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

BlackRock under CEO Larry Fink is World's largest investor in Amazon deforestation and destruction.

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

By Grace Iara Souza [2] - 24 October 2019

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 years15.

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, 9th October 2019.

[2] Dr. Grace Souza is an independent consultant, an adviser toPreventable Surprises and a Brazilian social scientist concerned with development and environmental policies affecting rainforest dwellers, particularly in the Amazon. Shehas a PhD is Political Ecology (King’s College London) is and alsothe 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”. Shehas 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.






















Larry Fink, the CEO of BlackRock, and Jair Messias Bolsonaro, who facilitates the environmental and other crimes in the Amazon from the side of the governance of Brazil, must be brought to the International Criminal Court (ICC) and the many cases of environmental crime, crimes against humanity, ecocide and genocide must be brought to trial. 


BlackRock in Amazon: 'World's largest investor in deforestation'

Report by Friends of the Earth faults asset manager for investing in companies that contribute to Brazil's fire risk.

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An aerial view of a burning tract of Amazon jungle as it is cleared by loggers and farmers near Porto Velho, Brazil [Ricardo Moraes/Reuters]

An aerial view of a burning tract of Amazon jungle as it is cleared by loggers and farmers near Porto Velho, Brazil [Ricardo Moraes/Reuters]

As Amazon fires spark unprecedented deforestation, a report released on Friday shows that BlackRock, the world's largest asset manager, holds extensive investments in the sectors deemed responsible for the devastation of forests in Brazil.

With $6.5 trillion of assets under management, BlackRock was labeled the "world's largest investor in deforestation" by the report's authors - Friends of the Earth US, Amazon Watch, and Dutch research firm Profundo.

The report, BlackRock's Big Deforestation Problem, looks at financial data from 2014 to 2018 showing the global investment management firm to be among the top three shareholders in 25 of the planet's largest publicly traded companies with "deforestation risk".

The data reveal that BlackRock's holdings in six sectors - soy, beef, palm oil, rubber, timber and pulp/paper - have increased by more than $500m in the last five years.

Jeff Conant, the report's lead author and senior international forest programme manager with Friends of the Earth US, said that "BlackRock's investments are directly causing the forest fires in the Amazon and deforestation around the globe".

"I don't believe that BlackRock and their providers are even looking at deforestation risk," he told Al Jazeera. "There are not a lot of worse companies out there than the companies on [our] list."

Of the 167 deforestation-risk companies identified by the researchers, BlackRock held shares in 61 of them - valued at $1.5bn by the end of last year.

"Sound corporate governance practices, including how companies manage the material environmental and social factors inherent to their business models, have the potential to impact the long-term value of our clients' assets," BlackRock said in a statement provided to Al Jazeera.

"Our obligation as an asset manager and a fiduciary is to manage our clients' assets consistent with their investment priorities," the company added.

"Absent the option to divest from these companies, we engage with them to evaluate how they manage the material sustainability-related risks and opportunities within their businesses, and encourage them to adopt the robust business practices consistent with sustainable long-term performance."

ESG: 'Do whatever they want'

Conant said that BlackRock makes money off of environmentally destructive agribusiness, particularly through commodity holdings in index funds that passively track global markets.

"[BlackRock] can get the ESG industry to do whatever they want," Conant said, referring to environmental, social and governance factors that thus far appear unsuccessful at screening out companies with deforestation risk from such funds. "Passive investment is an active problem."

"Most ESG funds are based on data from the ESG industry, which is really not necessarily looking at the whole picture and scanning the right sources for information," he added. "They are not thinking extremely deeply about what environmental impacts are - and their relative weights."

Overuse of land, water and pesticides - when combined with the adverse effects of climate change - have contributed to fires raging in Brazil, as well as in the Arctic, Indonesia and Central Africa.

Conant said, however, that these blazes are "to be expected and we will see more of them".

He also suggested that the problems were exacerbated by the "authoritarian regime of [Brazilian President Jair] Bolsonaro, which is being backed by global finance".

High-risk holdings and conflict-linked securities could pose a dilemma for BlackRock that is financial, environmental and moral.

Earlier in August, the Intergovernmental Panel on Climate Change said that deforestation and other land-use practices account for almost one-quarter of greenhouse gas emissions.

"BlackRock can follow the lead of other global asset managers and make change for the good of the rainforest, the climate, and its customers by shifting investments out of companies wrecking the planet, and applying maximum pressure to change company behaviour," said Moira Birss of Amazon Watch.

The report cited the Norwegian Government Pension Fund for having blacklisted many companies in BlackRock's portfolios. In addition, CalPERS - which provides benefits for public employees in the US state of California - has recognised deforestation as a "material investment risk".

"Responsible stewardship is about more than just public statements," said Ward Warmerdam of Profundo, which performed much of the research for the report. "It is about aligning your investment strategy with broadly accepted environmental and social standards."

Earlier this summer, a report by the Institute for Energy Economics and Financial Analysis faulted BlackRock for losing $90bn through fossil fuel investments during the past decade.

The new report says that BlackRock could instruct companies active in the Amazon to audit their supply chains, and in turn remove investments at all linked to the current fires.

"It takes time to unwind those investments but a public statement is very easy," Conant told Al Jazeera. "[BlackRock] should ask all index providers to develop default fossil-fuel and deforestation-free investment funds."

He criticised the Brazilian government's efforts to "wipe out one of the world's most precious ecosystems for short-term profit", adding that BlackRock should "take an active stance in rejecting that offer to destroy the Amazon for business".


SOURCE: Al Jazeera News

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 @ benpiven