over 600 Brazilian companies signed on to the initiative.  Today, the Global 
Compact lists 110 business signatories in Brazil (excluding SMEs); only six companies submitted COPS 
in 2008, according the Compact’s online database. 
 
Indices, equity research and ratings 
Specialised indices in addition to the ISE 
 
Apart from the ISE and BM&F Bovespa’s corporate governance index (the IGC), there are no other 
sustainability or similar indices focusing specifically on Brazilian or Latin American stocks.   
 
As noted on page 14, BM&F Bovespa is considering the possibility of changing the ISE by introducing a 
two‐tier system that would bring more Brazilian companies into the scope of the Index.   
 
Consideration is also being given to the concept of a regional sustainability index modelled on the ISE 
but covering countries such as Chile and Mexico as well.  Both of these concepts are at an early stage 
of discussion. 
Dow Jones Sustainability Index 
 
A small number of Brazilian companies are included in the international Dow Jones Sustainabilty 
Index (DJSI).  For the 2007/08 period, these companies were Aracruz Celusose; Banco Bradesco; 
Banco Itaú; Itausa; CEMIG; and Petrobras.  The DJSI was re‐balanced in Q4 2008 for the 2008/09 
period.  No Brazilian companies were dropped from the index;  Usiminas and VCP were admitted for 
the first time.   It is noteworthy that Petrobras kept its place in the DJSI while being dropped from the 
ISE at the same time. 
 
Independent sustainability research and rating products 
 
None of the US or European sustainable investment research firms have a permanent presence or 
full‐time research capability in Brazil.  Although coverage of Brazilian stocks is relatively limited, firms 
such as Innovest Strategic Value Advisors and KLD Research & Analytics Inc. (amongst others) do 
provide some research on approximately 25 of Brazil’s leading companies. 
 
Innovest has also undertaken research for the IADB on the extent to which selected Latin American 
companies participate in markets at the “base of the pyramid”, also referred to as Opportunities for 
the Majority (OM).  This study included 26 Brazilian companies ranging from Banco Bradesco and 
9
Unibanco to Natura, CEMIG and GOL  .  
 
Brazil’s sustainable investment market has not yet led to the establishment of an indigenous SRI 
research and rating industry.  The expertise exists in Brazil but has not been formed into a commercial 
offering due to the lack of commercial demand from the buy‐side, who thus far have limited 
themselves to using the publicly‐available ISE index, supplemented in a few cases by one or two in‐
house, part‐time sustainability analysts.  Similarly, there are no solicited ‘sustainability’ rating services 
in Brazil, suggesting there is little or no demand for such solutions in Brazil’s corporate community. 
  
One exception to this may be the Brazilian firm Serasa, a credit rating and business information firm 
recently acquired by Experian.   Serasa has apparently been offering an “Environmental Responsibility 
Report” product on Brazilian firms since 2006 and reportedly introduced a “Social Responsibility 
Report” product in 2007.   However, beyond a short statement to this effect, the company’s website 
does not provide any further information on these products.  The Serasa products do not appear to 
have a high profile with the asset managers, pension funds and other stakeholders contacted during 
this project. 
Sell‐side equity research on sustainability issues 
 
Brazilian sell‐side broker/dealers do not produce any equity research focusing on environmental and 
social sustainability issues.  This is despite the efforts of the LASFF, which developed analytical 
methodologies for three sectors in 2007/08 and disseminated them through APIMEC, the Brazilian 
equity analysts association.  Again, the primary barrier is not a lack of expertise, but a lack of 
commercial demand from the buy‐side.    
 
Although international investment firms such as HSBC have recently begun to produce sustainability 
research on emerging markets such as India, emerging markets like Brazil are still under‐researched 
and certainly have not received any coverage of the kind being promoted in Europe and the US under 
programmes such as the Enhanced Analytics Initiative (EAI).  Some Brazilian companies are covered 
by global sector research:  for example, Petrobras is covered by Goldman Sachs’ recent research on 
sustainability issues in the energy sector. 
 
Networks and associations 
Industry bodies 
 
As noted throughout this report, many of Brazil’s investment industry associations and professional 
bodies are involved in sustainable investment issues of behalf of their members.  This includes 
participation in the ISE Advisory Board, awareness‐raising activities, and involvement in initiatives 
such as CDP.  The key organisations that are active in this respect are the Brazilian Association of 
Pension Funds (ABRAPP); the National Association of Investment Banks (ANBID); and the Association 
of Capital Markets Analysts and Investment Professionals (APIMEC). 
                                                                    
9
 Innovest Strategic Value Advisors Opportunities for the Majority Index: Analysis of Corporate Performance in Latin America 
and the Caribbean Inter‐American Development Bank (December 2007) 
 
UNEPFI 
 
Brazilian financial institutions are very active members of UNEPFI’s Latin America Task Force.  The 
Task Force focuses mainly on the banking sector and on building awareness and capacity for 
sustainable banking outside Brazil, and is therefore not considered further in this chapter.  It should 
be noted that UNEPFI’s Geneva‐based Emerging Markets Responsible Investment Project is closely 
involved in the PRI Brazil Network (see below) and that UNEPFI itself is a member of the ISE Advisory 
Board. 
LASFF 
 
The LASFF (www.lasff.org) was formed in 2006 by CES‐FGV with seed funding from IFC and is currently 
supported by FEBRABAN.  Members include BM&F Bovespa, APIMEC, Banco Real, Banco Itaú, Banco 
Bradesco, Unibanco, Citi and HSBC.  The Forum was created to: 
 
 Support opportunity‐detection and investment strategies on regional level; 
 Influence policy‐making and public sector awareness of the financial industry’s potential role 
in the promotion of sustainable development; 
 Create an on‐line system (or clearing house) containing a thorough database on SF to be 
used for research, professional education and exchange; 
 Foster the development of high quality products and services as well as training and 
research; 
 Promote career opportunities in sustainable finance as a field for professional development 
through training, communication and networking; 
 Coordinate efforts to enlarge sustainable finance markets regionally, through global 
networking with key global market makers. 
 
The LASFF Capital Markets Working Group is comprised of the main asset managers who currently 
run retail SRI funds (Chapter 5) and deals with the type of issues covered by this report.  Other 
thematic working groups exist for topics such as the Equator Principles, microfinance and reporting.   
The Working Group’s activities include collaboration with APIMEC to provide sustainability training for 
analysts (see previous page), and a recent sign‐on campaign urging listed companies to remove forced 
labour from their supply chains.   
 
CES‐FGV hosts an LASFF web site which is available in both English and Portuguese, although the 
majority of materials and downloads are in Portuguese only.   
 
The Forum is essentially a project of the CES‐FGV and is not constituted as a separate legal entity with 
its own staff, membership structure or budget.  The LASFF does not have a full‐time coordinator or 
director.  The Forum cannot be considered to be analogous to sustainable investment professional 
membership bodies such as the US Social Investment Forum (SIF), the UK Sustainable Investment 
Forum (UKSIF) or the Association for Sustainable & Responsible Investment in Asia (ASrIA).  
UNPRI 
 
The PRI Brazil Network was launched in late 2008 and is emerging as a major force for sustainable 
investment in Brazil.  The Network benefits from a part‐time co‐ordinator based in São Paolo and 
strong support from the PRI Secretariat and UNEPFI’s Emerging Markets Responsible Investment 
project.  A summary of the PRI Brazil Network’s organisation and work programme is provided in the 
box overleaf.  Initial efforts focused on gaining more Brazilian signatories in both the asset owner and 
asset manager categories.  The emphasis is now on support for implementation.  PREVI and other 
Brazilian UNPRI signatories are also able to draw on PRI’s centralised services including the PRI 
Engagement Clearinghouse and the PRI Enhanced Research Portal. 
 
 
 
PRI BRAZIL NETWORK 
 
 
Background  
 
The PRI Brazil Network was launched in November 2008 in response to strong signatory demand for a local 
Portuguese language platform. PREVI, the largest pension fund in Brazil, was leading this with support from the 
PRI Secretariat. The purpose of the PRI Brazil Network is to facilitate implementation of the Principles in Brazil 
and to promote collaboration among signatories on a range of material ESG issues in the local Brazilian context. 
The PRI Secretariat employs a part time coordinator in Sao Paolo who supports key network activities and 
translates PRI materials into Portuguese. The Network has monthly calls chaired by PREVI. During the first call 
signatories set up three working groups Engagement, Recruitment and Integration, which all currently have 
monthly calls.  
 
Engagement 
 
In 2009 the focus of the Engagement Group is on promoting disclosure and improving quality of sustainability 
reports in Brazil. This is done in the context of the Emerging Markets Disclosure project and the group is working 
closely with the Global Reporting Initiative (GRI) in Brazil. In order to select companies with which to engage, the 
group is planning to analyse corporate sustainability reports for the 2008 financial year and identify companies 
that need to improve reporting quality and those companies that do not report at all. Signatories will then 
collectively engage in dialogue with these companies to improve the quality of disclosure. In addition to the 
disclosure focus, there are several other potential engagements being considered, including the elimination of 
slave labour in the supply chain, and engagements in construction and in agribusiness sectors.  
 
Banco Real Asset Management coordinates the Engagement group. Active participants include Luz Engenharia, 
Funcef, Unibanco Asset Management, Astra Investimentos, HSBC Global Asset Management, Valia, Sustain 
Capital, PREVI, ARUS, Santa Fé Portfólios and NSG Capital.  
 
Integration of ESG issues into investment analysis 
 
Members of the Integration group plan to share methodologies for ESG integration into investment analysis. The 
goal is to compare different methodologies and to create a common methodology for integrating ESG issues into 
valuations, which can be used by all PRI signatories in Brazil. The group would also like to identify and select ESG 
indicators that are most relevant and material for investors in Brazil. Based on this selection, the group plans to 
create a questionnaire to send to companies. The group will also compare the most commonly used indicators in 
Brazil with the GRI indicators. 
 
The group is coordinated by Astra Investimentos and its participants include Funcef, Infraprev, Unibanco Asset 
Management, Banco Real Asset Management, Valia, Sustain Capital, Centrus, PREVI, Santa Fé Portfólios and NSG 
Capital. 
 
Recruitment 
 
This working group aims to promote PRI among investors that are not yet signatories. To facilitate recruitment 
and implementation, the PRI Secretariat is working on overcoming the language barrier by making key PRI 
materials available in Portuguese. For example a ‘sign up kit’ has been developed, with all key information about 
the PRI and a description of the sign up process in Portuguese.  
 
The Recruitment group is coordinated by Infraprev and has participants from Luz Engenharia, Banco Real Asset 
Management, Funcef, Unibanco Asset Management, PREVI, Mauá Investimentos, Santa Fé Portfólios and NSG 
Capital.  
 
Source: UNPRI 
 
 
Development finance institutions 
 
IFC has helped to develop the sustainable investment market in Brazil since 2002.  In addition to the 
current report, IFC’s technical assistance and advisory services have included support for: 
 
 a CES‐FGV market intelligence briefing (2003) 
 a major São Paulo conference on emerging market sustainable investment (2004) 
 the development of the ISE index (2005) 
 the creation of the LASFF (2006) 
 GRI reporting by corporations (2008) 
 
In addition, IFC has been providing occasional training courses on sustainable investment for private 
equity funds in Latin America since the late 1990s. 
 
The IADB also runs sustainable investment training courses for private equity funds and plays a key 
role in the INOVAR program discussed in Appendix D.   
 
BNDES’ role in building Brazil’s venture capital industry (including “cleantech” funds such as those 
launched recently by Stratus and Sustain Capital) is also discussed in Appendix D.  BNDES has US$16 
billion worth of investments in publicly listed companies but is not involved in Brazil’s sustainable 
investment movement (see page 33). 
 
Language barriers 
 
The availability of information, reports, conference materials and training programs in both 
Portuguese and English (and, ideally, Spanish) is an important factor in the operation and further 
development of Brazil’s sustainable investment market and its interaction with foreign investors.  It is 
widely agreed that the language barrier can be a significant problem.   
 
There is a large body of English‐language sustainable investment material that is relevant to Brazilian 
professionals.  Much of this is now being translated by the PRI Brazil Network.  Similarly, there is a 
substantial body of Brazilian material is relevant to international investors and analysts.  Although 
most corporate sustainability reports are available in English as well as Portuguese, other key 
materials (such as statistical data and information on legislation) are difficult for a non‐Portuguese 
speaker to access.  This is an unnecessary impediment to engaging with foreign portfolio investors on 
sustainability issues in Brazil’s capital market. 
 
Green consumerism 
 
According to research conducted by the National Geographic Society and the international polling 
firm GlobeScan, consumers in Brazil are amongst the “greenest” in the world in terms of sustainable 
10
consumption and ethical consumer choices  .   GlobeScan conducted Internet surveys of consumers 
in 14 countries to compare the behaviours of individuals in four key areas: housing, transportation, 
food, and consumer goods.  The index measures both discretionary and essential consumption.  
Consumers in Brazil and India tied as most "green," with each scoring 60 on the 100‐point 
sustainable‐consumption scale.  Those in the United States scored lowest, or most wasteful (Figure 
22).  Although the survey does not cover consumer attitudes and behaviour with respect to financial 
products and investment services, the results suggest a favourable retail environment for sustainable 
investment in Brazil. 
 
                                                                    
10
 Greendex 2008: Consumer Choice and the Environment—A Worldwide Tracking Survey  National 
Geographic/GlobeScan (May 2008) 
 
 
Figure 22:  Green consumerism in Brazil (source: National Geographic/GlobeScan) 
India (1) 60.0
Brazil (1) 60.0
China (3) 56.1
Mexico (4) 54.3
Hungary (5) 53.2
Russia (6) 52.4
Australia (7) 50.2
Germany (7) 50.2
Great Britain (7) 50.2
Spain (10) 50.0
Japan (11) 49.1
France (12) 48.7
Canada (13) 48.5
USA (14) 44.9

 
 
 
 
 
 
 
 
10.  BUILDING ON SUCCESS 
 
 
Overall market size 
 
Consolidated estimates of SRI assets under management 
 
Table 15 aggregates the various data, estimates and educated guesses from Chapters 4‐9 on the stock 
of sustainable investment in Brazil at the current time.  It should be emphasised that this exercise is 
based on numerous assumptions and estimates as stated in the report, as well as data from different 
sources and time periods: it provides only a rough approximation but one which may nevertheless be 
useful. 
 
Overall, the total stock of investment that may be classifiable as “sustainable” could be in the order of 
US$75 billion.  The total domestic market capitalisation of the São Paulo stock exchange at the end of 
October 2008 was US$585 billion.  “Sustainable” investment could therefore be at least 10 per cent of 
market cap.  Taking a conservative approach, TERI‐Europe believes an estimate of US$40 billion (<7 
per cent of total market cap) may be more useful for comparative and decision‐making purposes. 
 
