Planet Tracker's assessment of Brazil’s sovereign health shows that it remains on an environmentally unsustainable path to 2030 and beyond, bringing systemic risks to its sovereign bonds, particularly to investors holding the $113 billion of Brazil’s debt repayable after 2030. If structural changes are not made, Brazil risks being left behind by the market transition to net zero, with potentially negative implications for the cost and availability of sovereign and commercial capital.
This report provides a summary of Brazil’s sovereign health and sets out a roadmap for enhancing it, showing the opportunities for sovereign investors to benefit from a green recovery. It provides sovereign investors with an updated case study of Brazil, demonstrating how to incorporate the state of a country’s natural capital into the assessment of the financial strength of its sovereign bonds; credit ratings are currently missing this aspect.
Specifically, the report recommends an innovative Deforestation-Linked Sovereign Bond, linking coupon payments to Brazil’s success in reducing deforestation. And, it sets out priority actions that investors can take to promote Brazil’s sovereign health and reduce systemic risk to their portfolios across asset classes.