Deforestation in the Amazon and the role of investors and their clients

24 October 2019

The Amazon deforestation and the role of investors and their clients[1]

Dr. Grace Iara Souza[2]

The Brazilian, Bolivian, Peruvian and Venezuela Amazon have been burning to unprecedented levels, prompting what scientists have been arguing to be an irreversible tipping point[3]. As the largest tropical rainforest still standing, the deforestation of the Amazon represents a huge loss not only to the indigenous populations of all nine countries that share the Amazon basin, but the whole global community.

The Amazon absorbs between 90–140 billion tons of carbon[4], that would otherwise contribute to the climate crisis; it has 15% of the world’s fresh water, responsible for most of the rainfall necessary to the agricultural frontier in the neighbouring countries; it also has 10% of the world’s biodiversity, representing an enormous medicine potential, including the anti-cancer and anti-malaria drugs[5].

As much as the current Brazilian government, led by the present Jair Bolsonaro, is to blame for reducing conservation and control measures and for propagating a vision that development means large scale monoculture, mining and big infrastructure projects at the expense of the rainforest and its people, it is important to remind ourselves that we’re all connected through global economy[6] and its impacts to climate change. Therefore, investors, companies and consumers have much to blame and a crucial accountability role to play.

As advocated not only by environmentalists but also by school children and students worldwide during the global climate strike there is no planet B! We live in a global climate emergency and governments have a decade to honour their commitments of reducing carbon emission to net zero by 2025[7]. However, the strategies to address the global call for sustainability and climate change have mostly focused on renewable energy, industrial efficiency and a low carbon economy, often overlooking the pressure our consumerist lifestyle[8], particularly in urban cities, put on the forests in the global south.

From an indigenous perspective, scientists, economists, policymakers, the Western society in general, have been falling to notice that the environment and society is part of a whole. So far, we have perceived the environment as raw material, something to be exploited, commodified, transformed, studied, somewhere to be visited, enjoyed, used. This perception is rooted in capitalist, colonial, and patriarchal dimensions that have failed. The bottom line is, after thirty years of ‘sustainable development’ discussions and practice, we are still considering how to keep global warming below 1.5 degree Celsius when the reality is we are heading towards 3-4 degree Celsius warming and greater inequality.

Investors and consumers need to listen to indigenous peoples, and realise that we are all part of the natural environment, regardless of whether you live in the urban cities or deep into the rainforest, our bodies are composed of more than 50% of water, we breathe the environment, we eat the environment. Our actions are intrinsically interconnected with the natural environment and because we are part of it, we should not be expecting the indigenous peoples to be the ones looking after it alone.

Investors and the private sector have been ‘talking the talk’ through Corporate Social Responsibility (CSR) and Socially Responsible Investing (SRI) now called Environmental, Social Governance (ESG) initiatives. Yet, the worldwide outrage for the Amazonian fires served to put a spotlight on the fact that many of these traders and investors have not actually been fulfilling their commitments[9].

Some of the main drivers of deforestation in the Brazilian Amazon are due to the global demands for commodities such as beef, leather and soy, mostly imported by China, Europe and Russia, which in turn result in products from meat and dairy to bags and shoes.

‘Talking the talk’, several of the most influential companies in forest-risk supply chains have pledged to ensure that their Brazilian supplies are deforestation-free by signing the Declaration on Forests and Consumer Goods Forum resolution. However, according to the Global Canopy’s Forest 500 project, the Amazon Watch and the Global Witness, they have been following rather short. For example:

JBS, the biggest beef exporter, has faced repeated accusations[10] for sourcing cattle from illegally deforested land, among a few others wrong doings[11];
90% of Brazil’s soy exports are used for animal feed in China and Europe. A market dominated by giants such as Bunge and Cargill. Both have faced fines in 2018 for sourcing from land that had been illegally cleared[12]. In the last July, Cargill has been nominated by the Henry Waxman, former Member of the US Congress and Chairman of Mighty Earth, “as the worst company in the world” for it’s environmental and human rights practices[13];

It is hard for consumers to know which companies to boycott. Therefore, it is the responsibility for consumer governments to show their commitments in tacking deforestation and climate change by requiring large companies to carry out due diligence on their supply chains[14]. The EU is expected to maintain its commitments to restore the world’s forests by introducing EU-wide corporate due diligence legislation to ensure companies are required to identify, prevent and mitigate environmental impacts in the their supply chains. The EU trade deal with the Mercosur is an important opportunity for the member states to actually show whether they really are committed to tackling deforestation and climate change or if it is only about maintaining the discourse[15].

Ricardo Salles, Brazil’s Environmental Minister, came to Europe early October to meet with the German pesticides BASF and Bayer, the car giants Volkswagen and Mercedes-Benz, a British fossil fuel and mining organisation and DEFRA. This was supposed to be a secret agenda[16] but it did not pass unnoticed by protesters[17].

Foreign investors have an enormous influence over what happens in the Brazilian Amazon by providing billions of dollars in lending, underwriting and equity investment. According to the Amazon Watch, BNP Paribas, JP Morgan Chase, Barclays, Bank of America, and Citigroup provided together more than a billion dollars in credit apiece to the giants ADM, Bunge, Cargill and Louis Dreyfus[18].

