Brazilian Stock Exchange B3 Leads Climate Action with Green Initiatives and ESG Investments

The climate can be defined as the set of average temperature and environmental conditions in a place over many years. Climate change occurs when there is a shift in these average conditions. Since the beginning of the 19th century the level of greenhouse gas emissions generated by humans, whether through industrialisation or deforestation, has increased exponentially. 

These gases trap the sun's heat and cause the planet's temperature to rise, leading to severe consequences. Natural systems, the global economy and human wellbeing are all affected by increasing extreme weather events, species extinction and poorer quality of life. 

In this worrying scenario, the private sector plays a crucial role in supporting climate change mitigation.  

B3, the Brazilian stock exchange, plays a significant role in combating climate change through its positions and commitments and through  several initiatives. Since 2005, B3 has been a signatory of the UN Global Compact, and in 2012, it adhered to the Principles for Responsible Investment (PRI). 

The stock exchange has also been part of the Task-Force on Climate-Related Financial Disclosures (TCFD) since the creation of the framework in 2017. In 2023, it joined the Ring the Bell for Climate initiative by the WFE. In addition to its institutional commitments, B3 is dedicated to engaging listed companies and offering products and services with a focus on ESG. 

This agenda needs to be on the radar of companies and investors. B3 works on several fronts, such as B3 Green Equities Designation, which highlights companies that contribute to the green economy. 

Listed companies that earn more than 50 percent of their annual gross revenue from activities considered green,  have more than 50 percent of their annual investments and operating expenses allocated to such activities and less than 5 percent of their annual gross revenue derived from fossil fuels can apply for this classification. This initiative promotes the allocation of capital to climate-positive companies according to the framework established by the WFE - The Green Equity Principles. 

Furthermore, the stock exchange launched a new methodology for the Carbon Efficient Index, ICO2 B3. This  indicator was created in 2010. To be compliant with it, companies need to be among the 75 percent that emit the least greenhouse gases proportionally to revenue and, at the same time, have a Greenhouse Gas Emission Management Score higher than their sector. 

The score, calculated by B3, is an indicator of quality in carbon-emission management. It is evaluated based on the adoption level of management practices that indicate potential improvement in the company's Emission/Revenue Coefficient. 

A partnership with AirCarbon Exchange (ACX), a leading global platform for trading carbon credits and environmental assets, was established to enhance carbon-credit trading. Through this collaboration, B3 aims to bring consistency, reliability, and efficiency to Brazil's carbon market. 

The topic is highly relevant and needs more attention from a business perspective.  Partnering with committed and proactive organisations is essential to drive solutions to today’s challenges. It’s no different with WFE; we need to join forces.