Some of the most significant problems the Brazilian economy is currently facing are environmental and social. These issues have been of a prominent concern and had played an important commercial differentiator role in the Brazilian financial and investment community for nearly, a decade. This is the reason why a new term has been introduced in the socio-economical terminology of the country; sustainable development. As a term sustainable development means that the country has to reduce the pressure on ecosystems and simultaneously create the proper circumstances for the creation of a socio-economical status quo that will give the proper means to citizens, in order to live a comfortable life.
Brazilian authorities demonstrate a noteworthy interest for the implementation of a policy that will be in accordance with sustainable development. Actually, the depth of the commitment and sophistication of the Brazilian program is probably unique among the world’s emerging economies and therefore have received international attention. Despite this, Brazil’s sustainable development program is still in its relative infancy and therefore constantly faces new challenges and obstacles. Of course this is relatively easy to be explained if we take into account the country’s environmental and social problems and the scale of the investment in certain economical domains that are strenuous for the environment.
This fact is highlighted by the sectoral breakdown of the IBOVESPA Index. IBOVESPA Index is the benchmark of the Brazilian stock exchange market and as it is shown in the above diagram that delineates the sectoral breakdown and the aforementioned index is dominated by the financial sector, oil & gas, mining and steel. Approximately 25% of the total value of the overall market is concentrated in just two companies, Petrobras (oil & gas) and Vale R Doce (mining); companies that are activated in industrial domains that are heavily involved with the environment.
International and national investors in Brazil are facing a wide and often complex range of social and environmental issues. That is the reason why sustainable development and subsequently investment, in the country have to be studied in the wider context of Brazil’s overall economic context that presents significant risks to shareholder value and corporate reputation.