 
Table 15:  TERI‐Europe’s estimates of the stock of sustainable investment (SI) in Brazil 
Estimated stock of SI   Percentage of 
Segment  Basis for % comparison 
(US$ billion)  segment total    
Asset manager signatories to  ANBID data (Oct 2008); estimating 
UNPRI (excluding NAV of SRI  US$7.9  11%  15% allocation to equities; assuming 
funds, below)  UNPRI implementation 
ANBID data (Oct 2008) and CVM data 
(Jan 2009); estimating that 15% of 
Retail SRI mutual funds  US$0.3   2% 
total retail AUM are allocated to 
equities 
ABRAPP data (Sep 2008); estimating 
Pension fund signatories to 
US$35.0  60%  32% allocation to equities; assuming 
UNPRI 
UNPRI implementation 
BNDESPAR holdings as of June 30, 
BNDES 
Unknown  Unknown   2008; Bovespa trading data as of Jan 
(US$16 billion in listed equities) 
23, 2009 
Foreign investment under SI  CVM data (Aug 2008); guessing that 
US$1.2   <1% 
management  1% of total stock is SI 
ADR investment under SI  ADR data as of Jan 2009; guessing 
US$1.0   <1% 
management  that 1% of total stock is SI 
Independent estimates of HNWI 
HWNI assets available for  wealth; guessing that allocation to 
US$24.5  <5% 
sustainable investment   equities is 35% and SI could be 5% of 
this 
TOTAL excluding BNDES  US$70 billion  12%  Percentage of total domestic market 

cap (US$585 billion as of Oct 2008) 
(World Federation of Exchanges data) 
TOTAL including BNDES  US$86 billion  15% 
 
 
Brazilian SRI in a global context 
 
Europe and the US provide useful international benchmarks.  Eurosif estimates that SRI assets 
11
represent over 17 per cent of the asset management industry in Europe .  According to the US Social 
Investment Forum, roughly 11 per cent of assets under professional management in the US are now 
12
involved in SRI . 
 
Strengths and weaknesses 
 
Appendix B provides a detailed analysis of the strengths and weaknesses identified by TERI‐Europe 
across the overall “ecosystem” of sustainable investment in Brazil.      
Strong commitment 
 
Brazil has made significant progress in developing a sustainable investment market over the last 
decade and rightly deserves its reputation as the leader among emerging economies in this regard.  
These achievements are attributable to the long‐term vision and commitment of a relatively small 
number of individuals and organisations in Brazil (particularly BM&F Bovespa, Banco Real, PREVI, CES‐
FGV and the Ethos Institute), supported at key moments by external change agents such as IFC, CDP, 
GRI and UNPRI.  
 
In addition to what has been achieved for the country itself, the evolution of a sustainable investment 
market by Brazil has led other emerging markets to focus on the same issues and goals. 
Strong business case   
 
Taken in combination, the many positive trends described in this report add up to a strong prima facie 
case for the mainstream importance of sustainability in business and investment in Brazil today, even 
if the current body of empirical data does not yet allow the business case to be proved by impeccable 
quantitative evidence.   
Contribution to sustainable development 
 
Brazil’s sustainable investment movement is now just beginning to move into the evolutionary phase 
where its development impact can start to go deeper as a result of efficient capital allocation to 
private enterprises that create real, on‐the‐ground, benefits to people’s livelihoods and the 
environment.   
 
For example:  
 
 the ISE index is gradually becoming more rigorous and assertive in holding companies to 
account; 
 
 shareholder engagement is (slowly) beginning to evolve from an emphasis on sustainability 
reporting to direct pressure on issues such as forced labour in the supply chain; 
 
 there are opportunities to create new investment products with high development impact 
themes such as climate change, SME finance, blended value investment, biodiversity and 
indigenous peoples. 
 
 
                                                                    
11
 2008 European SRI Study (Eurosif, 2008) 
12
 2007 Report on Socially Responsible investing trends in the United States (Social Investment Forum, 2007) 
 
 
Strategic challenges and risks 
 
Despite the many positive things that can be said about Brazil’s sustainable investment market, the 
movement is still relatively small and somewhat fragile, especially given current market conditions.   
Economic turmoil aside, the main challenges that lie in front of Brazil with respect to sustainable 
investment over the next two to three years are: 
 
 Stagnation (especially relevant to asset managers competing in the non‐institutional investor 
market)  
 Fragmentation (especially between the LASFF/ANBID and UNPRI/ABRAPP “cliques”) 
 Possible corporate push‐back (especially in relation to a more assertive ISE and early efforts 
at shareholder engagement) 
 Excessive risk aversion, reluctance to deviate from the IBovespa benchmark and internal 
resistance to new concepts and practices 
 Internalising the costs of sustainability research as well as the benefits  
 Meeting raised expectations (especially relevant to UNPRI pension funds) 
 Planning and adapting market architecture to meet evolving needs, including investment in 
human capital 
 
Issues on the horizon 
The ISE paradox 
 
The ISE index has been very successful.  Amongst other things, it has: 
 
 significantly increased the amount of SRI assets under management;  
 increased choice for retail investors;  
 stimulated competition between asset management firms;  
 raised companies’ awareness and influenced their behaviour;  
 shown that sustainable investment strategies can match the performance of conventional 
benchmarks;  
 encouraged BM&F Bovespa to introduce other sustainability services; and 
 prompted the creation of similar indices in other countries.   
 
Going forward, however, the ISE also presents some complex challenges that have critical 
implications.  If these issues are not resolved, Brazil’s sustainable investment market could potentially 
end up in an evolutionary cul‐de‐sac.  They basically boil down to the commercial business model 
adopted for the index. 
 
As discussed in Chapter 3, all BM&F Bovespa indices, including the ISE, are made available to investors 
free of charge.  Companies wishing to be included in the ISE pay an evaluation fee of US$2,000; 
companies admitted to the ISE can also purchase a license to use the ISE brand for a fee of US$7,000 
per annum.  These income streams are the only source of revenue to cover the ISE’s maintenance 
costs, which are largely incurred by CES‐FGV.   
 
Assuming that CES‐FGV analyses 50 companies a year (see Table 2, page 12) and that all of the 40 
companies admitted to the ISE pay for a license to use the brand image, annual gross income is likely 
to be in the region of US$300,000.   By comparison, assuming that management fees on the ten SRI 
funds listed in Table 5 (page 20) are a conservative 1 per cent, gross income on those ISE‐based funds 
could be about US$3 million per annum at the bottom of the market.  At the height of the market in 
December 2007, this figure may have been closer to US$7 million per annum.     
 
Although these are “back of the envelope” calculations, it should also be noted that they do not take 
into account the economic value of the ISE to beneficiaries such as PREVI and other Brazilian pension 
funds, for whom the ISE is currently one of the main tools available for implementation of the PRI 
across a total equity portfolio of around US$35 billion (page 25).  
 
 
The long‐term durability and equitability of ISE’s business model therefore deserves particular 
attention, especially given the need to support further innovation and capacity building in this field.   
The key points for consideration are as follows: 
 
 The entities that benefit most from the index (the SRI fund managers and – to a less extent ‐ 
the UNPRI pension funds) do not remunerate those who provide the service and carry the 
risk (BM&F Bovespa and especially CES‐FGV). 
 
 The entities that do pay for the index are the companies that apply to join it and the 
companies that are ultimately admitted.  This could pose a potential or actual conflict of 
interest. 
 
 Gross income earned by the index (i.e. by CES‐FGV) is effectively capped by the ISE 
regulations on the number of companies that can be included in the notional portfolio, 
regardless of how successful the index is in terms of adding value to its customers (the SRI 
fund managers and pension funds).   Not only is this basically unfair and commercially 
irrational, it also creates the theoretical risk that regulations might be changed to expand the 
portfolio simply to increase revenue at the expense of quality. 
 
 CES‐FGV’s overheads as data provider to the ISE are not a topic for this study but it may be 
reasonable to assume that net income is not large and leaves little scope for human capital 
development, investor education, corporate outreach, marketing or research & 
development. 
 
 The underlying data collected and maintained by CES‐FGV are potentially very useful to 
investors, analysts and other organisations and could generate additional revenues that 
could be used for strategic development.  However there is no commercial or even not‐for‐
profit outlet for this data.  This may be partly attributable to confidentiality agreements 
between CES‐FGV and companies responding to the ISE questionnaire. 
 
 Investors can use the ISE free of charge and it meets their basic needs at the current time.  
This may create a disincentive for investors to pay for the development or purchase of more 
advanced sustainable investment tools.  Arguably, it also seriously distorts the potential 
market for the commercial provision of more advanced tools.  In a worst case scenario, a 
monopoly situation then develops with no incentive or financial means for innovation in a 
marketplace that has become accustomed to subsidised externalisation of the costs of 
investing responsibly. 
 
A related issue is the fact the ISE methodology (and cost/revenue structure) relies on collecting data 
by means of a questionnaire and the response rate to this questionnaire has fallen every year since 
the ISE’s launch in 2005 (Table 2, page 12).  Given the success of the index and the increase in 
sustainability reporting (Figure 19, page 42), the response rate trend should be strongly positive.  
Questionnaire fatigue is a well‐known facet of the sustainable investment industry around the world 
and requires prompt mitigation or adaptation.  Falling company interest in or cooperation with the 
ISE is a matter of concern that should be given priority attention as soon as possible.   
 
The matter is further complicated by the possibility that PRI pension funds in Brazil may develop their 
own ESG questionnaire that they would jointly send to Brazilian companies (see pages 12 and 48). 
Limited research coverage  
 
As discussed on page 46, ESG research on Brazilian equities is relatively limited at the current time.  In 
particular, Brazilian sell‐side analysts do not produce ESG research (despite initiatives by LASFF and 
APIMEC) and Brazil does not have any local sustainable investment research firms. 
 
 
Brazil has proven that it has expertise to produce such ‘advanced’ sustainable investment tools, or at 
least the capability to create or acquire such expertise.  Although corporate sustainability reporting is 
still far from perfect, it provides a reasonably good dataset for such research and is improving.  
Moreover, CES‐FGV collects and maintains an extensive database of relevant information, as a result 
of its work on the ISE index: this knowledge bank could be made available to commercial research 
providers, for example through licensing agreements or some form of commercial partnership. 
 
The expertise and information exists in Brazil but has not been formed into a commercial offering for 
a simple reason: there is little or no commercial demand from the buy‐side.  In turn, this is 
attributable to four factors:  
 
 The disincentive created by a “free” ISE index, as discussed above. 
 
 Investors like PREVI are only just beginning to work out what their needs are for the kind of 
“advanced” analytical tools that require good quality ESG research. 
 
 Moreover, pension funds and asset managers in Brazil have a relatively strong ethos of 
developing and using in‐house expertise – out‐sourcing is not a strong part of the culture. 
 
 The Brazilian sustainable investment community as a whole has not leveraged the 
purchasing power of foreign portfolio investors by sensitizing them to the advantages (and 
potential availability of) good quality ESG research provided by in‐country experts with deep 
local insight. 
Stagnation in the asset management sector 
 
Chapter 5 describes the remarkable emergence of SRI mutual funds in Brazil, beginning with Banco 
Real’s Ethical Fund in 2001 and expanding over the 2005‐2007 boom years.  Several issues suggest 
that there is a risk of stagnation in this small but important section of the Brazilian sustainable 
investment market.  
 
At US$315 million, the ten SRI funds still represent a very small proportion of total assets under 
management.  For example, Banco do Brasil dominates the market in terms of assets under 
management that are invested in equities, with more than twice the business of its two closest 
competitors put together (see Figure 10, page 16):  SRI is only 0.05 per cent of this business (Figure 
15, page 24).   
 
Amongst those asset management firms with SRI funds, the “mainstreaming” of sustainable 
investment practices across “conventional” strategies and products appears to be rather limited 
(page 18).  Several firms that manage SRI funds are not yet signatories to the UNPRI.  None of the 
asset management firms employs full‐time ESG analysts, and five do not even have part‐time ESG 
analysts. 
 
Despite several new entrants to the market since the launch of the ISE, market share in the SRI niche 
continues to be dominated by the early pioneers, Banco Real and Itaú, who each control about 40 per 
cent of total SRI net assets (Figure 12, page 21).  The ten SRI funds are all “first generation” products 
that are similar to one another in terms of their sustainability features (page 23) and financial 
performance (Figures 13 and 14).  There has been almost no product innovation (either around alpha‐
seeking ESG strategies or high environmental/ social development impact strategies) since Banco 
Real, Itaú and the ISE index provided the “blueprint” for others to follow.   
 
Retail appetite for these somewhat homogenous sustainability products appears to have begun to 
level out in the middle of 2007, although this obviously coincides with the recent decline in retail 
appetite for variable income products in general.  This potential stagnation is exacerbated by the 
asset managers’ relative isolation from the main driving force for sustainable investment in Brazil 
today, i.e. PREVI and the other pension fund signatories to the UNPRI.   
 
The pension funds largely manage their equity portfolios in‐house and until recently there has 
therefore been little or no know‐how transfer or cross‐fertilization of ideas between the pension 
funds and asset managers such as Banco Real that have pioneered SRI in Brazil and developed in‐
house research capacity.   
Limited involvement of foreign portfolio investors 
 
The ISE index and Brazil’s sustainable investment movement in general do not yet seem to have 
captured the imagination of foreign portfolio investors or investors in Brazilian ADRs (page 11).  With 
some exceptions (such as collaborative engagement on the issue of forced labour) (page 32), foreign 
portfolio investors have had relatively little active involvement in Brazil’s sustainable investment 
activities, especially since the “loss” of ABN AMRO’s Luxembourg‐registered Brazil Equity Fund (page 
29).   
 
In part, this reflects the fact that sustainable investment is only just now beginning to mature in Brazil 
and is still a relatively new concept for the majority of foreign investors in emerging markets.  
However, it also highlights the absence of a coordinated international marketing strategy by all those 
involved in Brazil’s sustainable investment community. 
Fragmentation and overlap in market leadership 
 
Unibanco, Banco Real and HSBC are members of both the LASFF and PRI Brazil Network, with the 
latter two firms playing a particularly active role.  Other than this, there is little or no membership 
overlap or interaction between LASFF and the UNPRI network in Brazil.  Until very recently, the two 
networks appear to have had relatively little to do with one another and to some extent they 
compete for members and influence.  At the current time the PRI Brazil Network appears to have 
significantly more momentum than the LASFF. 
 
Recommendations 
Update the ISE’s commercial business model 
 
BM&F Bovespa and CES‐FGV should consider changes to the ISE’s commercial business model that 
would: 
 
 encourage sustainability investors (asset managers and pension funds) to begin to internalise 
the costs of sustainable investment; and 
 
 provide stronger foundations for continuous improvement to the ISE’s regulations and 
methodology, for international marketing and promotion, and for the possible later 
development of new products such as the idea of a regional index. 
 
The rationale for changing the ISE’s commercial business model would be as follows: 
 
 Reduce the index’s financial reliance on companies, in order to eliminate the risk of conflicts 
of interest. 
 
 Create income that is linked to the value that the index provides to investors, not the 
number of companies in the index basket. 
 
 Allocate more resources for marketing and promotion, especially at the international level 
(thus enhancing the brand value of the ISE for companies). 
 
 Create incentives to find commercial outlets for the underlying database and knowledge 
bank held by CES‐FGV. 
 
 
 Remove the risk that the index could be inadvertently holding back progress by distorting the 
commercial market for complementary research and rating services. 
 
The assessment fee currently paid by companies ‘applying’ for admission to the index could be 
reduced or phased out completely (the license fee paid by ISE companies for the right to use the ISE 
logo should probably be maintained). 
 
The names and weightings of ISE portfolio companies have always been in the public domain, as with 
all BM&F Bovespa indices.  Changing this may be counter‐productive as well as impractical.   
 
However, some type of fee structure could be phased in for those asset managers who currently use 
the ISE to manage and market existing SRI products.  At the simplest level, this could be a license fee 
for the right to use the ISE name and logo in fund prospectuses, fact‐sheets and related marketing 
materials, perhaps with a simple sliding scale based on NAV.  For existing ISE‐based funds (and given 
current market conditions), it may be appropriate to make this a voluntary arrangement in 2009‐2010 
on the understanding that their contributions will be passed on to BRASIF (see pages 61‐64).  More 
robust arrangements could be developed as and when asset managers start to develop new SRI funds 
under more favourable economic conditions. 
Make greater use of ISE data 
 
There are probably various ways to create commercial outlets for the ISE database held by CES‐FGV, 
as well as a number of potential barriers to market entry.  The best way to explore and test these 
possibilities is to put the concept to the test of entrepreneurialism, whilst also looking at the lessons 
that can be learned from other markets.  The options could include: 
 
 A solicited ESG or CSR rating product, i.e. companies pay to be rated by an independent firm 
and are then able to use this rating/report in their investor relations and public relations.  
Examples include Reputex’s recent work in China, and the European solicited ratings 
business of the French firm, Vigeo. 
 
