BNDES and ESG: The evangelism of Montezano
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BNDES and ESG: The evangelism of Montezano

Gustavo Montezano has been president of BNDES since July 2019. He is on a mission to get Brazil’s state development bank to adapt to the new financial reality of ESG. How the resultant tensions play out will be crucial to the development of Brazil and the world.


When, in July 2019, the 38-year-old Gustavo Montezano was announced as the new president of BNDES there were many questions about what his appointment meant for Brazil’s state development bank. Not least because he was replacing highly respected incumbent Joaquim Levy, a former economy minister and World Bank CFO, who had just quit after clashing with the country’s new right wing president, Jair Bolsonaro.

One of the reported disagreements between Levy and Bolsonaro had been over the role of BNDES’ Amazon fund. The president clearly disregarded any ambition to protect the huge rainforest, so the crucial financial role that BNDES has in the region meant the development bank was potentially a tool for the administration’s destructive environmental policies.

BNDES’s environmental and sustainable department was founded in 1991 and my goal is to shut it down
Gustavo Montezano

If Montezano’s youth was an issue for grizzled infrastructure financiers, far worse for environmentalists was his reported friendship with Jair Bolsonaro’s sons and his history in commodity broking at Engelhart Commodities Trading Partners.

“BNDES’s environmental and sustainable department was founded in 1991 and my goal is to shut it down,” Montezano tells Euromoney, knowingly playing on the darker elements of the market’s perception of his appointment.

“It’s a joke I like to make: I need to close it down and shift from having all this accumulated knowledge within a department and instead turn BNDES into a bank that is driven by environmental and sustainable policies throughout the institution.”

Montezano certainly talks a good ESG game. He says that he had an epiphany while working for Engelhart in London between 2016 and 2018. “I worked my whole life in the financial markets for private financial institutions and when I was in London I saw the whole sustainability boom first hand,” he says. “I saw the movement was going global and one of the main reasons I came back to Brazil and moved into the government was because I saw how this was going to play out in Brazil.”

Structural shift

For Montezano, sustainability – and indeed the wider environmental, social and governance (ESG) agenda – is a structural shift in the financial markets. He compares it to the permanent impact that the private equity (PE) industry had on global finance when it emerged in the 1970s and 1980s.

“When it started it was mostly in the US, with PE companies using a lot of sophisticated corporate finance calculations and using leverage and other new financing innovations. After 10 to 15 years companies had either migrated to this new style of financial management or they were out of the game or they were being bought out,” he says.

“We see the ESG trend as something similar – it’s a generation shift. In a matter of time (and that time is now) ESG will not be a label or a subset of the market, it will be the mainstream. Either banks understand this gravitational force and navigate the new environment or they will be on the table.”

Europeans just don’t understand the Amazon at all – they have no idea about the Amazon
Gustavo Montezano

He adds that for BNDES, as a development bank in an emerging market country like Brazil, that gravitational force is “even stronger”. His first steps have been aligned to this.

“The first thing I did was scrap all the financial goals of the bank – we executed the first business plan without any financial targets,” he says. “I know it sounds a little crazy but the idea was to shock the bank and to show that money isn’t the first priority – it’s the [bank’s] impact itself.”

In October, BNDES will launch its sustainability commitment that will pledge the bank to five priorities: providing access to basic services; supporting job creation and entrepreneurship; supporting clean energy generation; supporting sustainable infrastructure and industry; and promoting the preservation and restoration of forests and parks.


Montezano is evangelical about ESG. But is such evangelism rooted in real belief? For example, in 2009 the bank introduced Resolucao 1854, which required companies to ensure that public money wasn’t being used for activities related to deforestation. However, since 2001 BNDES has financed the country’s three largest meat producers – JBS, Marfrig and Minerva – to the tune of R$21 billion ($3.8 billion). More than half of this has been since the introduction of the rule and yet deforestation rates from the meat industry have been increasing. These companies have only committed to ending ‘cattle-washing’ – ensuring non-registered farms aren’t part of the production chain – by 2025.

In June 2020, a research study by the University of Minas Gerais found that 17% of all meat exported to the European Union from Brazil was sourced from such unregistered farms – directly leading to deforestation and complicating the ratification of the EU-Mercosur free trade agreement.

