On September 20, 2021, the Association of Financial and Capital Market Entities (ANBIMA) submitted to public hearing adjustments to the Code of Management of Third-Party Funds, involving, among other alterations, the creation of rules and procedures for identification of sustainable investment funds (“Rules and Procedures”).
According to the current classification of investment funds, a sub-category exists for sustainability/governance that only applies to stock funds. However, as pointed out by ANBIMA, a study conducted in 2020 revealed that other investment funds (not identified in the current sustainability/governance sub-category) call themselves “green”, sustainable or ESG (environmental, social and corporate governance).
In light of this situation, by proposing the Rules and Procedures, ANBIMA aims to: (i) to assure solid bases for the development of Sustainable Investment Funds (which will be called “IS”), due to the growing demand for ESG products in the Brazilian market; and (ii) to establish a definition for the other funds that already identify themselves as ESG.
According to Art. 1, § 1, of the Rules and Procedures, the funds investing in fixed-income instruments and shares regulated by CVM Instruction 555/2014 that meet the criteria set out in the Rules and Procedures can be identified as Sustainable Investment Funds.
Among the requirements applicable to the portfolio managers of IS Funds (as per Chapter II of the Rules and Procedures) are the following:
(i) policy regarding ESG aspects: the manager of IS Funds must prepare, maintain and publicize at its website a written document with internal guidelines, rules and procedures adopted by the institution involving questions of sustainable investment; and
(ii) professional responsible for ESG aspects: the portfolio manager of IS Funds must hire qualified professionals with functions and responsibilities to promote the management objectives of sustainable investment funds.
The new rules referring to the managers of IS Funds apply to all the managers of investment funds with the objective of sustainable development, including the managers of funds that are currently identified in some way as sustainable, such as the stock investment funds in the existing sustainability/governance sub-category.
Among the requirements applicable to IS Funds, as set forth in Chapter III of the Rules and Procedures, the following stand out:
(i) provisions in bylaws: IS Funds must include in their bylaws a summary of the objectives of sustainable investment;
(ii) specific investment strategy: It will be necessary to adopt an investment strategy that includes at least: (a) the method used to achieve the sustainable investment objectives; (b) the sources of reference of the information used in conformity with the method and how that information is processed; and (c) other tools employed that complement or support this strategy; and
(iii) management: IS Funds will have to be managed by a professional or entity that meets the requirements of managers of investment funds set out in the Rules and Procedures.
The requirements listed in the Rules and Procedures must be attested and reported to ANBIMA in the form requested, in which respect the Association can indicate a standard and frequency for monitoring and verifying each of them.
Finally, the Rules and Procedures stipulate, in Chapter III, the possibility for certain funds to be classified as “Funds that Integrate ESG Questions”. Funds that do not have sustainable investment as their main objective, but consider some ESG questions in their investment policies can be included in this classification.
When classified as “Funds that Integrate ESG Questions”, the funds can express this in their publicity materials, as long as they abide by the requirements and limits set forth in Chapter III of the Rules and Procedures, which include:
(i) the need to adopt a method to integrate ESG questions (e.g., the selection to invest in assets according an evaluation of ESG aspects); and
(ii) the need to use information, metrics and/or indicators that allow identifying the ESG characteristics of the assets in their portfolios.
Suggestions and comments regarding the Rules and Procedures must be sent in writing by October 29, 2021 to ANBIMA, to the e-mail address “audiencia.publica@anbima.com.br”, or by means of the Workplace of ANBIMA, a space exclusively for tis members.
More information, including the full content (in Portuguese) of the Rules and Procedures, can be found at the website of ANBIMA (www.anbima.com.br).