 An on‐line database of historical GRI‐type indicator data.  In theory, companies would pay to 
have their information on this database (as a way to deal with questionnaire fatigue) and 
investment analysts would pay to access it.  The London Stock Exchange developed a similar 
product (the Corporate Responsibility Exchange) several years ago.  Although their particular 
business format did not find commercial success at the time, it may provide useful lessons 
and ideas. 
 
 A joint venture or similar arrangement between CES‐FGV and an established SRI research 
house in Europe or North America.  CES‐FGV could license its database to the research 
house, which would then be able to offer much better coverage of Brazilian stocks for its 
off‐the‐shelf products and customised research.  The Johannesburg Stock Exchange’s 
Socially Responsible Investment (SRI) Index (where the data provider is the UK‐based firm 
EIRIS) may provide some useful lessons and ideas in this regard. 
 
PREVI has commented that it needs tools that go beyond the in/out screening represented by the ISE 
(pages 11 and 26).  It needs to be able to drill down into companies based on ESG issues and carry out 
horizontal comparisons between companies and sectors.  In light of this, the UNPRI pension funds 
may be the main initial audience for new information products based on the underlying database and 
knowledge bank that CES‐FGV has built up by being the data provider for the ISE since 2005.   
 
As discussed on page 12, the PRI Brazil Network’s Integration Working Group is examining the ESG 
indicators that are most relevant and material for investors in Brazil and consideration is being given 
to developing a joint questionnaire that the PRI pension funds will send to Brazilian companies.  The 
relationship between this initiative and the ISE index is currently unclear.  Clarifying this issue will also 
be important in taking forward the idea that greater use can be made of the ISE database.   
 
 
Create a commercial market for ESG research 
 
The key mechanism for creating a business environment that favours commercial ESG and SRI 
research providers consists of updating ISE’s commercial business model and exploiting the latent 
value of the underlying ISE database, as discussed above.  This involves a major but necessary change 
in mind‐set: the costs of investing sustainably should be internalized in order to drive the next phase 
of progress.  These costs should be regarded as an investment in the future, not just an overhead.  
 
Willingness to make this shift in mind‐set and practice is an important test of Brazil’s commitment to 
sustainable investment, especially in relation to the possibility of new support from DFIs. 
 
Consideration should also be given to complementary initiatives that would help to encourage ESG 
research and rating providers.  For example, competitive forums could be created to showcase good 
research.  The Enhanced Analytics Initiative (recently absorbed into the UNPRI) and UNEPFI’s 2004‐
2005 “Materiality” project provide models that might be adapted in this regard. 
Develop human capital 
 
There are probably fewer than a dozen individuals in Brazil at the current time with substantial hands‐
on experience in ESG analysis and SRI portfolio management.  These experts are located mainly in the 
asset management arms of organisations like Banco Real, Votorantim and HSBC.  These organisations 
also have relevant expertise in their corporate banking and project finance business units as a result 
of initiatives such as the Equator Principles.  
 
There is therefore a great deal of asymmetry between human and financial capital for sustainable 
investment.  The human capital is mainly located in asset managers, the financial capital is mainly 
located in pension funds; there is not a lot of interaction, and the human capital is spread thinly. 
 
This report has already emphasised the need for closer cooperation on sustainable investment 
between Brazil’s pension funds and leading asset managers.  Human capital development can be part 
of this, for example through joint workshops or even secondment of staff.  This could be done on a 
domestic only basis (between Brazilian organisations) or a mutually beneficial international basis (for 
example, with European and North American counterparts and/or with DFIs such as IFC). 
 
It may be useful to prepare an inventory of existing human capital and survey key organisations about 
their current and future needs.  Training and employment opportunities could be advertised on 
relevant websites, and appropriate plans for training and qualifications could be developed with 
organisations such as the FGV business school, APIMEC and other bodies.  Human capital 
development with other market actors may also be useful.  For example, there may be value in 
holding workshops or seminars with CVM officials, the Brazilian Institute of Investor Relations (IBRI) 
and similar stakeholders.   
Implement an international strategy 
 
Brazil’s sustainable investment community should develop an international communications and 
technical cooperation strategy with the following main objectives:  
 
 Raise the international profile of the ISE Index and ISE companies (in cooperation with 
BM&F Bovespa) 
 
 Help “mainstream” international investors in Brazil to understand the importance of ESG 
issues and the resources that are available to assist them. 
 
 Encourage international sustainability investors to invest in Brazil and to develop products 
similar to the former ABN AMRO Brazil Equity Fund discussed on page 29. 
 
 Import and export of news, information, new research and market intelligence. 
 
Such a strategy should focus on a targeted range of foreign stakeholders including institutional 
investors, investment consultants, asset managers and SRI research houses.  The strategy should 
address the language barriers discussed on page 49 and help to provide a single focal point for 
international access to relevant information from multiple Brazilian sources and organisations.  Apart 
from a good quality website and a bi‐lingual communications officer, this strategy could include: 
 
 Blogging. 
 Monthly or quarterly newletters/e‐mail bulletins. 
 Annual or biennial reports on the state of sustainable investment in Brazil (similar to the 
annual Eurosif reports on SRI in Europe, and perhaps taking this TERI‐Europe report as a 
starting point for future updates). 
 Participation in relevant international networks in addition to the UNPRI and regular 
attendance at appropriate overseas conferences. 
 Capital markets events/analyst presentations on sustainable investment in Brazil. 
 Annual or biennial surveys of foreign institutional investors’ views and/or activities in 
relation to sustainable investment in Brazil. 
Invest in research and development 
 
This report identifies several areas where there are significant and important data gaps.  In order of 
likely priority, the four main topics that merit further investigation are: 
 
1.  ESG Issues Mapping    
 
At the current time, there is no single source that provides (and updates) an investor‐friendly 
synthesis of key ESG issues relevant to shareholder value in Brazil’s main industry sectors (page 4).  
These sectors are financial services; oil & gas; mining; steel; utilities; telecommunications and 
transportation (see Figure 1).  Pulp & paper and biofuels should probably also be added to the list.   
 
IFC is currently sponsoring a similar mapping exercise on the Indian market by WRI, and this could 
provide a model for the kind of research that is suggested here.  LASFF and APIMEC have already 
developed relevant materials on three sectors (page 46) and these may also provide a valuable 
foundation for this activity.  Amongst other things, such an ESG mapping exercise should pay special 
attention to climate change, particularly the economic and commercial implications of Brazil’s 
recently published National Plan on Climate Change (see Appendix A). 
 
2.  ESG Footprint of Foreign Institutional Investors    
 
It is currently difficult to form an accurate picture of the foreign portfolio investors who are the main 
investors in Brazilian stocks, although good data are publicly available in relation to ADRs.  In both 
cases, information on the extent to which such investors take ESG considerations into account in one 
way or another is mainly anecdotal (Chapter 7).   
 
Further studies to answer these types of questions would probably have synergy with the work of the 
UNPRI, as well as a forthcoming Mercer Investment Consultants report (commissioned by IFC) on ESG 
practices in the world’s leading asset managers for the emerging markets asset class.   
 
Together with the suggested “ESG Mapping” project, this research would be valuable for the 
international strategy described earlier. 
 
3.  Non‐financial disclosure practices    
 
As discussed in Chapter 9, Brazilian companies have a good and continually improving record of 
voluntary non‐financial disclosure, in the form of annual sustainability reports (largely following GRI 
guidelines) and the number (if not necessarily the quality) of responses to the Carbon Disclosure 
Project.   
 
 
On the other hand, these activities still appear to be coloured by public relations objectives rather 
than the governance of material ESG‐related risks (for example, see SustainAbility’s observations on 
page 43).  This impression is reinforced by a cursory review of IPO prospectuses and Form 6‐K filings 
with the US SEC (pages 39‐40). 
 
Arguably, it may now make sense to capitalise on the strengths of current practice and make progress 
on remaining gaps by institutionalising non‐financial disclosure through some type of formal code.  
This would reinforce the kind of corporate governance leadership represented by the Novo Mercado, 
and would need to take into account: 
 
 emerging best practice as illustrated by the recent ICGN statement (page 39) and related 
measures being taken by exchanges in other markets such as Australia (page 40); 
 
 possible developments in relation to climate change disclosure under US SEC rules (page 39); 
 
 expectations for an eventual recovery in Brazilian IPO activity (see Appendix A for 
information on capital raising prior to the current global economic downturn).       
 
However, further research on the current baseline is needed in order to weigh up the potential 
business case for such an initiative.  The starting point should probably be a detailed review of the 
treatment of ESG risk issues in regulatory filings and recent IPO prospectuses, perhaps in conjunction 
with research into Brazilian and international buy‐side views on this subject. 
 
4.  HNW Opportunities    
 
Brazil’s rapidly growing HNW population forms a wealth management market of over US$1 trillion.  
Although “green investment” trends in the HNW market have been researched at a global level (by 
CapGemini and Merrill Lynch), there is no detailed information on this market niche in Brazil (page 
36).   An educated guess is that the potential stock of HNW sustainable investment in Brazil could be 
roughly US$70 billion.  For comparison, the total stock of retail assets under management is about 
US$110 billion (page 19), and the sustainability component of this is only US$315 million and appears 
to be stagnating (page 23). 
 
Given that the Brazilian pension funds with the most interest in sustainable investment tend to use in‐
house equities managers (page 25), the HNW market probably represents the best opportunity for 
Brazil’s asset managers to expand their sustainable investment product range and market share.  To 
stimulate competitive thinking on this theme, it may be useful to carry out market research into this 
area along the lines of EUROSIF’s assessment of the European market (page 36).  This might even be 
combined with a targeted public opinion survey on “green financial consumerism”, building on the 
National Geographic/GlobeScan survey (page 49). 
Foster competition and innovation 
 
In addition to the market research outlined above, other measures can be taken to stimulate 
renewed competition and innovation among Brazil’s asset managers in the SRI field once economic 
conditions improve.  One of the most obvious possibilities is to encourage better differentiation 
between the rival products in relation to their sustainability credentials as well as their financial 
performance.  
 
For example, Trucost, the London‐based international environmental research organisation, 
calculates an annual ranking of UK investment funds based on their carbon emissions, enabling 
13
investors and others to compare investments on an environmental basis .   The firm has also recently 
extended this kind of analysis to Australian funds and, with the support of IFC, to emerging Asian 
funds.  Research of this kind on Brazil could produce some very interesting and useful results. 
 
                                                                    
13
 Carbon Counts 2007: The Carbon Footprint Ranking of UK Investment Funds (Trucost, 2007) 
 
Another possible route that might be suitable for Brazil in the medium term is illustrated by the 
Eurosif Transparency Guidelines.  These focus on retail SRI funds in order to increase accountability to 
consumers.  Launched in November 2004 with support from the European Commission, as of April 
2008, there were about 50 signatories, representing more than 140 SRI funds. Eurosif has created a 
logo specific to the Transparency Guidelines that can be used by signatories once their responses to 
the Guidelines have been updated and reviewed by their national Social Investment Forum.  
Signatories are expected to disclose information on a number of questions, including: 
 
 How does the fund define SRI? 
 What are the SRI criteria of the fund? 
 What is the SRI research methodology and process? 
 How are the results of research integrated into the investment process? 
 What is the policy and procedure for divestment on SRI grounds? 
 What methods of engagement are employed? 
 What engagement activity has been carried out on behalf of the fund during the past year?  
 Does the fund have a voting policy and are voting practices disclosed? 
 What voting actions occurred that were related to the SRI fund criteria?  
 
Fostering “second generation” sustainability products and strategies through competition and 
innovation among Brazil’s asset managers would arguably also have significant benefits for pension 
funds implementing PRI.  As previously noted, PREVI and other leading UNPRI signatories have 
historically relied on in‐house analysts and portfolio managers, and there have been few 
opportunities to harness the SRI experience of external asset managers.  By working together under a 
more collaborative framework, however, creative partnerships could be developed.   
 
For example, a pension fund (or consortium of pension funds) might consider putting a relatively 
small mandate (say US$100 million) into the hands of an external manager as a “one‐off” strategic 
learning exercise that can then be internalized.  The RFP would invite asset managers to come 
forward with innovative, “second generation” SRI strategies (for example, based on engagement, 
carbon optimisation or sustainability leaders).  Such a unique, prestigious and strategically important 
mandate is likely to stimulate a high level of competition and innovation, both among the asset 
management firms and internally among in‐house portfolio managers. 
 
Organising for success 
 
For a number of reasons, 2009 is probably a milestone year in the development and evolution of 
Brazil’s sustainable investment market.  The last ten years or so have seen a number of building 
blocks fall into place and the market has attained a new level of maturity and mainstream 
acceptance.  New risks and opportunities lie ahead.  The way that the sustainable investment 
community adapts to these risks and opportunities over 2009‐2010, through difficult economic 
conditions, is likely to shape its market for at least the next five years.  
 
The issues that need to be addressed (and their potential solutions) are inter‐related and, to a large 
extent, inter‐dependent.  A strategic vision is therefore required.  The ideal development path 
involves a series of linked and mutually reinforcing actions that, in combination, will: 
 
 help Brazil’s pension funds to meet their UNPRI objectives in a cost‐effective manner; 
 
 encourage and enable Brazil’s asset managers to develop “second generation” sustainable 
investment products for their clients, especially in the retail and HNW market;   
 
 unlock the latent potential of sustainable foreign investment. 
 
The recommendations in this report form the main elements of such a strategic development 
concept.  Such a strategic vision underlines the need for Brazil’s sustainable investment community to 
improve the way it is organised. 
 
 
The Latin American Sustainable Finance Forum (LASFF) has played an important role since its creation 
in 2006 and its significant contribution deserves acknowledgement.  However, LASFF was not 
designed as an analogue to organisations such as the UK Social Investment Forum (UKSIF) or Eurosif 
that are vital to mature sustainable investment markets in other parts of the world.  The time may 
now be right to create such an organisation to represent and support Brazil’s multi‐billion dollar 
sustainable investment industry.  One option might be to create a Brazilian Sustainable Investment 
Forum (BRASIF).  This concept is outlined in the box below and would need to unify the interests of 
the PRI Brazil Network, the retail SRI fund managers and the ISE.   
 
 
 
 
Possible concept for a Brazilian Sustainable Investment Association (BRASIF) 
 
The geographic focus should be firmly on Brazil, not the region.  Other economies in the region are too far 
behind Brazil in relation to sustainable investment; given the important needs of Brazil itself, other organisations 
such as UNEPFI and IFC should take the lead in sowing the seeds for sustainable investment in those countries.  
Brazil should, of course, continue to support regional awareness raising and capacity building on this subject to 
the extent possible, especially in relation to sustainable investment issues that have a cross‐border significance 
such as climate change, regional infrastructure development and Brazilian multinationals. 
 
The industry focus should be firmly on institutional, retail and HNW portfolio investment in listed equities, 
expanding as and when appropriate to include other assets classes that are important for institutional investors 
(such as private equity, real estate and corporate bonds).  Sustainable banking and the Equator Principles are 
already well served by organisations like FEBRABAN, UNEPFI and IFC. 
 
BRASIF could be a separate legal entity constituted as a not‐for‐profit membership organisation with an elected 
board of directors and a full‐time executive director; ideally it would also have its own office premises and a 
small staff handling administration and communications.  The US Social Investment Forum, UKSIF and ASrIA all 
provide good models for BRASIF to adapt.  “Twinning” with an organisation like UKSIF or the US Social 
Investment Forum could be very valuable.  This approach would help to ensure that BRASIF’s learns from the 
successes (and mistakes) of other sustainable investment membership organisations.  In addition, it would 
provide an excellent mechanism for raising Brazil’s profile with foreign sustainability investors. 
 