However, Montezano is unapologetic. “The reputational moment that we are living in in Brazil is a natural thing for a country that holds the biggest natural capital in the world. Let me explain what I mean. When I go to conferences in Europe I am always being asked about deforestation and capital, but no one is asking Europeans about their portfolio allocation to coal companies.”

When Euromoney points out that financing coal has become an important and contentious theme in the European ESG conversation, Montezano changes tack.

“Europeans just don’t understand the Amazon at all – they have no idea about the Amazon,” he says. “Brazil is holding the world’s largest natural capital but it is a liability – it’s not an asset.


“Every country that holds a natural asset is treated as someone that would offend nature by somehow using or consuming part of that natural capital. But there is no cash flow for that. And Brazil still has 60% of our land covered by forest – it is by far the largest proportion of [forest land coverage] of any of the world’s large countries. We should be rewarded for holding the natural capital but no one so far wants to pay us to do so.”

Montezano also points to the high levels of poverty in these regions of Brazil: 100 million Brazilians still don’t have household sanitation and much of this population lives in the Amazon region.

He’s probably right that foreign perceptions of the Amazon are largely based on ignorance. His own knowledge has largely developed since his appointment to BNDES – most Brazilians have never set foot within the Amazon. He has since travelled extensively throughout the region and is stark about the social problems he has seen.

“If you look at the world map and look at the link between poverty and biodiversity the correlation is almost one. Where you have high biodiversity, you have misery and poorer people – and richness is in polluted areas of the Earth with low biodiversity.”

There’s a keen feeling in many parts of Brazil that the rest of the world is not prepared to match rhetoric about the Amazon being a global resource by sharing the wealth other countries have created by plundering their own natural capital. And Brazil’s per capita carbon footprint is one of the lowest given its relatively low consumption and high renewable energy matrix.

Montezano says that 45% of the country’s power comes from clean energy – and that includes transportation, making Brazil “probably one of the most sustainable countries.” He makes a lot of the fact that Brazilian society – particularly among those who live outside the main cities – is wary of the ‘stick’ approach they suspect underlies much of today’s sustainable agenda.

“Where you have big deforestation you have criminal drug dealers, you have criminal mines, you have child prostitution, misery and murder – there’s a direct correlation. It’s a big challenge that we must face as a country,” he says. “It’s a big challenge; we need to transition from the old world to the new world.” However, this argument fails to acknowledge any responsibility the bank has for the initial deforestation.

Montezano is right, of course, about the horrific human cost and environmental fallout from illegal deforestation but surely stronger policies to prevent that activity in the first place would be more effective. To echo the terminology of United Nations Climate Change Conference, COP26, in regards to deforestation, mitigation should be the focus, rather than adaptation.

Global coordination

There’s a similarly questionable logic in his call for a greater global effort to partner with Brazil to both protect the Amazon and promote sustainable development. The world would surely be more willing to partner with the Brazilian government had it not overseen a huge increase in the rate of deforestation – now at a 12-year high.

However, Montezano is insistent that protecting the Amazon is “a bill that needs to be paid”.

“I like to tell my environmentalist friends that ecosystems belong to economic systems. We cannot just ring fence the forest and make sure no one steps there – that doesn’t work.” He says that Europeans should visit the Amazon – not only to see the social and development issues for themselves but also to help the region through tourist spending.

He also points to the issue of carbon credits. He says Amazon-generated offsets can be bought for a few dollars a tonne whereas the price in Europe is over €50. “Carbon is carbon,” he says, touching on the thorny issue that means that the voluntary carbon credit market is driven by the concept of ‘additionally’, which means keeping large swathes of standing forest falls outside this regime. There are strong anti-greenwashing reasons for this, of course, but at the same time this removes a mechanism that could enable this “large natural liability” to generate cash flows and incentivize local communities to protect standing forests.

“What are people and countries willing to give?” he asks. “We need global coordination. We can’t just have countries accusing Brazil and creating boycotts – that just speeds up the deforestation and makes the transition more challenging.”

Such a meeting of minds, the development of trust and a consensus for a way forward between the Brazilian state and the rest of the world community is going to be one of the most important – and difficult to achieve – outcomes of COP26.

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