UK and Brazil Agree to Cooperate on Green Finance and Fintech
UK and Brazil held the fourth Economic and Financial Dialog between the two countries in December 2020. The participants included the central bank governors and the heads of financial sector regulators. Among other topics, the discussions centered on collaboration in the areas of green finance, financial technology and innovation, and insurance and capital markets. One of the key developments was the agreement of the UK and Brazil on the implementation of the UK-Brazil Green Finance program, to develop the Green Finance market in Brazil. To ensure follow-up across all the agreed areas, senior officials will meet to take stock in the first half of 2021, with the next Dialog expected to be held in Brazil in 2021.
The UK proposed that Brazil consider the possibility of joining the Coalition of Finance Ministers for Climate Action. As one of the main Program beneficiaries, the Brazilian National Development Bank (BNDES) will pioneer the integration of international ESG standards into its processes, policies, and mandates. Both countries welcomed engagement between the UK Green Finance Institute (GFI) and the multi-stakeholder forum Brazilian Financial Innovation Laboratory (LAB), which aims to foster sustainable finance through innovative financial instruments. Both countries committed to a series of technical engagements to work together on deliverables to advance the sustainable finance agenda in Brazil, including an industry roundtable in early 2021. The Central Bank of Brazil committed to implement mandatory climate-related disclosures for financial institutions aligned with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) by 2022. UK and Brazil agreed to enhance cooperation on the implementation of mandatory climate-related financial disclosures, ahead of COP26. They agreed on the need for a global approach to international climate-related disclosure standards to limit fragmentation across jurisdictions.
They also recognized the developing role of the IFRS and other international standard-setters in this regard. The UK welcomed the Brazilian central bank’s membership of the NGFS and the commitment to perform climate stress testing by 2022. The UK also encouraged Brazil to join the Coalition of Finance Ministers for Climate Action. The UK welcomes and supports SUSEP’s commitment to promote initiatives to implement TCFD recommendations in the insurance sector and offers technical assistance for the development of these initiatives. Finally, both sides agreed to work together to explore further measures to encourage financing growth, including through sustainable bonds, infrastructure investment, and local currency bonds. Both sides agreed to consider the feasibility of, and presence of any barriers to, dual listing of Brazil’s sovereign bonds in London, providing additional investor diversification and profile.
The two nations reinforced their commitment to collaborate on issues related to the development of the fintech ecosystem in the Brazilian and British markets. To this end, the UK and Brazil welcomed the planned workshop on Regulatory Sandboxes between the UK FCA, and the Central Bank of Brazil, the Securities and Exchange Commission, and Superintendence of Private Insurance; the workshop is expected to take place virtually in the first quarter of 2021. Both countries welcomed the Central Bank of Brazil’s interest in, and the Superintendence of Private Insurance’s intention of, joining the Global Financial Innovation Network (GFIN). They also welcomed the UK cooperation with the central bank of Brazil through the Support Open Banking Implementation Project. While the Brazilian Open Banking model will be implemented in four phases throughout 2021, general rules for the ecosystem and for its governance structure and technical standards for the first phase have already been issued. Brazil intends to move toward an Open Finance model by also including on its scope the sharing of data pertaining investment, insurance, foreign exchange, and open pension funds products and transactions.
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Keywords: Europe, Americas, UK, Brazil, Banking, Insurance, Securities, ESG, Sustainable Finance, Climate Change Risk, Disclosures, Stress Testing, Green Bonds, Fintech, Open Banking, COP26, BCB, HM Treasury
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