Importantly, BRASIF would need to be a coming together of Brazil’s pension funds and leading asset managers, 
who have thus far mainly moved in separate circles as far as sustainable investment is concerned.  PRI would be a 
very important part of BRASIF’s agenda and there should be a close working relationship with the UNPRI Brazil 
Network.  UNPRI and UNEPFI have recruited a part‐time PRI coordinator based in Brazil, and co‐location could be 
considered. 
 
BRASIF would continue the goals set out for LASFF and be the main driving force and monitor of the strategic 
development vision that evolves from the proposals in this report.  Specific priorities and possible projects would 
include: 
 
 Fostering a commercial market for ESG research; 
 Human capital development; 
 A strategy for international engagement and marketing Brazil overseas; 
 Research and development on issues of common interest to members; and 
 Fostering “second generation” sustainability products and strategies through competition and 
innovation among Brazil’s asset managers. 
 
The moral support (and possibly financial support) of development finance institutions such as IFC, IADB and 
BNDES would help to refine and implement this strategic development vision.  In BNDES’s case, involvement is 
also relevant in view of BNDESPAR’s own significant investments in publicly quoted companies.  One option could 
be for BRASIF to have some type of DFI Liaison Group, composed of the development banks and key BRASIF 
members, to provide an informal framework for such interaction and potential support. 
 
 
 
 
 
 
Figure 23:  Possible framework for funding BRASIF 
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One possible disadvantage of the BRASIF concept is that it could dilute the momentum of the PRI 
Brazil Network and, in particular, lead to competition for membership fees.  Weighing against this, 
however, are the significant benefits of having an organisation such as BRASIF that combines the PRI 
Brazil Network with other Brazilian organisations that are not currently PRI signatories (or, in the case 
of industry associations such as APIMEC, are not eligible to become signatories) in order to have one 
body representing Brazil’s national interests in sustainable investment.   Work‐around solutions may 
be possible to avoid competition for membership fees in a way that also provides organisational 
clarity and win‐win benefits for all stakeholders.   
 
One such possible solution is illustrated in Figure 23. This takes into account a number of related 
recommendations made earlier in this chapter, including updating the ISE’s business model and 
exploring opportunities for CES‐FGV to make greater commercial use of the underlying data.  The 
concept involves increasing ISE fee revenues to BM&F Bovespa; the stock exchange could then use 
net ISE fee income to sponsor BRASIF.  Whilst it may still be appropriate for BRASIF members to pay a 
membership fee (to discourage ‘free‐loaders’), this fee could be relatively low.   
 
 
Ultimately, the right way forward for Brazil must come from a bottom‐up, demand‐driven process 
rather than through a top‐down blueprint imposed from outside.  The analysis and recommendations 
in this report are offered for consideration and discussion by all participants in Brazil’s sustainable 
investment market.   
 
The final recommendation of this report is therefore to suggest that it might be useful for relevant 
stakeholders to come together in some type of roundtable discussion that takes stock on the progress 
made over the last five years and enables debate on the strategic direction and needs of the market 
over the next five years or so.  Hopefully, this report will add value to such a process.  Whether and 
how this happens will depend on the right people taking the initiative for convening and shaping the 
discussion going forward.  Given the quality of leadership for sustainable investment in Brazil, there is 
an encouraging number of candidates for this role.  TERI‐Europe and the authors of the report look 
forward to feedback with great interest and will be pleased to lend their ongoing support.        
 
APPENDIX A: 
COUNTRY PROFILE 
 
 
Profile 
 
Table 16 provides information on selected development indicators for Brazil.  Based on the IMF’s 
2008 estimates of worldwide GDP, Brazil is today the world’s 10th largest economy (Figure 24).  
Characterized by large and well‐developed agricultural, mining, manufacturing, and service sectors, 
Brazil's economy outweighs that of all other South American countries and is expanding its presence 
in world markets.  Brazil became investment grade at the end of April 2008, when Standard & Poor’s 
upgraded Brazil’s sovereign debt rating to BBB‐ from BB+.   
 
The World Bank/IFC annual Doing Business survey of 181 countries worldwide provides a quantitative 
measure of regulations for starting a business, dealing with construction permits, employing workers, 
registering property, getting credit, protecting investors, paying taxes, trading across borders, 
th
enforcing contracts and closing a business.  Brazil ranked 124  out of 181 economies in the 2008 
th
survey (Table 17).  By comparison, the other BRIC economies of Russia, India and China ranked 120 , 
nd rd
122  and 83  respectively.  (The top three ranked countries globally were Singapore, New Zealand 
and the US).   
 
Figure 25 illustrates Brazil’s ranking in the Doing Business Survey and in several other commonly used 
international benchmarks covering issues such as corruption, human development and 
competitiveness. 
 
 
 
Figure 24: The world's 20 largest economies (source: IMF) 
United States
Japan
China
Germany
France
UK
Italy
Russia
Spain
Brazil
Canada
India
Mexico
Australia
Korea
Netherlands
Turkey
Poland
Belgium
Saudi Arabia
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
GDP, current prices, US$ billions, 2008 estimates

 
 
 
 
 
 
 
 
Table 16:  Brazil ‐ selected development indicators 
WORLD VIEW     
Population, total (millions)  2007  191.60 
Population growth (annual %)  2007  1.2 
Surface area (sq. km) (thousands)  2007  8,514.9 
Poverty headcount ratio at national poverty line (% of population)  2006  25.6 
GNI, Atlas method (current US$) (billions)  2007  1,133.03 
GNI per capita, Atlas method (current US$)  2007  5,910 
GNI, PPP (current international $) (billions)  2007  1,795.65 
GNI per capita, PPP (current international $)  2007  9,370 
PEOPLE     
Income share held by lowest 20%  2005  2.9 
Life expectancy at birth, total (years)  2006  72 
Mortality rate, under‐5 (per 1,000)  2006  20 
Immunization, measles (% of children ages 12‐23 months)  2006  99 
School enrolment, primary (% net)  2005  94 
Prevalence of HIV, total (% of population ages 15‐49)  2007  0.6 
ENVIRONMENT     
Forest area (sq. km) (thousands)  2005  4,777.0 
Agricultural land (% of land area)  2005  31.2 
Improved water source (% of population with access)  2006  91 
Improved sanitation facilities, urban (% of urban population with access)  2006  84 
Energy use (kg of oil equivalent per capita)  2005  1,122 
CO2 emissions (metric tons per capita)  2005  1.8001 
Electric power consumption (kWh per capita)  2005  2,008 
ECONOMY     
GDP (current US$) (billions)  2007  1,314.17 
GDP growth (annual %)  2007  5.4 
Inflation, GDP deflator (annual %)  2007  4.5 
Agriculture, value added (% of GDP)  2007  5 
Industry, value added (% of GDP)  2007  31 
Services, etc., value added (% of GDP)  2007  64 
Exports of goods and services (% of GDP)  2007  13 
Imports of goods and services (% of GDP)  2007  11 
Gross capital formation (% of GDP)  2007  22 
STATES AND MARKETS     
Time required to start a business (days)  2007  152 
Market capitalization of listed companies (% of GDP)  2007  104.3 
Military expenditure (% of GDP)  2007  1.6 
Fixed line and mobile phone subscribers (per 100 people)  2007  84 
Internet users (per 100 people)  2007  26.1 
High‐technology exports (% of manufactured exports)  2006  12.0 
GLOBAL LINKS     
Merchandise trade (% of GDP)  2007  22.0 
Net barter terms of trade (2000 = 100)  2006  104 
External debt, total (DOD, current US$) (millions)  2006  194,150 
Short‐term debt outstanding (DOD, current US$) (millions)  2006  20,325 
Total debt service (% of exports of goods, services and income)  2006  37.3 
Foreign direct investment, net inflows (BoP, current US$) (millions)  2006  18,782 
Workers' remittances and compensation of employees, received (US$) 
2007  4,382 
(millions) 
Official development assistance and official aid (current US$) (millions)  2006  82 
Source: World Bank – World Development Indicators database     
 
 
Table 17:  Doing Business 2009 – Brazil’s profile 
Doing Business rank (out of 181 countries) 
Ease of…  Change in rank 
2009  2008 
Doing Business  125  126  +1 

Starting a business  127  125  ‐2 
Dealing with construction  108  105  ‐3 
permits 
Employing workers  121  120  ‐1 
Registering property  111  115  +4 
Getting credit  84  79  ‐5 
Protecting investors  70  66  ‐4 
Paying taxes  145  138  ‐7 
Trading across borders  92  98  +6 
Enforcing contracts  100  103  +3 
Closing a business  127  134  +7 
Source:  Doing Business 2009 (World Bank/IFC) 
 
 
 
Figure 25:  International benchmarking 
UNDP:
HUMAN DEVELOPMENT INDEX
Human Development Report 2007/08
Brazil’s ranking: 70/177
Transparency International:
CORRUPTION PERCEPTIONS INDEX
Corruption Perception Index 2008
World Bank:
EASE OF DOING BUSINESS INDEX
Doing Business 2009
World Economic Forum:

GLOBAL COMPETITIVENESS INDEX
Global Competitiveness Report 2008-09
A T Kearney/Foreign Policy magazine:

GLOBALIZATION INDEX
Globalization Index 2007
World Economic Forum:

FINANCIAL DEVELOPMENT INDEX
Financial Development Report 2008
Lower performers Better performers
 
 
Millennium Development Goals 
 
Brazil’s progress towards achieving the Millennium Development Goals (MDGs) is summarised in 
Table 18.  The Government of Brazil has attached great importance to achieving the MDGs and has 
produced three National Monitoring Reports (2004, 2005 and 2007), based on detailed official data.  
In addition to the measurement of indicators, these reports also include a presentation of the most 
relevant public policies and analysis of the prospect of achievement.   
 
During the past decade, the results show significant improvement in most indicators and clearly show 
that Brazil has already accomplished some targets and is close to achieving others.  However, 
important challenges still remain primarily due to the great levels of inequality and disparity in 
Brazilian society and among geographic regions.  Income inequality has been decreasing since 2001 
and reached its lowest level in 2005. 
 
 
 
Table 18: Millennium Development Goals ‐ summary profile for Brazil 
MDG 1:  Eradicate extreme poverty 
Brazil has already fulfilled its commitment to this Goal. 
and hunger 
Significant improvements have been registered in access to education, resulting in 
MDG 2:  Achieve universal primary  nearly universal coverage for elementary school. But the quality of basic education 
education   still lacks, since a large number of children finish grade 4 without adequate reading 
and writing skills. 
Women have reached a higher schooling level than men in Brazil.  However, 
MDG 3:  Promote gender equality and  discrimination is revealed in high levels of domestic violence, women’s participation 
the empowerment of women   in the labour market and their presence among political leaders. The indicators show 
a slight improvement but challenges still remain. 
Child mortality and infant mortality have been decreasing at an escalating pace. At 
MDG 4:  Reduce child mortality  
the national level Brazil is likely to reach the Goal if present trend continues. 
Maternal mortality rate fell from 61.2 to 53.4 per 10,000 babies born between 1997 
and 2005, which indicates that Brazil is on track to achieve this Goal. But a close 
MDG 5:  Improve maternal health 
monitoring of maternal mortality is still difficult because of poor information and 
underreporting of cases. 
The number of people living with HIV/AIDS has remained steady since 2000 and the 
MDG 6:  Halt the spread of HIV/AIDS,  number of AIDS‐caused deaths has fallen among men and women. This indicates a 
malaria and other diseases   reversal of the trend of growing death rate, resulting in fulfilment of this Goal. 
Similarly, after 3 years of increase, the incidence rate for malaria dropped in 2006. 
Brazil has reduced its deforestation index, reduced the CFC consumption and 
increased its energy efficiency by relying on renewable energy sources. Expanding 
water supply indicates that Brazil will reach this indicator by 2015. However, 
improving urban and rural sanitation depends on the criterion used for its gauging 
MDG 7:  Ensure environmental 
and on the volume of investments. Data show that progress has already been 
sustainability 
achieved in many Brazilian cities – the proportion of urban domiciles with adequate 
housing conditions increased from 49.4% in 1992 to 61.5% in 2005. To rapidly 
improve the situation, the Government has introduced this issue as a national priority 
in its recently approved Accelerating Growth Plan for the next four years. 
Brazil has had a leading role in striving to achieve fairer trading rules and is making 
considerable efforts towards achieving universal access to AIDS medicines. The 
MDG 8:  Develop a global partnership 
Government of Brazil has been very proactive and innovative in promoting global 
for development  
partnerships using South‐South Cooperation as a vehicle. Therefore, Brazil is very 
likely to achieve this Goal. 
Source:  UN MDG Monitor (Brazil profile last updated January 2008) 
 
 
Economy 
GDP growth 
 
Economic growth in Brazil increased from 3.8 per cent in 2006 to exceed expectations at 5.4 per cent 
in 2007 (Figure 26).  This trend continued over the first seven months of 2008 when GDP grew by 
some 6.1 per cent.  Growth has subsequently been impacted by the global financial shocks that have 
dominated the second half of the year, and the final figure for 2008 is expected to be 5.2 per cent.   
 
The outlook for 2009 is rather more pessimistic, with the IMF’s latest estimates suggesting that GDP 
growth will decline to 3.0 per cent in 2009, reflecting global economic conditions.  Brazil’s economy is 
nevertheless expected to be relatively strong compared to the world’s advanced economies: for 
example, US ‘growth’ is expected to be ‐0.7 per cent in 2009 whilst the forecast for the UK is even 
worse at ‐1.3 per cent. 
 
 
Figure 26:  Brazil GDP growth trends (source: IMF) 
5
GDP growth %
0
e
98
99
00
01
02
03
04
05
06
07
e
e
e
e
e
11
08
09
10
12
13
19
19
20
20
20
20
20
20
20
20
20
20
20
20
20
20
 
Value‐added 
 
The services sector contributes around two‐thirds of the value added to Brazil’s GDP.  Industry 
accounts for 31 per cent; Brazil’s main industries include textiles, shoes, chemicals, cement, lumber, 
iron ore, tin, steel, aircraft, motor vehicles and parts and other machinery and equipment.   
Agricultural production – which consists of coffee, soybeans, wheat, rice, corn, sugarcane, cocoa, 
citrus and beef – accounts for about 5 per cent of GDP.   
Foreign trade 
 
Brazil’s main trade partners are the US, Argentina, China, Germany, the Netherlands and Nigeria 
(Table 19).  Strong external demand, high commodity prices and a more active export policy have 
contributed to booming export earnings since 2003, leading the trade surplus to swell and 
transforming the current account from a deficit of 4.6 per cent of GDP in 2001 to a surplus for several 
years.  However, this surplus has been steadily declining and the current account is expected to be in 
deficit in 2008. 
 
 
 
Table 19:  Brazil ‐ main import and export markets (2007 data) 
Major exports   % of total  Major imports   % of total 

Transport equipment & parts  12.5  Machinery & electrical equipment  26.1 
Metallurgical products  11.6  Chemical products  15.4 
Soybeans, meal & oils  8.2  Oil & derivatives  16.6 
Chemicals  1.9  Transport equipment & parts  12.0 
Leading markets   % of total  Leading suppliers   % of total 
US  16.1  US  15.7 
Argentina  9.2  China  10.5 
China  6.8  Argentina  8.6 
Netherlands  5.6  Nigeria  4.4 
Germany  4.6  Netherlands  0.9 
Export earnings (est)  US$161 billion  Import bill (est)  US$121 billion 
Sources:  Economist Intelligence Unit, CIA World Factbook 
Private capital flows 
International context 
 
Net debt and equity inflows to developing countries increased by US$269 billion in 2007 to reach a 
record US$1.03 trillion, according to the World Bank’s Global Development Finance 2008 report.  This 
marks five consecutive years of strong gains in net private flows, which averaged over 44 per cent a 
year (however, much of the increase in dollar terms reflects the depreciation of the US$ against most 
other currencies).   
 
