In June of this year the Brazilian Government added to its list of projects in the infrastructure sector initiatives that are considered priorities due to their significant social or environmental benefits.
The listed projects are benefited by a reduction in Income Tax relative to finance sourcing through public offer of infrastructure debentures.
Infrastructure Sector Perspectives
Economic recovery post pandemic will require governmental investments in the economy in sectors that are expressively bottlenecked. The Organization for Economic Co- operation and Development (OECD) admits that, faced with a scenario of retraction and uncertainty, investments in alternatives that are more sustainable and less aggressive to the environment could result in important benefits in the long term from reduction of environmental and climatic risk caused by projects that are highly polluting and environmentally degrading.
Further, in light of a possible scarcity of available funds, promoting and incentivizing the application of differentiated income tax rates relative to investor-held debenture debt instruments resulting in important social and environmental benefits is certainly a meaningful way of creating viable incentives which are fundamental for a balanced and long term growth of the economy.
The Projects Contemplated
The so-called “Green Projects” are those related to Infrastructure area sustainable and less polluting activities, which are divided between the urban mobility, electric energy and basic sanitation sectors.
The non-motorized or low-polluting public transport projects considered are: (I) subways; (II) Light Rail Vehicles (VLTs); (III) electric buses; and (IV) projects for the construction of Bus Rapid Transit (BRT) vehicles.
In the electric energy sector, projects included as priorities are those based on renewable production techniques such as: (I) solar panel plants; (II) wind turbine fields; and (III) waste- to-energy power plants, as well as small hydroelectric centers with expressive power generation in small flooded areas.
Basic sanitation initiatives such as (I) water supply projects and (II) residential sewage removal and treatment, as well as projects implemented in urban areas within the peripheries of large cities, were also listed by the Decree as priorities and are eligible for financing through the public offer of debentures.
The Importance of Investment in Sustainable Projects
Green bonds fund investment in sustainable and low environmental impact projects. In addition to directly benefiting the routine of large cities and millions of citizens, such investments also benefit investors through the reduction of the tax rate incident on financial applications.
The COVID-19 pandemic has brought with it the necessity of rationalizing existing sources of funds, in addition of demonstrating the importance of implementing measures and initiatives that are beneficial to the environment. The new decree is a key instrument for “green revolution” in the infrastructure sector. In the so-called “new normal” those who pay attention to the social and environmental benefits of sustainable investments shall certainly be at the forefront.
The Projects Contemplated
The so-called “Green Projects” are those related to Infrastructure area sustainable and less polluting activities, which are divided between the urban mobility, electric energy and basic sanitation sectors.
Considered non-motorized or low pollution-emitting public transport priority projects in the urban mobility sector are: (I) subways; (II) Light Rail Vehicles (VLTs); (III) electric buses; and (IV) projects for the construction of Bus Rapid Transit (BRT) vehicles.
In the electric energy sector included as priority projects are those based on renewable production techniques such as: (I) solar panel plants; (II) wind turbine fields; and (III) waste- to-energy power plants, as well as small hydroelectric centers with expressive power generation in small flooded areas.
Basic sanitation initiatives such as (I) water supply projects and (II) residential sewage removal and treatment, as well as projects implemented in urban areas within the peripheries of large cities, were also listed by the Decree as priority and eligible for financing via the public offer of debentures.
The Importance of Investment in Sustainable Projects
Green bonds fund investment in sustainable and low environmental impact projects. In addition to directly benefiting the day-to-day of large cities and millions of individuals, such investment also benefits investors via reduction of the income tax rate incident financial applications. The COVID-19 pandemic has brought with it the necessity of have to rationalize evermore existent sourcing of funding, in addition to demonstrating the importance of implementing measures and initiatives beneficial to the environment. The new decree is a key instrument for “green revolution” in the infrastructure sector. In the so-called “new normal” those paying attention to the social and environmental benefits of sustainable investment shall certainly be at the forefront.
Written by: Leonardo Palhares e Igor Ferreira Luna