JBS, Marfrig, and Minerva, the major Brazilian beef companies, receive significant investments from foreign sources. JBS, for example, has investments from Capital Group, BlackRock, Fidelity Investments, and Vanguard. Having also received almost 1.2 US billion dollars in underwriting from Santander, JP Morgan Chase and Barclays in the past five years[15].

My colleagues at Preventable Surprises and I tend to be rather weary of claims such as those made by Blackstone co-founder and CEO Stephen Schwarzman saying that his company “…is committed to responsible environmental stewardship”[19] when the organisation is also a major donor to climate denialist politicians such as US Senate Majority Leader Mitch McConnell and President Donald Trump. Blackstone largely owns the Amazon terminal Hidrovias do Brasil and Patria Investimentos, responsible for the construction of a contentious highway and the port to facilitate the cultivation and export of grain and soybeans. Part of Bolsonaro’s plans to privatise and development the Amazon rainforest will count on Hidrovias to help transforming the rainforest into a farmland.

Concerned to how the fires in the Amazon started to trace back to their image, 244 institutional investors representing more than 30 countries and a sum of USD 17.2 trillion in assets under management, signed an statement (v.02/10/2019) called on unnamed companies to take urgent action in meeting their commodity supply chains or risk economic consequences[20].

This statement is a very welcome acknowledgement that forest deforestation has been an overlooked issue by Brazilian businesses and their investors and that very few companies are on track to reach the goal ending commodity-driven deforestation by the end of 2020. But the statement still falls very short in imposing any factual change to business practice. What are the companies that really need to change? And by when? And if they don’t end their commodity-driven deforestation, which sort of economic sanctions would be put in to place as a consequence of non-compliance?

Going back to the indigenous understanding of the socio-environment, with the climate change 1.5 degree Celsius clock ticking, it is ever so crucial that investors and their clients go beyond “greenwish”[21] and focus on the real world impact, taking a systemic perspective. Unless investment intermediaries – you – and your clients/suppliers understand your collective role and clearly commit to zero deforestation strategies, it is not only the ethical sustainability of your businesses that is at risk, but the precondition of a future to our own children[22].

Download: SRI Annual Event 09.10.2019 Grace Iara SOUZA

[1] Presented at the SRI Services & Partners ‘Screened Themed and Engaged Annual Event in London, 9^th October 2019.

[2] Dr. Grace Souza is an independent consultant, an adviser to Preventable Surprises and a Brazilian social scientist concerned with development and environmental policies affecting rainforest dwellers, particularly in the Amazon. She has a PhD is Political Ecology (King’s College London) is and also the co-founder of CLOSER, a multi-disciplinary and multi-institutional research group on Brazilian socio-environmental research and the Brazil Institute Fellow at King’s College London. When Grace is not teaching in London, she is often researching the actual implementation processes of sustainability policies in the Brazilian Amazon. Her focus is on the gap between “walk” and “talk”. She has been working with multiple-stakeholders (e.g. government, civil society, funders, private sector, academics) for more than a decade, including coordinating a carbon-credit project for a sugar-ethanol organisation.

[3] https://www.economist.com/briefing/2019/08/01/the-amazon-is-approaching-an-irreversible-tipping-point

[4] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2373903/#bib74

[5] https://www.businessinsider.com/why-amazon-rainforest-is-important-life-support-is-burning-2019-8

[6] https://www.huffingtonpost.co.uk/entry/amazon-deforestation-consumerism_n_5d66f174e4b022fbceb5a02b?guce_referrer=aHR0cHM6Ly9tZWRpdW0uY29tL2dsb2JhbC1jYW5vcHkvb24tdGhlLWdsb2JhbC1kYXktb2YtYWN0aW9uLWZvci10aGUtYW1hem9uLWNvbXBhbmllcy1tdXN0LWxvb2stYXQtdGhlaXItcm9sZS1pbi1mdWVsbGluZy10aGUtNDlhYWYxYjFmNjJi&guce_referrer_sig=AQAAAA5Jsd5_J-5kuIKv0g2krVmbnFrempTzuHatMVH4A4UqnDw5snrb_Vu-8XR2r9l4OEPcXKK1rTXGn4nM4PZ53-773h0h4ZqyyYypTYQ56QOQ34jy3xE3AdG0rmQmlzIEALemrUza-LKWCfYvci-oaPGQ121Fv5D7F3UUFsBVso3x&guccounter=2

[7] https://www.businessinsider.com/global-climate-strike-photos-show-protests-around-world-school-children-2019-9?r=US&IR=T

[8] https://amazonwatch.org/assets/files/2019-complicity-in-destruction-2.pdf

[9] https://medium.com/global-canopy/on-the-global-day-of-action-for-the-amazon-companies-must-look-at-their-role-in-fuelling-the-49aaf1b1f62b

[10] https://www.thebureauinvestigates.com/stories/2019-07-02/jbs-brazilian-butchers-took-over-the-world

[11] https://www.theguardian.com/environment/2019/jul/02/revealed-amazon-deforestation-driven-global-greed-meat-brazil

[12] https://medium.com/trase/soy-traders-in-cerrado-under-fire-for-illegal-activities-3138f4d4d4e1

[13] https://stories.mightyearth.org/cargill-worst-company-in-the-world/index.html

[14] https://petition.parliament.uk/petitions/266638