The rapid expansion in private flows reflects strong gains in both equity and debt components.  Net 
(foreign direct and portfolio) equity inflows reached an estimated US$616 billion in 2007 (Figure 27), 
equal to a record 4.5 percent of GDP, up from 4.1 per cent in 2006.  Figure 27 also illustrates how 
portfolio equity inflows have become increasingly important since the turn of the millennium. 
Brazil 
 
Foreign direct investment (FDI) into Brazil has averaged at just over US$22 billion a year over the last 
decade, and reached a high of US$35.5 billion at the end of 2007.  Net foreign portfolio investment 
flows have increased dramatically in the last few years and by 2007 they reached US$34 billion, 
almost matching the volume of FDI (Figure 28).   Data from CVM indicates that the total stock of 
foreign portfolio investment amounted to some US$214 billion at the end of 2007 and by the end of 
August 2008 stood at US$232 billion (Figure 29).   
 
Brazil’s share of total FDI flows to emerging markets has been in decline since 1998 and is estimated 
at just under 6 per cent for 2007 (Figure 30).  Over the last three to four years, foreign portfolio 
investment has become increasingly important to Brazil’s economy; Brazil’s share of net portfolio 
equity flows to all developing countries surged to nearly 25 per cent in 2007 (Figure 31). 
 
 
 
 
 
 
 
 
 
Figure 27: Net equity flows to developing countries (source: World Bank Global Development 
Finance 2008) 
500
450
400
350
300
US$ billion
250 Net portfolio equity inflows

200 Net FDI inflows
150
100
50
-
1999 2000 2001 2002 2003 2004 2005 2006 2007
 
Figure 28:  FDI and foreign portfolio investment in Brazil: flows (sources: CVM, UNCTAD) 
40,000
35,000
30,000
25,000
US$ million
20,000
FDI
15,000
10,000 Foreign portfolio investment (net)
5,000
-
(5,000)
1997 1999 2001 2003 2005 2007
 
 
Figure 29:  FDI and foreign portfolio investment in Brazil: stock (sources: CVM, UNCTAD) 
 
350,000
300,000
250,000
US$ millions
200,000
FDI
150,000
Foreign portfolio investment
100,000
50,000
0
1997 1999 2001 2003 2005 2007
 
 
 
 
 
Figure 30:  Brazil's share of total FDI flows to emerging markets (source: UNCTAD) 
35%
30%
25%
20% Brazil
Russia
15% India
China
10%
5%
0%
1994 1996 1998 2000 2002 2004 2006
 
 
 
Figure 31:  Brazil's share of net portfolio equity flows to developing countries (sources: CVM; World 
Bank Global Development Finance 2008) 
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
1999 2000 2001 2002 2003 2004 2005 2006 2007
 
 
The stock market 
Market size 
 
th
The São Paolo stock exchange, operated by BM&F Bovespa, is the 13  largest market in the world by 
market capitalization (Figure 32), following a dramatic increase in size over the last two decades 
(Figure 33).  
 
In common with almost all other markets, Brazil’s market capitalisation has experienced a sharp 
decrease in the last 12 months as a result of the global economic crisis and the worldwide fall in 
equity prices.  As of the end of November 2008, the market value of BM&F Bovespa listed companies 
came to R$1,355 billion (US$585 billion).   
 
 
 
 
Figure 32:  Domestic market capitalisation of the world's 20 largest exchanges (USD millions) 
(source: World Federation of Exchanges) 
NYSE Group
Tokyo SE
Nasdaq
Euronext
London SE
Shanghai SE
Hong Kong Exchanges
TSX Group
Deutsche Börse
BME Spanish Exchanges
Swiss Exchange
Australian SE
BM&FBOVESPA
Bombay SE
OMX Nordic Exchange
National Stock Exchange India
Borsa Italiana
Korea Exchange
JSE
Taiwan SE Corp.
0 5,000,000 10,000,000 15,000,000 20,000,000
end Oct 2008 end Oct 2007

 
 
 
Figure 33:  BM&F Bovespa domestic market capitalisation (source: World Federation of Exchanges) 
1,600,000
Domestic market cap US$ millions
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
End 1990
End 1991
End 1992
End 1993
End 1994
End 1995
End 1996
End 1997
End 1998
End 1999
End 2000
End 2001
End 2002
End 2003
End 2004
End 2005
End 2006
End 2007
October 2008
 
 
 
 
Table 20 shows the country weighting for Brazil in the three main emerging market indices published 
by FTSE, MSCI and Standard & Poor’s.  The table includes data for India for comparison. 
 
Table 20:  Country weighting in key emerging market indices 
Index  BRAZIL  INDIA  Reporting date 
FTSE All‐World Emerging Index  14.59%  9.97%  Jan 14, 2009 
MSCI Emerging Market Index  13.36%  6.65%  Jan 14, 2009 
S&P/IFCI Composite Index  12.78%  7.13%  Nov 30, 2008 
Corporate governance segments 
 
There are different listing segments for companies traded on the stock exchange.  In addition to the 
Traditional Bovespa segment, these include the Novo Mercado and two further differentiated 
corporate governance categories, Level (Nivel) 1 and Level (Nivel) 2.  The key features of these 
corporate governance segments are summarised in Table 21. 
 
 
Table 21:  Novo Mercado and corporate governance levels 
Requirements  Level 1  Level 2  Novo Mercado 

Information sharing  Minimum required by 
IFRS or US GAAP  IFRS or US GAAP 
standards  CVM 
Shareholding position  Shareholding position  Shareholding position 
of the Board and  of the Board and  of the Board and 
Senior Management  Senior Management  Senior Management 
     
Identity of any  Identity of any  Identity of any 
shareholder with  shareholder with  shareholder with 
more than 5% of total  more than 5% of total  more than 5% of total 
Disclosure of  shares  shares  shares 
Information       
Other requirements 
Income statement,  Income statement,  Income statement, 
balance sheet and  balance sheet and  balance sheet and 
cashflow of the  cashflow of the  cashflow of the 
company and the  company and the  company and the 
controlling company  controlling company  controlling company 
     
Annual public meeting  Annual public meeting  Annual public meeting 
for presenting results  for presenting results  for presenting results 
and perspectives  and perspectives  and perspectives 
Stocks without voting 
Yes  Yes  No 
rights permitted? 
Minimum free floats  25%  25%  25% 
Protection to minority  Tag along for stocks 
No  100%  100% 
shareholders  with voting rights 
Tag along for stocks 
No  80%  N/A 
without voting rights 
Conflict solving via 
Optional  Obligatory  Obligatory 
arbitration chamber 
Requirements 
Management  Minimum: 5 members  Minimum: 5 members 
regarding the Board  No 
Requirements  and 2 year mandate  and 2 year mandate 
of Directors 
 
 
 
 
 
Key companies and industries 
 
As of the end of November 2008, 393 companies were listed on the exchange with a combined 
market capitalisation of R$1,355 billion (US$570 billion).  Figure 34 shows the share of market 
capitalisation between the different listing segments: Novo Mercado companies represent about 33 
per cent of total market cap.   
 
Table 22 lists the companies in the IBovespa, the market’s main benchmark index. The five industrial 
sectors with the highest market value are financial institutions (22 per cent); oil, gas and biofuel (20 
per cent); mining (15 per cent); steel and metallurgy (11 per cent); and electric power (7 per cent) 
(Figure 35).   
 
The market is highly concentrated:  the top ten companies with the highest market value make up 
about 50 per cent of total market capitalisation.  Approximately 25 per cent of the total value of the 
market is concentrated in just two companies, Petrobras and Vale R Doce; these two firms represent 
34 per cent of the notional IBovespa portfolio.  The capital structure of both Petrobras and Vale R 
Doce includes preference as well as common shares; neither firm is listed on the Novo Mercado. 
 
 
 
Figure 34:  Market capitalisation by listing segment 
NOVO MERCADO
(32.6%)
TRADITIONAL
BOVESPA
(32.6%) NIVEL 2 (2.1%)
NIVEL 1 (47.2%)
Source: BM&F BOVESPA (data as of end Nov 08)
 
 
 
 
Figure 35:  Industry breakdown of IBovespa index constituents 
Other 16.1% Financial

21.6%
Transportation
4.1%
Telecom 4.8%
Electric utilities
7.3% Oil and gas
19.8%
Steel 11.1%
Mining 15.2%
 
 
Table 22:  Companies in the IBovespa index 
Market cap US$ 
Company  Industry  ISE ?  IBovespa weight (%) 
million 
ALL AMER LAT (N2)  Railroads  2,868  1.415 
AMBEV  Beer & soft drinks  24,219  1.122 
ARACRUZ (N1)  Pulp & paper  1,409  0.777 
B2W VAREJO (NM)  Retail  1,156  0.904 
BMF BOVESPA (NM)  Diversified financial services  5,265  4.360 
BRADESCO (N1)  Financial intermediaries   27,966  3.700 
BRADESPAR (N1)  Holdings ‐ diversified  2,834  1.199 
BRASIL (NM)  Financial intermediaries   15,969  2.404 
BRASIL T PAR (N1)  Telecommunications  5,091  0.721 
BRASIL TELEC (N1)  Telecommunications  7,745  0.420 
BRASKEM (N1)  Petrochemicals   1,207  0.545 
CCR RODOVIAS (NM)  Toll roads & highways  4,076  0.611 
CELESC (N2)  Electric utilities   663  0.121 
CEMIG (N1)  Electric utilities   6,123  1.642 
CESP (N1)  Electric utilities   1,908  1.215 
COMGAS  Gas utilities  1,652  0.114 
COPEL (N1)  Electric utilities  2,686  0.651 
COSAN (NM)  Sugar ‐ alcohol  1,575  0.603 
CPFL ENERGIA (NM)  Electric utilities   6,191  0.522 
CYRELA REALT (NM)  Residential building construction  1,400  1.257 
DURATEX (N1)  Wood   773  0.551 
ELETROBRAS (N1)  Electric utilities   12,379  1.903 
ELETROPAULO (N2)  Electric utilities   1,704  0.691 
EMBRAER (NM)  Aerospace   2,791  0.656 
GAFISA (NM)  Residential building construction  597  0.930 
GERDAU (N1)  Steel   8,584  3.100 
GERDAU MET (N1)  Steel   3,430  0.916 
GOL (N2)  Airlines  858  0.737 
ITAUBANCO (N1)  Financial intermediaries   30,708  3.471 
ITAUSA (N1)  Financial intermediaries  15,437  2.238 
JBS (NM)  Meat, poultry & others  3,034  0.658 
KLABIN S/A (N1)  Pulp & paper  1,530  0.355 
LIGHT S/A (NM)  Electric utilities   1,908  0.203 
LOJAS AMERIC  Retail  1,915  1.200 
LOJAS RENNER (NM)  Retail  815  0.858 
NATURA (NM)  Cosmetics   3,486  0.638 
NET (N2)  Cable TV  2,372  0.946 
NOSSA CAIXA (NM)  Financial intermediaries  3,124  0.397 
P.ACUCAR‐CBD (N1)  Retail  3,249  0.553 
PERDIGAO S/A (NM)  Meat, poultry & others   2,634  0.887 
PETROBRAS  Oil, gas & biofuels  95,846  19.776 
REDECARD (NM)  Diversified financial services  7,401  0.933 
ROSSI RESID (NM)  Residential building construction  311  0.569 
SABESP (NM)  Water utilities   2,706  0.403 
SADIA S/A (N1)  Meat, poultry & others   1,162  1.139 
SID NACIONAL  Steel  9,845  3.454 
SOUZA CRUZ  Tobacco  5,768  0.487 
TAM S/A (N2)  Airlines  1,145  0.711 
TELEMAR  Telecommunications   5,763  1.511 
TELEMAR N L  Telecommunications  5,773  0.296 
TELESP  Telecommunications  9,272  0.191 
TIM PART S/A  Telecommunications   3,628  0.955 
TRAN PAULIST (N1)  Electric utilities  2,766  0.371 
ULTRAPAR (N1)  Holdings ‐ diversified  3,103  0.437 
UNIBANCO (N1)  Financial intermediaries   15,755  2.417 
USIMINAS (N1)  Steel  5,677  3.667 
V C P (N1)  Pulp & paper   1,545  0.618 
VALE R DOCE (N1)  Mining  60,142  15.154 
VIVO  Telecommunications  4,457  0.722 
 
Capital raising 
 
The amount of capital raised on the stock exchange by Brazilian companies through the issuance of 
new and secondary equity offerings has increased significantly over the last three to four years 
(Figures 36 and 37).  Although the number of IPOs has increased since 2005 and reached a record high 
in 2007, the longer term trend is dominated by secondary public offerings. 
 
Table 23 provides details of Brazilian IPO and secondary public offerings from June 2007 to June 2008 
(new deals since June 2008 have all but dried up as a consequence of wider economic conditions).  
Some US$35 billion of new deals were completed during this period.  Key IPOs have included Bovespa 
(US$3.7 billion in October 2007); the commodities exchange BM&F (US$3.3 billion in November 
2007); the electricity generation and distribution firm MPX Energia (US$1.3 billion in December 2007); 
and the oil & gas company OGX (US$4.1 billion in June 2008).  The majority of IPOs in recent years 
have been on the Novo Mercado.  
 
