INVESTMENT ESG FUNDS: LEGAL REGULATION AND INVESTOR PERCEPTION IN BRAZIL

Abstract

In the present study, a critical analysis will be developed on the main existing debates regarding investment funds with ESG metrics (Environmental, Social, and Governance), a term that represents corporate commitment to sustainable development. ESG, broadly speaking, encompasses a variety of issues related to the environment (e.g., climate change, energy and water use, carbon emissions), social responsibility (e.g., human rights, product safety, gender equality, health and safety), and corporate governance (e.g., board independence, corruption and bribery, reporting and disclosure, shareholder protection). However, funds investing in sustainable development have faced conceptual and legal uncertainties, covering issues such as expected financial returns, investor demands for sustainable products, and managers' responsibilities in verifying and disclosing information related to sustainable governance. There is discussion, meanwhile, as to whether recommendations should not be centered on sustainability, while other objectives would naturally derive from the good performance of the activity. In light of this scenario of evident standards and regulation construction, this study seeks to analyze the main challenges faced by fund managers in incorporating ESG (Environmental, Social, and Governance) practices and examine how such practices are perceived by investors, highlighting: (i) the discussion on the legal nature of investment funds; (ii) sustainable development and ESG principles as a framework for investment standards; and (iii) the implementation of ESG policies as a fundraising metric for funds. Therefore, this research project proposes an analysis of legal solutions for the implementation of sustainable funds in Brazil, aiming to promote transparency and avoid greenwashing practices, thereby contributing to the solid and orderly growth of sustainable investments in the country.