BNDES | Annual Report 2021

Given the context that emerged in recent years, climate change is a growing risk. Economic growth must be aligned with efforts to limit and stabilize the temperature of the planet and promote the fulfillment of the sustainable development goals (SDGs) agreed upon by Brazil and the remaining member States of the United Nations (UN).

More than just an ethical concern, sustainable development is fundamental to the success and continuity of companies’ business activities, bringing to light issues related to climate change, efficient management of natural resources such as water, supply chain management, relationship with workers and building of a corporate culture that generates confidence and promotes innovation.

As seen during the pandemic, development banks are fundamental in responding to emergencies and are at the forefront of identifying challenges and obstacles to economic growth, as well as seeking out solutions for improving quality of life and addressing climate change.

Strategic planning has defined the BNDES’ vision as to be the Brazilian sustainable development bank. The institution’s missions are primarily related to the SDGs. Support for micro-, small- and medium-sized enterprises (MSMEs), for example, aims to provide jobs, productivity, and competitiveness, thereby contributing to promote “decent work and economic growth” and “reduced inequalities”. Stimulating basic education and professional qualifications, which is part of the Bank’s education agenda, is a well-established means of reducing poverty. Themes such as building resilient infrastructure, promoting inclusive and sustainable industrialization and fostering innovation remain relevant parts of the institution’s strategy.

The BNDES’ missions are also aligned with the transition to a low-carbon economy and are focused on expanding renewable energies, developing the carbon market, and providing support for operations in productive sectors that have a positive impact on the environment. In the area of sanitation, the Bank has been working with the Brazilian federal government and subnational entities in order to create mechanisms and channel both public and private resources in order to bolster investment in areas of low viability. In sectors such as urban solid waste and urban mobility, which are essential to building sustainable cities and communities, the institution has also contributed to the structuring of projects, making up for a historical shortfall.

The Bank’s great capacity for communication – which allows it to implement coordinated actions with the different spheres of government, other financial institutions, international funds, and multilateral organizations – greatly enhances its performance. These partnerships increase the availability of funding and promote the sharing of risks. As a result, the institution is also gaining importance within the international context as a catalyst for actions aimed at sustainable development.

This movement is complemented by the diversification in the BNDES’ solutions and forms of action, with emphasis, in addition to credit, to the structuring of projects, the granting of guarantees, the investments in funds and the issuing of green bonds. In a concurrent fashion, digital transformation and the development of solutions in partnership with financial agents and fintechs have brought the institution closer to MSMEs and entrepreneurs, with direct impact on the generation of employment and income.

Assessment of these and future actions implemented by the Bank demonstrating its results and impacts on Brazilian society is fundamental, and this report is a means of providing transparency with regards to these initiatives.

As the highest body of governance of the BNDES, we are reinforcing our commitment to the strategy that has been put into place and the vision in which the BNDES is “the Brazilian sustainable development bank”. We therefore wish to invite readers to learn more about the path that the BNDES has taken in 2021, the details of which are provided in the discussion of objectives and strategic actions presented in this publication. This report is part of our commitment to providing transparency and increasing direct communication with society.

Board of Directors
BNDES | BNDESPAR | FINAME

In this context, we are moving forward in line with commitments made under the UN Global Compact and the ten universal principles proposed for the areas of human rights, labor, environment and anti-corruption measures. We can and will work in an increasingly open and innovative manner, transforming this institution in Brazil’s main sustainable development ecosystem, in addition to seeking out new markets and opportunities.

ESG WINDS - History will remember this period as being the point at which the urgency of socioenvironmental issues and disruptions in the adoption of new technologies converged. The moment at which social support networks were solidified through the exponential acceleration of the socioenvironmental revolution. A veritable explosion of opportunities rooted in the ESG philosophy in which Brazil is a protagonist by nature.

This was the direction that our strategic agenda took in 2021. We consolidated our forest conservation and recovery programs, including Floresta Viva, positioning the BNDES not as a mere monopolist seeking a good cause, but rather a partner agent stimulating initiatives along with the market. This is a step not limited to philanthropy, that also includes exploring new possibilities of return in projects aimed at the protection, measurement, and commercialization of intangible assets, such as Payment for Environmental Services (PSA).

We also placed the Bank on the list of financial institutions that participated in COP26, held in Glasgow. At the summit, we collaborated to position the government of Brazil at the forefront of advancing the regulation for a unified carbon credit market.

A unified and global approach to solutions for reducing gas emissions throughout the entire planet is an essential part of the BNDES’ strategy alongside its international partners.

MSMES - Throughout the year, the support for micro-, small- and medium-sized enterprises (MSMEs) was a major focus of our agenda, rooted in the following objectives: (i) expansion of our distribution network, which today includes more than sixty agents through means of partnerships with cooperatives, regional banks, fintechs and niche banks, in addition to commercial banks; (ii) development of alternative instruments such as innovation funds, venture capital, and guarantee funds that increase the allocation of the Bank’s resources on the last mile of MSMEs’ risk.

More than 129,000 MSMEs and individuals were supported through credit and guarantee operations. We fulfilled the majority of our objectives for the year, strengthening and structuring our activities to further increase our impact in terms of generating sustainable development.

Emergency measures adopted during the COVID-19 pandemic, such as the Emergency Credit Access Program (FGI-PEAC), which fueled our economy with R$ 92 billion in credit for MSMEs, also demonstrated the relevance of the guarantee funds for this niche market. These initiatives taught us important lessons that suggest that the perpetuation of these tools within the Bank’s strategy will be essential in the future.

RECYCLING CAPITAL - In 2021, as part of our divestment strategy, we sold more than R$ 20 billion of our equity and debenture portfolio. As a result, we now rely on a composition of assets that are less exposed to volatility in stock markets. We are also carrying out a large-scale recycling of capital by redirecting resources previously allocated in mature companies towards supporting burgeoning sectors of the economy.

This was the idea behind the creation of new funds, such as the one related to Internet of Things (IoT), and the investment in receivables funds (FDIC), which direct credit towards small companies through means of card payment machines and marketplaces, among other innovative initiatives.

MANUFACTURING PROJECTS - With regards to infrastructure, we established the BNDES as the world’s largest development bank structuring concession agreements, PPPs, and privatizations, with a portfolio that includes more than 150 projects and more than R$ 300 billion in mobilized capital.

In terms of sanitation, more than 10 million Brazilians will now have access to water and sewage as a result of the commitments made under contracts developed by our Project Factory. It is now time to increase the level of investments made in urban solid waste and mobility projects capable of significantly improving the lives of Brazilians.

We also made advancements in consolidating project finance within the Brazilian financial system, increasing the number of players present by assuming new risks that are consistent with our role as a development bank. Our focus is on attracting funding by sharing risks through means of securitized syndicated loans, thereby driving participation in private and capital markets.

GOVERNANCE - We give priority to each aspect of the ESG agenda (environmental, social and governance). However, we understand that governance has been the cornerstone of our reconstruction. Without the capital “G”, any economic, social or environmental development agenda would inevitably be compromised. It is essential that we continue to make improvements to the governance structure that we have established in Brazil in recent years, both from a public or private perspective.

This annual report, the integrity of which I hereby guarantee, is the result of a collective reflection process involving all areas of the BNDES and its various decision-making bodies, in addition to consultation with external parties. The most recent edition from 2020 was awarded the 23rd ABRASCA Award of Annual Reports, in the category “closed corporations”. This recognition highlights the efforts that the Bank has made towards becoming increasingly transparent and open.

We hope that you enjoy reading the content of this report and that the following pages provide you with further insight into our strategy, governance, and performance.

Gustavo Montezano
President of the BNDES