Bolsonaro Really Wants Pension Reform in 2019

Brazil’s new president’s opening session letter demands social security system overhaul.

As Brazil’s legislature convened, the nation’s new president reinforced his agenda to overhaul its pension system.

Jair Bolsonaro sent a letter to Congress on Monday, which was read by Congresswoman Soraya Santos. Although the president was unable to attend the opening session as he is recovering from surgery related to being stabbed during his campaign, his message was loud and clear: Let’s fix the pension system.

He noted the need to privatize Brazil’s retirement  structure, which he has been working on.

“We are conceiving a modern and at the same time fraternal proposal, which combines the actuarial balance with support to those who need it most, separating ‘welfare’ from ‘assistance,’ while fighting fraud and privileges,” the letter read.

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Bolsonaro said one of the items being “formulated” for the new pension is individual retirement savings accounts. Brazil’s legislature said the message could mean a minimum income for all beneficiaries, some of which would be tied to the “ceiling” of the pension system. Congress added that a minimum age requirement and public sector rules should be added to the proposal.

The president said the changes will encourage the rate of national savings, and a consistent way to “free the country from international capital,” adding that welfare’s overhaul “started a big change in Brazil, business flows, [and] employment increases.”

Rodrigo Maia, the president of the Chamber of Deputies, agreed that Brazil’s social security system needs a revamp. He called it the current legislature’s greatest challenge, but if approved, it would indicate further congressional changes such as tax reform, ways to continue economic growth, reducing violence, and combating inequality and poverty.

Maia was re-elected on Friday for another two-year term. He predicted a pensions bill to take two months to get a vote in the lower house before it went to the Senate.

“I am sure we will be able to make the necessary changes in legislation and continue to respond to the wishes of society,” he said.

Senate President Davi Alcolumbre said the overhaul is “vitally important for the balance and sustainability of public finances,” but that a “broad discussion” of this and other topics such as administrative and tax reforms was needed to clarify things.

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Canada Pension Plan Investment Board Issues Euro Green Bonds

€1 billion 10-year fixed-rate notes are issued to invest in renewable energy.

The CA$368.3 billion (US$281.2 billion) Canada Pension Plan Investment Board (CPPIB) issued its first euro-denominated green bond with the sale of €1 billion ($1.15 billion) in 10-year fixed-rate notes that will enable it to invest in assets such as renewable energy, and water and real estate projects.

“The European market for green bonds is robust and gaining even more traction amid changes such as the EU’s increased targets for how much of the region’s consumed energy comes from renewable sources,” Poul Winslow, CPPIB’s global head of capital markets and factor investing, said in a release. “The capital raised will help finance our expanding portfolio of eligible green assets and demonstrate how we integrate environmental considerations into our investment decisions.”

Among the green bond-eligible investments recently made by CPPIB is a joint venture in renewable power and offshore wind assets. In 2018, CPPIB acquired 49% of energy transportation company Enbridge’s interests in two German offshore wind projects, as well as a 49% stake in some of Enbridge’s North American onshore wind and solar assets.

In June, CPPIB was the first pension fund to launch a green bond as investors bought CA$1.5 billion of a Canadian dollar-denominated 10-year bond. 

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CPPIB’s “Green Bond Framework” defines the following three categories as eligible for investment from green bond proceeds:

  • Renewable Energy (wind and solar)
  • Sustainable Water and Wastewater Management
  • Green Buildings (LEED Platinum certified)

Green bonds support environmental, social, and governance (ESG) projects,  are tax exempt, and can provide tax credits. To qualify as green bond, the bonds must be verified by a third party, such as the Climate Bond Standard Board. The CPPIB’s Green Bond Framework has been evaluated by the Center for International Climate Research (CICERO), which provides second opinions on the qualification of debt for green bond status.

According to CPPIB, the annual issuance of green bonds reached CA$155 billion in 2017, a 78% increase from 2016. It also said annual issuance is expected to reach CA$250 billion to CA$300 billion in 2018, and increase to CA$1 trillion by 2020, according to the Climate Bonds Initiative, an investor-focused not-for-profit organization.

The green bonds offered by CPPIB have not been, and will not be, registered under the US Securities Act of 1933, or the Securities Act, and were offered or sold within the US only to “qualified institutional buyers.”

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