 
Figure 36:  Capital raised by share issues on BM&FBOVESPA (US$ millions) (source: World 
Federation of Exchanges) 
$45,000
$40,000
$35,000
$30,000
US$ millions
$25,000
Secondary public offerings
$20,000
Initial public offerings
$15,000
$10,000
$5,000
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008
 
 
Figure 37:  Number of IPOs on BM&FBOVESPA (source: World Federation of Exchanges) 
80
70
Number of newly listed companies
60
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
 
 
 
Table 23:  Main deals completed in Brazil since June 2007 
Size (US$ million) 
Company  Industry  Date 
Primary  Secondary  Total 
OGX PETRÓLEO  Oil & gas  Jun 08  4,100.0  ‐  4,100.0 
GERDAU  Materials  Apr 08  600.3  ‐  600.3 
LE LIS BLANC  Consumer Staples  Apr 08  76.9  ‐  76.9 
COPASA  Utilities  Apr 08  239.8  36.0  275.8 
METALURGICA GERDAU  Materials  Apr 08  601.0  ‐  601.0 
ANHANGUERA EDUC  Consumer Discretionary  Apr 08  266.6  39.2  305.8 
HYPERMARCAS  Consumer Staples  Apr 08  367.0  55.0  422.0 
GLOBAL VILLAGE  Telecommunications  Feb 08  156.8  11.7  168.4 
GP INVESTMENTS  Financials  Feb 08  186.5  557.2  743.7 
NUTRIPLANT  Materials  Feb 08  11.8  1.8  13.5 
TEMPO  Financials  Dec 07  217.7  47.1  264.8 
PERDIGAO  Consumer Staples  Dec 07  507.3  94.9  602.1 
MPX ENERGIA  Utilities  Dec 07  1,080.3  215.6  1,295.9 
BOLSA BM&F  Financials  Nov 07  2,890.7  433.6  3,324.2 
BANCO PANAMERICANO  Financials  Nov 07  391.3  55.9  447.2 
LAEP INVESTMENTS  Financials  Oct 07  286.8  42.9  329.7 
AMIL  Financials  Oct 07  457.5  331.7  789.2 
BRASIL BROKERS  Real Estate/Construction  Oct 07  171.3  224.8  396.1 
BOVESPA HOLDINGS  Financials  Oct 07  3,218.6  482.9  3,701.5 
HELBOR  Real Estate/Construction  Oct 07  129.9  30.3  160.2 
AGRENCO  Industrial  Oct 07  370.0  55.5  425.6 
PDG REALTY  Real Estate/Construction  Oct 07  277.7  41.7  319.4 
MARISA  Consumer Discretionary  Oct 07  245.0  ‐  245.0 
BR MALLS PARTIC  Real Estate/Construction  Oct 07  332.1  ‐  332.1 
SEB EDUCAC  Consumer Discretionary  Oct 07  159.2  68.2  227.5 
TRISUL  Real Estate/Construction  Oct 07  176.5  ‐  176.5 
CONSTRUTORA TENDA  Real Estate/Construction  Oct 07  333.6  ‐  336.6 
BANCO INDUSTRIAL E COMER  Financials  Oct 07  310.6  139.7  450.2 
SATIPEL INDUSTRIAL  Real Estate/Construction  Sep 07  114.4  99.1  213.5 
GENERAL SHOPPING BRASIL  Real Estate/Construction  Jul 07  143.2  7.2  150.4 
SPRINGS GLOBAL PARTIC  Industrial  Jul 07  189.5  109.7  299.2 
MULTIPLAN EMP IMOBIL  Real Estate/Construction  Jul 07  360.8  124.7  485.4 
COMPANHIA PROVIDENCIA  Industrial  Jul 07  246.1  ‐  246.1 
BANCO DO RIO GRANDE SUL  Financials  Jul 07  428.8  690.5  1,119.2 
BANCO ABC BRASIL  Financials  Jul 07  328.7  5.1  333.8 
AÇUCAR GUARANI  Consumer Staples  Jul 07  357.8  ‐  357.8 
MRV ENGENHARIA E PARTIC  Real Estate/Construction  Jul 07  540.2  30.1  570.3 
CIA HERING  Consumer Staples  Jul 07  123.2  44.4  167.5 
TRIUNFO PARTIC E INVEST  Industrial  Jul 07  163.7  112.1  275.8 
KROTON EDUC  Consumer Discretionary  Jul 07  191.7  65.0  256.7 
MINERVA S/A  Consumer Staples  Jul 07  199.7  39.9  239.6 
INVEST TUR BRASIL  Real Estate/Construction  Jul 07  450.6  59.0  509.6 
BANCO INDUSVAL  Financials  Jul 07  120.4  17.2  137.6 
DROGASIL  Healthcare/Pharma  Jul 07  106.8  97.8  204.6 
BANCO DAYCOVAL  Financials  Jun 07  486.4  81.2  567.6 
MARFRIG FRIGORIFICOS  Financials  Jun 07  305.2  218.3  523.5 
BANCO CRUZEIRO DO SUL  Financials  Jun 07  222.1  67.6  289.7 
EZ TEC  Real Estate/Construction  Jun 07  245.9  36.9  282.7 
TOTAL      27,845  7,216  35,061 
COUNT      79%  21%  100% 
Source:  Citigroup Global Markets Equity Research; BM&F Bovespa 
 
 
 
 
Performance 
 
Figure 38 compares the performance of Brazil’s benchmark index, the IBOVESPA, with that of the 
MSCI Emerging Market Index (MSCI EM) over the last five years.   
 
The IBOVESPA steadily gained in value over the 2005‐2007 period and began to outperform the MSCI 
EM in Q3 2007 as the “sub‐prime” problem began to make its effects felt beyond the US.   
 
Both the MSCI EM and IBOVESPA have fallen sharply since Q2 2008 as the international credit crunch 
crisis evolved into a severe global financial and economic downturn.   
 
The IBOVESPA, while falling dramatically, continues to be ahead of the MSCI EM.   
 
 
Figure 38:  IBOVESPA performance compared to MSCI Emerging Market Index, 5 years (source: 
Bloomberg) 
250%
200%
150%
100%
50%
0%
-50%
Jan-04
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Mar-04
IBOVESPA MSCI EM
 
 
Market participants 
 
Figure 39 illustrates trading on BM&F Bovespa by different classes of market participants: individuals 
(including investment clubs), institutional investors, international investors, companies and financial 
institutions.   
 
Trading by companies has declined over time relative to other types of market participants, whilst 
trading by Brazilian institutional investors and international investors has increased, reflecting the 
increase in domestic savings and foreign portfolio investment.    
 
Figure 39 also shows how individual investors and investor clubs have continually been a very 
important component of the buy‐side in Brazil. 
 
 
Figure 39:  Evolution of investors’ participation on BOVESPA's Total Trade Value (%) (source: BM&F 
Bovespa) 
Jun-08 24.4 26.3 37.2 3.3 8.8
2007 23 29.7 34.5 2.4 10.4
2006 24.6 27.2 35.5 2.3 10.4
2005 25.4 27.5 32.8 2.6 11.7
2004 27.5 28.1 27.3 3.4 13.8
2003 26 27.6 24.3 4.1 18
2002 21.9 16.5 26 3.5 32.1
2001 21.7 16 25.1 3.2 34
2000 20.2 15.8 22 5.3 36.7
Individuals Institutional International Financial Institutions Companies

 
 
 
Key environmental and social issues 
 
Corporations and their investors in Brazil face a wide and often complex range of social and 
environmental issues that present potentially significant risks and opportunities to shareholder value 
and corporate reputation.   At the current time there does not appear any single source that 
synthesises this information into an investor‐friendly, comprehensive analysis of key sustainability‐
related business drivers in the industries that make up Brazil’s stock market.  A detailed assessment is 
beyond the current scope of this report. 
Principal issues 
 
The main environmental and social issues that influence business and investor risk in Brazil include: 
 
 Poverty and inequality 
 Access to finance at the ‘base of the pyramid’ 
 Land distribution and landless workers 
 Food security 
 Child labour 
 Forced labour 
 Indigenous peoples and associated land rights 
 Urban air pollution 
 Biodiversity protection 
 Deforestation and land use change 
 Greenhouse gas emissions 
 Water and sanitation 
 Energy (including oil & gas, hydroelectricity and biofuels) 
 Climate change adaptation 
 Regional (cross‐border) infrastructure development 
 
Appendix B provides a selection of recent press articles illustrating the relevance of these issues to 
Brazil’s leading industries and corporations. 
 
 
New national plan on climate change 
 
One important recent development is the Brazilian Government’s National Plan on Climate Change, 
published in December 2008.  The measures in this action plan may have potentially significant 
implications (both positive and negative) across a number of key Brazilian industry sectors, including 
oil & gas, biofuels, mining, steel, power and pulp & paper.  Some of the key principles and actions in 
the National Plan on Climate Change are summarised in the box below. 
 
 
 
NATIONAL PLAN ON CLIMATE CHANGE (DECEMBER 2008) 
SELECTED MEASURES 
 
INCREASE ENERGY AND CARBON EFFICIENCY IN THE PRODUCTIVE SECTOR: 
Achieve gradual energy savings up to 106 TWh/year by 2030, avoiding emissions of around 30 million tons of CO2 in that year. 
Increase use of sustainable charcoal to replace coal in steel plants, mainly through the encouragement of forestation in 
degraded areas. 
Encourage use of water solar power heating systems, reducing electricity consumption in 2,200 GWh per year by 2015. 
Phase out use of fire for clearing and cutting of sugarcane in areas where harvesting mechanization can take place.  
Integrated agricultural and cattle raising systems including carbon sinks via crop‐livestock integration and agro‐forestry. 
MAINTAIN RENEWABLE ENERGY’S HIGH SHARE IN THE ELECTRIC MATRIX: 
Increase electricity supply from cogeneration, mainly from sugarcane bagasse, to 11.4 per cent of the total supply in the 
country, in 2030, corresponding to 136 TWh. 
Reduce non‐technical losses in the electricity distribution at a rate of 1,000 GWh per year over the next ten years. 
34,460 MW from new hydropower plants to be added to the system in accordance with the schedule of works of the Ten Year 
Energy Plan (2007‐2016). 
Increase the energy matrix share of renewable energy from wind and sugarcane bagasse through specific auctions of 
renewable energy. More than 7,000 MW of renewable sources will be implemented by 2010.  
Expand national solar photovoltaic industry and the use of this energy source in systems that are isolated and connected to the 
grid. 
INCREASE BIOFUEL USE AND WORK TOWARDS AN INTERNATIONAL MARKET OF SUSTAINABLE BIOFUELS: 
Encourage industry to achieve an average annual ethanol consumption increase of 11 per cent in the next ten years.  
Stimulate an international ethanol market through technical cooperation with other countries with a high potential for growing 
sugarcane. 
ACHIEVE ZERO ILLEGAL DEFORESTATION: 
Amazon Fund:  created in 2008, the Amazon Fund aims to raise financial resources nationally and internationally from 
governments and the private sector for the reduction of deforestation, sustainable forest use and conservation. 
Climate Fund:  submitted to the National Congress, amongst other purposes it aims to finance actions concerned with 
preventing deforestation. 
Minimum price policies for non‐timber forest produces (linked to traditional communities and peoples). 
ELIMINATE NET LOSS OF FOREST COVERAGE BY 2015: 
Revision of current banking requirements to make forestation and reforestation activities more attractive, including areas for 
charcoal production. 
Development of forest products for fuel applications. 
Prevention of the use of illegal timber in the building industry – starting in January 2009, the legal origin of timber will have to 
be proved by building companies and companies from the real estate sector. 
 
 
 
 
 
 
 
APPENDIX B: 
EXAMPLES OF ESG ISSUES IN THE 
INTERNATIONAL MEDIA 
 
 
 
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!  
 
 
 
APPENDIX C: 
SWOT ANALYSIS 
 
 
 
STRENGTHS/OPPORTUNITIES  WEAKNESSES/THREATS 
BM&F Bovespa is a proactive and innovative stock exchange  Many other initiatives and challenges compete for management 
with respect to ESG investment concepts and solutions  attention 
The Brazilian investment and corporate community puts a  Corporate governance culture has not yet evolved to fully 
strong emphasis on corporate governance, including pioneering  include governance of environment and social risks – emphasis 
initiatives such as the Novo Mercado  remains on ‘core’ CG issues such as minority shareholder rights 
 
No listing rules or stock exchange guidance in relation to non‐
financial reporting or ESG disclosure 
 
Risk of falling behind emerging best practices (e.g. ICGN 
Statement and Guidance on Non‐financial Business Reporting) 
Strong environmental legislation  Variable environmental enforcement 
The complexity and significance of environmental and social  The complexity and significance of environmental and social 
issues in Brazil mean that there is a strong business case for  issues presents important information and management 
corporate sustainability, and therefore a strong value‐added  challenges, as well as decision‐making dilemmas and difficult 
argument in favour of sustainable investment strategies  judgement calls.  
 
Failure to deal adequately with ESG issues in investment can 
lead to very real social and environmental damage and put 
value at risk 
Through its Center for Sustainability Studies, Brazil’s leading  CES‐FGV’s resources may sometimes be spread too thinly 
business school (FGV) is an active and catalytic participant in the 
development of Brazil’s sustainable investment market 
The ISE Index has matured into a successful and important  The ISE business model may not provide sufficient revenue for 
element in the Brazilian investment and corporate responsibility  R&D, marketing, etc and arguably distorts the marketplace for 
landscape, and appears to be able to operate on a break‐even  commercial ESG research 
basis   
The ESG investment needs of Brazilian institutional investors 
like PREVI are evolving beyond what the ISE can currently 
provide 
 
The company response rate to the annual ISE survey is low and 
falling steadily and the ISE has a low profile with foreign 
portfolio investors 
Many of Brazil’s leading asset managers participate in  Currently, no asset manager employs full‐time ESG analysts:  
sustainable investment and have built up experience via SRI  human capital development is likely to emerge as an issue for 
mutual funds that have proved they can deliver respectable  the future 
financial returns compared to relevant benchmarks   
  Lack of ESG research out‐sourcing hinders the development of a 
  commercial ESG research services 
 
Relatively few asset managers have signed the UNPRI and there 
seems to be limited interaction and know‐how exchange with 
Brazil’s UNPRI pension funds and the UNPRI as a whole 
 
The competing SRI mutual funds are all similar to one another in 
terms of ESG features and financial performance 
 
The asset managers’ SRI business lines appear to be stagnating 
(no recent product innovation, static/falling consumer appetite) 
 
Since the ‘loss’ of the ABN AMRO Brazil Fund, Brazilian asset 
managers no longer offer off‐shore ESG funds suitable for 
foreign investors 
 
Shareholder engagement is in its infancy. 
 
Brazilian pension funds were among the founding signatories of  Implementation is at a relatively early stage and is mainly 
the UNPRI and are currently the main driving force behind  concentrated in PREVI 
sustainable investment in Brazil under the leadership of the   
influential leadership of PREVI, by far the country’s largest  Currently, no pension fund employs full‐time ESG analysts:  
pension fund   human capital development is likely to emerge as an issue for 
  the future 
Public policy measures to promote sustainable investment (e.g.   
pension fund transparency rules) have not been necessary  Lack of ESG research out‐sourcing hinders the development of a 
commercial ESG research services 
 
By itself, the ISE is currently insufficient for the ESG investment 
needs of PREVI and other UNPRI signatories – however, 
developing additional tools and methodologies is a significant 
challenge 
 
In‐house management of equities isolates the UNPRI pension 
funds from the sustainable investment expertise built up by 
asset managers in the SRI mutual fund niche 
 
Shareholder engagement is in its infancy. 
IFC has played a catalytic role by supporting a number of  Other emerging markets/advisory needs compete for IFC’s 
strategic initiatives in this field, including the development of  management attention and finite grant funding resources 
the ISE Index   
  BNDES and IADB do not appear to be engaged in Brazil’s 
IADB and BNDES both play key roles in helping to develop  networks and initiatives for sustainable portfolio investment in 
Brazil’s hi‐tech and ‘greentech’ venture capital industry  Brazil 
   
IADB has commissioned interesting research from Innovest on  It is not clear whether or how BNDES handles ESG issues with 
the “Opportunities for the Majority” strategies of several Latin  respect to its ownership of significant stakes in Brazil’s leading 
American corporations, including a number of Brazilian firms  listed companies 
 
There is little or no interaction between IFC, IADB and BNDES on 
DFI support for the development of Brazil’s sustainable 
investment market 
Brazil’s HNWI population is growing rapidly and may represent a  There is no published market research on sustainable HNWI 
potential stock of sustainable investment assets of roughly  investment in Brazil 
US$70 billion 
As a general observation, foreign portfolio investors are  There is relatively little data on the ESG “footprint” of Brazil’s 
increasingly focusing on ESG issues when investing in Brazil and  foreign portfolio investors and investors in Brazilian ADRs listed 
other emerging and frontier markets  in New York 
Brazil has emerged as the main centre of PE/VC activity in the  GPs with formal ESG policies and procedures are still the 
region, including a number of “greentech” funds and deals  exception rather than the rule 
   
Institutional investors such as PREVI are promoting sustainable  Biofuels have become a significant part of PE/VC activity in 
private equity investment in Brazil through the UNPRI  Brazil and this sector poses complex environmental and social 
  issues and challenges 
IPOs have become an attractive exit route, creating synergies   
between sustainable PE and the ISE Index  New tools, standards and capacity building programmes are 
  needed to support further progress towards mainstream 
WRI’s New Ventures programme plays a key role in developing  integration of ESG investment in the PE/VC sector 
VC opportunities in sustainable SMEs    
At some point in the future WRI is likely to need an effective 
“exit” mechanism for New Ventures Brazil, possibly involving 
commercial spin‐out 
Brazil’s leading listed companies are relatively good at voluntary  Further progress is needed in terms of coverage and quality 
non‐financial reporting in the form of GRI sustainability   
reporting and responses to the Carbon Disclosure Project  Sustainability reporting still has a strong PR flavour 
   
Brazil has a strong body of consultants, not‐for‐profit  Non‐financial reporting of potentially material ESG risks does 
organisations and other entities that provide expertise and  not appear to be widely practiced in relation to IPO 
advocacy for sustainability reporting etc.  prospectuses and regulatory filings 
 
Many of Brazil’s leading listed companies are listed in New York 
and are therefore potentially vulnerable to regulatory changes 
that are currently being discussed in the US in relation to e.g. 
SEC rules on climate change disclosure 
 
A small number of international sustainable investment  Coverage by international firms is still relatively limited and is 
research firms cover some of Brazil’s leading companies  largely conducted by non‐Brazilians located abroad 
   
Brazil has the human capital to develop its own sustainable  Brazil has not developed its own sustainable investment 
investment research providers  research industry, due to lack of commercial demand from the 
buy‐side 
Some international sell‐side firms are producing sector‐specific  International sell‐side research on the ESG aspects of Brazilian 
sustainability research which includes a small number of  stocks is extremely limited 
Brazilian companies that are globally significant in their sector   
Brazilian sell‐side analysts do not produce ESG research due to 
lack of commercial demand from the buy‐side 
Organisations such as the Brazilian Association of Pension  Language barriers (English‐Portuguese and Portuguese‐English 
Funds, the National Association of Investment Banks and the  translations of key reports, guidance materials and other 
Association of Capital Market Analysts and Investment  relevant information are rare and often of poor quality) 
Professionals play an active part in promoting sustainable 
investment in Brazil 
Several of Brazil’s asset managers are active in CES‐FGV’s Latin  The LASFF does not have a wide membership base in the asset 
American Sustainable Finance Forum (LASFF)  management community, and does not fulfil the crucial role 
  played by industry organisations in other regions as UKSIF in the 
The UNPRI is becoming increasingly active in Brazil and intends  UK or ASrIA in Asia 
to recruit a full‐time Brazil‐based coordinator to expand   
membership and support implementation  Despite having almost identical strategic and technical interests, 
there is little membership overlap between the LASFF and 
UNPRI, and technical cooperation has begun only recently. 
 
