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International banks are being urged to cut ties to three meat trading companies in Brazil, after an anti-corruption investigation accused the trio of contributing to deforestation in the Amazon.

A detailed report from Global Witness – an influential campaign group with a focus on environmental protection – alleges that despite international pressure, meat traders JBS, Marfrig and Minerva are continuing to source cattle from ranches involved in deforestation.

The report says that activity is in breach of sustainability agreements the companies signed over a decade ago, but was overlooked by auditors and only uncovered after examinations of licensing agreements and satellite imagery.

The report also points out that JBS, Marfrig and Minerva have taken billions of dollars in funding from international banks, through loans, investment and other financial products, and argues that the companies’ activities are not in keeping with those banks’ sustainable lending criteria.

“Fresh evidence shows that major Brazilian meat traders JBS, Marfrig and Minerva are failing to remove vast swathes of deforested Amazon land from their supply chains,” Global Witness says.

“The financial actors, importers and supermarkets who deal with these companies should immediately suspend any business dealings with them until, at a minimum, conditions are put in place to undertake basic due diligence on the companies, including full supply chain transparency.”

The trio received more than US$9bn in funding between 2017 and 2019, facilitated or provided by 250 financial institutions, the report says. Nearly half of those have headquarters in the US, EU or UK.

The allegations against the three meat producers stem from agreements on deforestation signed after a Greenpeace Brasil investigation in 2009 that found they frequently bought from ranches linked to deforestation.

The companies reached an agreement with federal prosecutors in the Brazilian state of Pará not to buy from producers that carried out deforestation after July 2008, as well as a similar agreement with Greenpeace with an October 2009 cut-off date.

Annual sustainability reports issued by the companies and signed off by international auditing firms claimed close to 100% compliance with those commitments, particularly since 2017, the report says.

However, Global Witness says that its investigation shows JBS purchased from at least 177 ranches responsible for deforestation in 2017.

It adds that indirect suppliers used by Marfrig are linked to over 34,000 hectares of deforestation in the last decade, yet there is no systemic verification or monitoring of those suppliers, and that Minerva has sourced from at least 16 direct suppliers also linked to illegal forest clearing.

The report comes as Inpe, Brazil’s space agency, reports that deforestation in the Amazon reached its highest level in over a decade between August 2019 and July 2020. More than 11,000 square kilometres was found to have been destroyed, an increase of 9.5% from the previous year.

All three companies dispute the allegations on several fronts, including that many ranches are on the way to becoming compliant, that deforestation is not as severe as Global Witness claims, and that ranches have changed land boundaries to make them compliant with the Greenpeace and prosecutor agreements.

 

Sources of finance

Though the main target of the report is the meat producers themselves, Global Witness argues that financial institutions should reconsider their exposure to those companies – particularly in light of growing pressure around sustainable finance and investment.

The report says JBS received US$4.8bn in investment and loans between 2017 and 2019, while Marfrig and Minerva received US$3.5bn and US$1.3bn respectively.

In all cases the largest proportion of that funding came from within Brazil, but a sizeable amount was obtained from banks in the UK, US and EU, as well as financial centres such as Switzerland and Japan.

In the case of JBS, the report says that as of April this year, Blackrock, Deutsche Bank and Santander held shares in the company worth over US$270mn overall.

Deutsche Bank also provided two loans to JBS in 2017 and 2018 totalling US$2.8bn, both of which expire after five years. The bank tweeted in 2019 that it would “not finance activities where there is clear and known evidence of clearing of primary forests”, though that has since been deleted.

Santander and Blackrock both say they have engaged with JBS on the issues raised, threatening to declare early maturity of debts and vote to remove directors respectively if improvements are not made.

Barclays also provides financial services to JBS, the report adds, underwriting four overseas bond deals worth US$2.75bn since 2017.

HSBC has heavily criticised JBS, according to a leaked document seen by Global Witness and also reported by the Guardian, suggesting it “has no vision, action plan, timeline, technology or solution” to improve traceability on cattle.

With Marfrig, the report says BNP Paribas, Santander and ING Bank have supported the issuance of “sustainable transition bonds”, and that the former two also hold at least US$3mn of shares in the company.

Minerva, meanwhile, has obtained financing from Bank of America with the support of the World Bank. HSBC has underwritten bonds worth nearly US$1bn, and in January this year, JP Morgan managed a share issuance worth around US$300mn.

Those banks should “immediately suspend any services, financing or contracts with JBS, Marfrig and Minerva and all meat traders sourcing in the legal Amazon until, at minimum, the conditions are in place to undertake basic due diligence on the companies, including full supply chain transparency”, Global Witness says.

It also recommends banks assess their due diligence processes, including whether shareholders or clients may have been misled around investment in the beef industry, and should consider supporting calls for publicly available and independent data on the lifecycle of Brazilian cattle.

Global Witness adds that governments should consider “requiring businesses, including finance, to identify, prevent, mitigate and report on deforestation risk”.

 

Banks respond

When contacted by GTR, a spokesperson for Santander says the bank “has set out specific sectoral policies that contain the criteria for analysing social and environmental risks in our customers’ activities within sensitive sectors, including soft commodities”.

The bank uses satellite imagery to monitor properties in Brazil that it is financing, the spokesperson adds, and reiterates that if illegal activity is found it “has the contractual power to declare the early maturity of the debt and demand its payment”.

“This activity illustrates our commitment to tackling deforestation – but we are well aware that more can and should be done,” the bank says, adding that it has prioritised achieving zero deforestation in the meat value chain.

“As such, as part of our ongoing dialogue with the main companies in Brazil on the challenge of deforestation, together with the other two major private sector banks in Brazil, we presented to the Federal Government 10 measures to promote the sustainable development of the Amazon region.”

A spokesperson for HSBC says the bank does not comment on client relationships “even to confirm or deny that a relationship exists”.

“HSBC takes our agricultural commodities policy very seriously and regularly assesses its clients for commitment to sustainable business practices,” they add. “Our agriculture products policy sets our minimum standards related to the impact on forests from palm oil, soy, rubberwood and cattle farming.”

A spokesperson for BNP Paribas says: “Several actions to fight against deforestation have been taken over recent years but BNP Paribas is well aware that there is still a lot to do to protect biodiversity and act against climate change.

“To ensure that the bank’s business activities do not lead to deforestation or forest degradation, BNP Paribas makes sure that its potential financial support to producers and traders of agricultural commodities is screened and assessed under the scope of dedicated financing and investment policies in the sectors of wood pulp, palm oil, and agriculture.”

As of press time, other banks mentioned have not commented further when approached by GTR, and are not accused of any wrongdoing.