LASFF and UNPRI both have limited human and budget 
resources 
 
 
 
 
 
 
 
APPENDIX D: 
SUSTAINABILITY IN BRAZIL’S PRIVATE 
EQUITY AND VENTURE CAPITAL MARKET 
 
 
 
 
The Emerging Market Private Equity Association (EMPEA) provides extensive and authoritative 
14
information on private equity and venture capital in Brazil and Latin America , as do the Brazilian 
Private Equity and Venture Capital Association (ABVCAP) and the Latin American Venture Capital 
Association (LAVCA).   
 
Brazil has implemented a series of reforms in recent years to attract and promote private equity and 
venture capital, and is now the leading center for PE/VC activity in the region.  These reforms have 
included stronger laws on fund formation and operation, better protection of intellectual property 
rights, and lower restrictions on institutional investors.  In addition, the corporate governance 
segments created by Bovespa in 2001 have opened new opportunities for exits on public markets.   
 
Prior to the global economic crisis, Brazil led a resurgence of investor interest in private equity in Latin 
America in general, and drew nearly 60 per cent of the private equity capital raised for Latin America 
PE funds in 2007.  Investment volumes recorded unprecedented heights—at US$4.7 billion, 2007 
volumes were roughly 10 times that of 2005, and double the peak of the 1990s boom years. As a 
result, 53 firms commenced private equity operations in Brazil between 2001 and 2007, and 89 PE/VC 
firms currently manage 153 funds in Brazil (Table 24).   
 
Brazilian private equity managers also built a solid record of exits, contributing to the explosion in IPO 
activity in 2006 and 2007.  Brazil’s 2007 aggregate exit values surpassed dollar volumes across the 
entire region from 2003 to 2005.   
 
Brazilian institutional investors are becoming increasingly active in private equity.  Insurance 
companies may invest up to 50 per cent of reserves in variable‐income instruments such as shares.  
The insurance sector remains underdeveloped in Brazil, though it is expanding.  The participation of 
pension funds in PE/VC activity is larger than that of insurers, and pension funds have become major 
players in the industry by regional standards.  ‘Open’ pension funds (i.e, those not limited to 
employees and retirees from specific companies) may invest 60 per cent of reserves in stocks. Many 
pension funds insist in participating on the investment committees of funds in which they invest.  
 
Fundraising Activity 
 
Until the recent economic downturn, the funds universe in Brazil was in a period of dramatic growth, 
both in the amount of capital being raised and the diversity of funds tapping the market (Figure 40).   
This growth spans the buyouts end of the spectrum, the middle market and the venture capital 
segment. 
 
Overall, funds focused on Brazil raised more than US$1 billion between April 2007 and April 2008.   
Additionally, at least 10 funds are raising upwards of US$4.6 billion, translating to a potential doubling 
in capital focused on Brazilian opportunities in 2008 relative to the US$2.5 billion raised in 2007.  
 
The financial crisis will undoubtedly have an impact on international fund‐raising.  However, the 
impact on the Brazilian venture capital and private equity industry is likely to be cushioned because 
Brazilian pension funds such as PREVI are becoming increasingly active in this asset class. 
 
 
 
 
 
 
                                                                    
14
 Insight Brazil: An Overview of Trends in Select Sectors and Markets  EMPEA (May 2008) 
 
Table 24:  Brazil ‐ recent private equity funds (source: EMPEA) 
PE Firm  Fund  Sector Focus 
Actis  Actis Latin America 3 LP (US$132m)  Generalist 
Advent International  Latin America Private Equity Fund IV (2007, US$1.3b)  Generalist 
AIG Capital Partners  AIG Brazil Special Situations Fund II (2008, US$692m)  Generalist 
Angra Partners  AG Angra Infrastructure Fund (2006, US$397m)  Infrastructure 
Artesia Gestao de Recursos  Artesia Exclusive II (2007, US$98m)  ‐ 
Axxon Group  Natixis Mercosul Fund (2001, US$100m)  ‐ 
Banco Pactual  Fundo Brasil Energia (2004, US$255m)  Energy 
Banco Santander  ASCET I‐FIP (2007, US$31m)  Generalist 

BRASOIL FIP (2007, US$31m) 
Capitania Gestores  Private Equity Brazil Multi‐strategy I (2007, US$260m)  Generalist 
CRP  CRP VI Venture (2006, US$28m)  Generalist 
Darby Overseas Investments  Darby BBVA Latin America (2005, US$175m)  Agribusiness/Infrastructure 
DGF  FIPAC (2006, R$80m)  Technology, Pharma 
Dynamo  Puma II (2004, US$208m)  ‐ 
FIR Capital Partners  Fundo Tec II (2007, US$45m)  Technology, life sciences 

DFJ FIR Brazil Fund II (2007, US$100m) 
Gavea Investimentos  Fund II (2007, US$480m)  Generalist 
GG Investimentos  Governança & Gestão Fund I (2006, US$140m)  ‐ 
GP Investments  GP Capital Partners IV (2007, US$1.3b)  Generalist 
Infinity  Infinity Bioenergy Fund I (2006, US$516m)  Cleantech 
Investidor Profissional Gestão de  Gibraltar Fundo de Investimento em Participacoes II  Technology 

Recursos  (2007, US$78m) 
JB Partners  JBVC I Fund (2007, US$57m)  Generalist 
Mellon Global Investments Brazil  Rio Agribusiness FIP (2007, US$13m)  Agribusiness/Generalist 

Polaris Fundo de Investimento em Participacoes (2007) 
Mercatto Venture Partners  MVP Tech Fund (2002, R$23m)  Technology 
Patriã Private Equity  Fundo de Terceirização de Serviços para o Brasil (2006)  Outsourcing 
PTZ/Biomass Technology Group  PTZ/Biomass Technology Fund I (2006, US$63m)  Cleantech 
Rio Bravo  RB Nordeste II (2006, US$46m)  Generalist 
Southern Cross Group Brazil  Southern Cross Latin American Private Equity Fund III  Generalist 

(2007, US$751m) 
Stratus Investimentos  Stratus VC Fund III (2006, US$31m)  Cleantec 
Temple Capital Partners  Clean Energy Brazil (2006, US$197m)  Cleantech 
Vision Brazil  Vision Agro Fundo de Investimento em Participacoes II  ‐ 
(2007, US$78m) 
Votorantim Ventures  Votorantim New Business (US$300m)  IT, life sciences 
 
 
 
 
 
 
 
Figure 40:  PE funds raised 2002‐2007 (source: EMPEA) 
May 2008
by PriceWaterhouse Coo- food and beverage retailers Grupo RA and La Mansion,

110 transactions involving and duty-free retailer Brasif. GP Investments is building an
mpleted in 2007, 57 were integrated human resources company through acquisitions
ortfolio companies. Fund of Grupo Suma, Top Service, and People Domus. Equity
ts of consolidation plays International and GP Investments are building a portfolio
ich has been investing in of shopping center developments through their 2006 co-
e region, such as Brazilian investment in BR Malls.
 
 
Figure 41:  Number of PE‐backed Public Offerings in Brazil (source: EMPEA) 
f Brazilian GPs is a critical ÕLiÀÊvÊ* L>Vi`Ê*ÕLVÊ"vviÀ}Ã
ery.
25
cial sponsors) account for 21
hirds of the exits in 2007. 20
s with strategic sponsors 16
path to exit in Brazil. Re- 15
International’s exit from 12
adora (JMS) in exchange 10 9
umer credit bank Parana

ealized a US$12.5 million 5
h a sale to US protective
Industries. In November 0
2004 2005 2006 2007
nts realized its investment
Source: ABVCAP, Bovespa.
Investing Trends 
ÕÊ6
É* Ê ÝÌÃ]ÊÓääÈÊÊÓääÇ
 
Net Revenues
2006 Private equity firms are bullish on Brazilian agricultural investments, in spite of the tight credit 
Investment Time to exit Estimated IRRs
(USD million) markets. Investors with cash say the current market turmoil will create opportunities in Brazil’s fast 
(USD million) (years) in US$
393 growing agricultural sector, especially in the heavily leveraged sugar and ethanol sector, where 
11 2 481%
1746 analysts expect a wave of mergers and acquisitions.  Fuel production and energy drew the majority of 
26 1 242%
161 16 <1 199%
investment in 2007.  The attractiveness of sugarcane‐based ethanol production projects is being 
308 100 5 40%
305
driven by strong demand in Brazil (where 87 per cent of all new light vehicle sales are flex‐fuel cars) 
78 9 36%
3374 and by global energy security concerns.  Investors are also active in beef, coffee, bioenergy and 
77 8 26%
793 infrastructure, logistics and retail. 
202 7 22%
517 49 8 9%
n/a Exit Trends  
n/a 4 130%
122   2.5 7 32%
n/a Trade sales (to strategic or financial sponsors) accounted for roughly two‐thirds of exits in 2007.  
7 6 12%
Among trade sales, transactions with strategic sponsors continue to be the predominant path to exit 
in Brazil.  Although rare during private equity’s early years in Brazil, IPOs became an attractive exit 
route prior to the current economic crisis.  Of the 176 IPOs on the São Paulo Stock Exchange over 
2004 – 2007, 30 per cent were companies backed by private equity or venture capital (Figure 41).   
Examples of private equity‐backed IPOs are shown in Table 25 and include DASA (now a component 
Association of the ISE index), TAM and GOL.  5
 
 
 
Table 25:  Examples of successful VC/PE exits, 2006 ‐ 2007 
Net revenues 2006  Investment  Time to exit  Estimated IRRs 

Exit Type  Company 
(US$ million)  (US$ million)  (years)  in US$ 
Equatorial  393  11  2  481% 
GOL  1,746  26  1  242% 
TOTVS  161  16  <1  199% 
DASA  308  100  5  40% 

IPO 
Gafisa  305  78  9  36% 
TAM  3,374  77  8  26% 
ALL  793  202  7  22% 
Localiza  517  49  8  9% 
Akwan  n/a  n/a  4  130% 

Trade Sale  Autotrac  122  2.5  7  32% 
Microsiga  n/a  7  8  12% 
Source:  EMPEA (ABVCAP, Bovespa) 
 
Developing Brazil’s venture capital industry 
 
The government‐owned Brazilian Innovation Agency (FINEP) (part of the Ministry of Science and 
Technology) has played a key role in building Brazil’s venture capital industry.   
 
The INOVAR Project was created by FINEP in 2000 in conjunction with financing from the Multilateral 
Investment Fund (MIF) (part of the InterAmerican Development Bank, IADB) as a financial mechanism 
to support small high‐tech start ups through venture capital funds.   
 
The project has since established 24 funds, half of which have been invested in by the MIF, and has 
also created the Inovar Seed Money program (Inovar Semente) to stimulate the generation of seed 
and early stage funds for small entrepreneurs. 
 
The INOVAR Project includes: 
 
 INOVAR Fund Incubator; 
 Brazil Innovation Forum; 
 Brazil Venture Capital website; 
 INOVAR Business Prospecting and Development Network; 
 Development of capacity building and training programs for venture capital agents. 
 
BNDES has also played an important strategic role in the Brazilian PE/VC industry by emphasizing the 
development of venture capital in general and investments in PE in priority sectors.   
 
An analysis of sustainable investment practices in the Brazilian private equity/venture capital market 
can be broken down into three main (but overlapping) topics: 
 
 Integration of ESG issues (primarily risks) into the investment policies of ‘mainstream’ 
private equity funds (i.e. funds that are not specifically focused on sustainability‐related 
investment themes). 
 
 
 ‘Themed’ private equity and venture capital funds whose investment strategy is focused on 
ESG and sustainability‐related opportunities such as clean technology, biofuels, etc.  In 
recent years, the bio‐ethanol industry has been a large part of PE/VC activity in Brazil.  The 
environmental and social pros and cons of this industry are complex and are the subject of 
much debate.  A more detailed discussion of these issues is beyond the ambitions and scope 
of this report. 
 
 Venture capital funds and related technical assistance programs focusing on social 
enterprises and sustainable entrepreneurs towards the ‘base of the pyramid’.  
  
Mainstream private equity 
 
At the ‘mainstream’ end of the spectrum, few GPs and private equity funds in Brazil have formal ESG 
policies and procedures dealing with sustainability‐related risks and/or responsible investment values.  
 
There are a few exceptions particularly amongst funds whose LPs include multilateral/bilateral 
development finance institutions (DFIs).  Such DFIs include IFC, the Inter‐American Investment 
Corporation (IIC), MIF, the US Overseas Private Investment Corporation (OPIC) and CDC.  Table 26 lists 
examples of DFI‐backed funds.  The policies of IFC and many other such DFIs stipulate that private 
equity funds in which they invest must follow certain social and environmental procedures, including 
negative screening on issues such as child labour and compliance with applicable national and World 
Bank standards and guidelines.   
 
DFIs such as IFC provide guidance on their environmental and social requirements and occasionally 
run training programs for their GPs.   
 
The UK‐based firm Actis, which has raised close to US$130 million for its Latin America Fund 3, has a 
well‐defined and comprehensive management system for incorporating environmental, social and 
governance issues into the investment process.  This integration occurs at all stages of investment 
decision making, from origination through to investment appraisal and management of portfolio 
companies.   
 
Most other mainstream PE firms investing in Brazil concentrate more or less exclusively on corporate 
governance issues and have no systematic procedures for identifying environmental or social impacts 
or for subsequently engaging with the investee companies to improve environmental and social 
standards.  
 
Discussions with several Brazilian PE firms revealed that there has been little or no pressure from the 
majority of their LPs to conform to higher environmental and social standards.  However, this 
situation is slowly changing: Brazilian pension funds are becoming more active in the PE/VC market 
and are seeking to implement the UNPRI in the asset class.   
 
PREVI, for example, has recently run workshops for GPs on the integration of ESG issues into PE/VC 
term sheets, and has expressed interest in developing additional sustainable investment standards 
and tools specific to PE in Brazil.   
 
Three PE firms – NSG Capital, Stratus and Sustain Capital – have signed the UNPRI.   Other notable 
exceptions include DGF Investimentos, which has a strong framework of documented ESG policies 
and procedures, and a management team with impressive expertise in sustainability‐related risks and 
opportunities. 
 
 
 
 
 
 
Table 26:  Examples of Latin American and Brazilian PE funds backed by development finance 
institutions  
Inception  DFI LPs 
PE Firm  Fund 
year  include 
Advent International  Advent Latin American Private Equity Fund II  2002  IFC, IIC 
Darby/BBVA  Darby‐BBVA Latin America Private Equity Fund   2003  IFC 
Dynamo  Dynamo Puma II International  2003  IFC 
GP  GP Capital Partners III  2005  IFC 
Advent International  Advent Latin American Private Equity Fund III  2005  IFC 
Paladin Realty  Paladin Realty Latin America Investors II  2005  IFC 
GP  New GP Capital Partner B  2002  IFC 
Actis   Actis Latin American Private Equity Fund III  2008  CDC 
Patria  Patria Brazilian Private Equity Fund III  2008  CDC 
Advent International  Advent Latin American Private Equity Fund IV  2008  CDC 
Conduit Capital Partners  Latin Power III  2005  OPIC 
 
Clean technology and venture capital 
 
Venture capital and early stage start‐ups are especially suited to investments in environmental and 
clean technology sectors.  According to New Energy Finance (NEF), by the end of 2007, worldwide 
venture capital/private equity (VC/PE) investments in clean energy companies was US$9.8 billion with 
VC investments reaching an all time high of US$3.5 billion. Despite the recent correction in public 
markets, NEF believes that the underlying fundamentals driving investments in clean energy remain 
strong, although deal sizes may become smaller.  EMPEA provides extensive market intelligence on 
15
cleantech investment in Brazil and other emerging markets .   
 
Brazil is the world’s second largest producer of ethanol as an alternative fuel, and is expected to 
surpass the US and Europe in production volumes by 2015.  Given the high level of development of its 
biofuels sector (92 per cent of all gas stations sell ethanol), Brazil is extremely well positioned for 
continued strong profitable growth of its cleantech industry as energy security concerns grow and 
global demand for biofuels and corresponding technology such as flex‐fuel cars boom.  In January 
2008, the government mandated that all diesel fuel contain at least 2 per cent biodiesel, rising to 5 
per cent by 2013.  Seven biofuels deals accounted for nearly US$600 million (as much as 20 per cent) 
of private equity investment in 2006–2007.   
 
Notable deals in 2007 included Brenco, a new holding company investing in Brazilian bioethanol 
production, which raised US$240 million from a consortium of high profile investors including Vinod 
Khosla, James Wolfensen, Steven Bing and Steve Case.  In March 2007, the Carlyle Group and 
Riverstone Holdings invested US$240 million in four ethanol mills.  Clean Energy Brazil paid US$130 
million for 49 per cent of ethanol producer Usaciga and in October 2007, Goldman Sachs invested 
US$221 million in Santelisa Vale, Brazil’s number two sugar and ethanol producer.   
 
Notable biofuels IPOs have included the US$200 million IPO of Sao Martinho, a sugar and ethanol 
producer, on the São Paulo Stock Exchange in February 2007.  More than half its shares were 
acquired by foreign investors.  Cosan Ltd, Brazil’s largest sugar ethanol producer, raised US$1 billion 
on the New York and São Paulo exchanges in August 2007. 
 
In addition to ethanol production, Brazil has also seen investments in timber, wind energy, and 
renewable plastics.  Dow Chemical and Brazil’s Crystalsev announced plans to build the world’s 
largest polyethylene from sugar cane plant in July 2007, and Econergy International announced the 
purchase of the Pedra do Sal wind project.   
 
                                                                    
15
 Insight Cleantech: An overview of trends in select sectors and markets EMPEA (April 2008) 
 
Local PE firms investing selectively in ‘sustainable’ markets include Rio Bravo, whose portfolio 
includes Hortus (organic vegetable production), Agira (gas station compressors for fueling natural gas 
powered vehicles), Ecoluz (an energy service company), ADESPEC (an award‐winning supplier of 
environmentally friendly adhesive solutions) and Perenne (water and effluent treatment technology 
for industries such as ethanol and pulp & paper). 
 
A number of “greentech” PE/VC funds have been launched by local managers over the last year, most 
of which have evolved from FINEP’s highly successful INOVAR program and respond to innovative 
RFPs issued by BNDESPAR.  Stratus closed its US$60 million Stratus VC III Fund in 2006 and started 
investing in 2007.  The fund invests in biomass, biotechnology/biodiversity, and environmental 
technologies companies in Brazil.  The portfolio includes Ecosorb (an oil spill pollution response firm) 
and Brazil Timber (FSC‐certified sustainably managed native forests).  LPs include BNDES, FINEP, 
PETROS and MIF. 
 
DGF has raised US$140 million for its Terra Viva Equity Fund.  The firm is primarily targeting Brazilian 
players for its fund, which will invest in the entire ethanol chain including raw material producers, 
manufacturers and transport logistic operators during its 10 year life cycle.  The fund’s investment 
strategy places a strong emphasis on labour standards and does not permit investment in sugar cane 
in the Amazon.  
 
Sustain Capital and its controlling shareholder Latour Capital have been selected by BNDES to manage 
BRASIL SUSTENTABILIDADE, the first private equity fund incorporated in Brazil associated with the 
Clean Development Mechanism (CDM) of the Kyoto Protocal.  The fund is unique in that it invests 
only in companies that have CDM projects, but does not take the carbon revenue.  BNDES is the 
cornerstone investor with US$100M and the GP is now capital raising with other investors.  The 
pipeline consists of three‐four expansion investments and one‐two greenfield investments.  The 
fund’s primary focus is renewable energy.  It will also seek investments in forestry projects (mainly 
charcoal), where the strategy is based on replacing use of native forests with use of eucalyptus, 
combined with more efficient kilns that fix more carbon in the charcoal.  Sustain Capital has 
developed a comprehensive sustainability screening tool covering environmental, social and 
governance issues. 
Sustainable entrepreneurs 
 
Brazil is one the main hubs of the New Ventures program, an initiative of the World Resources 
Institute (WRI) that aims to promote sustainable growth in emerging markets by supporting and 
accelerating the transfer of capital to businesses that deliver social and environmental benefits at the 
base of the economic pyramid.  New Ventures focuses on small and medium sized enterprises in fast‐
growth, environmental and base‐of‐the‐pyramid (BoP) sectors such as ecotourism, renewable energy, 
clean technologies and water management.  
 
Each New Ventures country program releases an annual Call for Business Plans from businesses in 
target sectors seeking investment from US$100,000 to US$5 million. New Ventures screens 
businesses for financial outlook, innovation, market potential, and social and environmental benefits.  
Once selected into the New Ventures Portfolio, SMEs receive intensive business consulting services 
that improve their business plans, help increase sales, and better prepare them to move into new 
markets. Investors have an opportunity to interact with the New Ventures companies at an annual 
New Ventures Investor Forum. 
 
New Ventures Brazil is run in partnership with CES‐FGV and is sponsored by Banco Real and Natura 
amongst others; the program also works with other Brazilian organisations such as FINEP, ABVCAP 
and BNDES.  The Brazilian portfolio currently consists of over 40 SMEs, ranging from ethical clothing 
and organic baby food to sustainable aquaculture and fuel cell technology.  New Ventures’ November 
2008 investor forum in São Paulo was hosted by BM&F Bovespa and attracted over 180 participants.  
To date, New Ventures’ Brazilian program has helped five enterprises to attract investment of R$13.5 
million (US$5.8 million).  Venture capital funds specialising in this segment of the market in Brazil 
include Axial PAR and E+Co. 

Sustainable Investment in Brazil 2009 (April 2009)

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Sustainable Investment in Brazil 2009 (April 2009)

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IFC Sustainable Investment Country Reports:

Other 16.1% Financial

-30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00

Electric utilities Water utilities

2005 2006 2007 2008

No. of companies invited to complete questionnaire 121 120 137 137

Response rate to questionnaire 52% 50% 42% 37%

SECURITIES AND EXCHANGE COMMISSION

For the month of November, 2007

Commission File Number 1-15106

PETRÓLEO BRASILEIRO S.A. - PETROBRAS

Brazilian Petroleum Corporation - PETROBRAS

Avenida República do Chile, 65

Form 20-F ___X___ Form 40-F _______

Yes _______ No___X____

Pension funds - public

Pension plans 11% Others 2%

BANCO DO BRASIL $21,131

$0 $5,000 $10,000 $15,000 $20,000 $25,000

Launch NAV Cumulative Performance

0% 5% 10% 15% 20% 25%

BANCO DO BRASIL 0.05%

Rank Pension fund R$ million US$ million PRI CDP 2008

Period Stock of Assets (US$ m) % in Stocks % in Fixed Income Net Flows (US$ m)

1999 23,110 99.0 ‐ 1,100

2000 18,528 91.9 7.0 ‐1,835

2001 15,532 88.5 9.3 ‐728

2002 10,373 74.7 21.5 ‐336

2003 20,120 86.8 11.6 2,421

2004 29,066 90.1 8.3 270

2005 53,439 91.0 6.8 707

2006 101,601 81.7 16.9 8,585

2007 214,111 77.4 19.0 33,878

2008 (Jan‐Aug) 232,280 67.3 29.8 12,205

Value % of Filing

ALL AMER LAT 11.4 655.50 283.15

Top 10 managers R$ million US$ million

1 ITAU 33,962 14,670

2 UNIBANCO 17,387 7,510

3 CREDIT SUISSE HEDGING GRIFFO 12,552 5,422

4 UBS PACTUAL 12,430 5,369

5 BNY MELLON 11,712 5,059

6 SANTANDER BRASIL 9,458 4,086

7 BRADESCO 8,412 3,634

8 OPPORTUNITY 6,761 2,920

9 BANCO DO BRASIL 6,150 2,657

10 VOTORANTIM ASSET MANAGEMENT 5,178 2,237

Total (40 managers) 152,058 65,684

Global North America Asia-Pacific Latin America Europe Middle East

Source: Capgemini/Merrill Lynch Financial Advisor Survey, April 2008

Company Industry ISE Report English GRI Verification

Rank Company Industry Year

1 Natura Personal care products 2007

2 Suzano Petroquimica Chemicals 2006

3 Ampla Electric utilities 2007

Coelce Electric utilities 2007

5 Banco Real Financial services 2007

6 Energias do Brasil Electric utilities 2007

7 Sabesp Water utilities 2007

8 Bunge Food processing 2007

Celulose Irani Forestry & paper 2007

10 Banco Itaú Financial services 2007

Company Industry ISE Response GHG data disclosed

See regulatory risks 49%

IFC Sustainable Investment Country Reports: 

  2005  2006  2007  2008 

No. of companies invited to complete questionnaire  121  120  137  137 

Response rate to questionnaire  52%  50%  42%  37% 

Form 20-F _X_ Form 40-F _______

Yes _____ No_X____

Launch  NAV  Cumulative Performance 

Rank  Pension fund  R$ million  US$ million    PRI   CDP 2008 

Period  Stock of Assets (US$ m)  % in Stocks  % in Fixed Income  Net Flows (US$ m) 

1999  23,110  99.0  ‐  1,100 

2000  18,528  91.9  7.0  ‐1,835 

2001  15,532  88.5  9.3  ‐728 

2002  10,373  74.7  21.5  ‐336 

2003  20,120  86.8  11.6  2,421 

2004  29,066  90.1  8.3  270 

2005  53,439  91.0  6.8  707 

2006  101,601  81.7  16.9  8,585 

2007  214,111  77.4  19.0  33,878 

2008 (Jan‐Aug)  232,280  67.3  29.8  12,205 

Value  % of  Filing 

ALL AMER LAT  11.4  655.50  283.15 

Top 10 managers   R$ million   US$ million 

1  ITAU   33,962  14,670 

2  UNIBANCO   17,387  7,510 

3  CREDIT SUISSE HEDGING GRIFFO  12,552  5,422 

4  UBS PACTUAL   12,430  5,369 

5  BNY MELLON   11,712  5,059 

6  SANTANDER BRASIL   9,458  4,086 

7  BRADESCO   8,412  3,634 

8  OPPORTUNITY   6,761  2,920 

9  BANCO DO BRASIL   6,150  2,657 

10  VOTORANTIM ASSET MANAGEMENT  5,178  2,237 

Total (40 managers)  152,058  65,684 

Company  Industry  ISE  Report  English  GRI  Verification 

Rank  Company  Industry  Year 

1  Natura  Personal care products  2007 

2  Suzano Petroquimica  Chemicals  2006 

3  Ampla  Electric utilities  2007 

  Coelce  Electric utilities  2007 

5  Banco Real  Financial services  2007 

6  Energias do Brasil  Electric utilities  2007 

7  Sabesp  Water utilities  2007 

8  Bunge  Food processing  2007 

  Celulose Irani  Forestry & paper  2007 

10  Banco Itaú  Financial services  2007 

Company  Industry  ISE  Response   GHG data disclosed 

TOTAL excluding BNDES  US$70 billion  12%  Percentage of total domestic market 

!"#$%&'()+(,&-. Fees Income Donation

Doing Business  125  126  +1 

Major exports   % of total  Major imports   % of total 

Index  BRAZIL  INDIA  Reporting date 

FTSE All‐World Emerging Index  14.59%  9.97%  Jan 14, 2009 

MSCI Emerging Market Index  13.36%  6.65%  Jan 14, 2009 

S&P/IFCI Composite Index  12.78%  7.13%  Nov 30, 2008 

Requirements  Level 1  Level 2  Novo Mercado 

PE Firm  Fund  Sector Focus 

Actis  Actis Latin America 3 LP (US$132m)  Generalist 

Advent International  Latin America Private Equity Fund IV (2007, US$1.3b)  Generalist 

AIG Capital Partners  AIG Brazil Special Situations Fund II (2008, US$692m)  Generalist 

Angra Partners  AG Angra Infrastructure Fund (2006, US$397m)  Infrastructure 

Banco Pactual  Fundo Brasil Energia (2004, US$255m)  Energy 

Banco Santander  ASCET I‐FIP (2007, US$31m)  Generalist 

Capitania Gestores  Private Equity Brazil Multi‐strategy I (2007, US$260m)  Generalist 

CRP  CRP VI Venture (2006, US$28m)  Generalist 

Darby Overseas Investments  Darby BBVA Latin America (2005, US$175m)  Agribusiness/Infrastructure 

DGF  FIPAC (2006, R$80m)  Technology, Pharma 

FIR Capital Partners  Fundo Tec II (2007, US$45m)  Technology, life sciences 

Gavea Investimentos  Fund II (2007, US$480m)  Generalist 

GP Investments  GP Capital Partners IV (2007, US$1.3b)  Generalist 

Infinity  Infinity Bioenergy Fund I (2006, US$516m)  Cleantech 

Investidor Profissional Gestão de  Gibraltar Fundo de Investimento em Participacoes II  Technology 

JB Partners  JBVC I Fund (2007, US$57m)  Generalist 

Mellon Global Investments Brazil  Rio Agribusiness FIP (2007, US$13m)  Agribusiness/Generalist 