{"id":29176,"date":"2020-06-23T09:49:10","date_gmt":"2020-06-23T14:49:10","guid":{"rendered":"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/?p=29176"},"modified":"2020-06-23T09:49:10","modified_gmt":"2020-06-23T14:49:10","slug":"exclusive-european-investors-threaten-brazil-divestment-deforestation","status":"publish","type":"post","link":"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/exclusive-european-investors-threaten-brazil-divestment-deforestation\/","title":{"rendered":"Exclusive: European investors threaten Brazil divestment over deforestation"},"content":{"rendered":"<p><a href=\"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/wp-content\/uploads\/2020\/06\/brazil-fire-1.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-29177\" src=\"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/wp-content\/uploads\/2020\/06\/brazil-fire-1.jpg\" alt=\"\" width=\"700\" height=\"426\" srcset=\"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/wp-content\/uploads\/2020\/06\/brazil-fire-1.jpg 700w, https:\/\/panamaadvisoryinternationalgroup.com\/blog\/wp-content\/uploads\/2020\/06\/brazil-fire-1-300x183.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p>Seven major European investment firms told Reuters they will divest from beef producers, grains traders and even government bonds in Brazil if they do not see progress in resolving the surging destruction of the Amazon rainforest.<\/p>\n<p>The rising threats from investors with more than $2 trillion in assets under management, including Finland-based Nordea and the UK\u2019s Legal &amp; General Investment Management (LGIM), show how the private sector is taking global action to protect the world\u2019s largest rainforest.<\/p>\n<p>Brazil\u2019s President Jair Bolsonaro has shrugged off diplomatic pressure on the matter.<\/p>\n<p>Deforestation of Brazil\u2019s Amazon surged to an 11-year high in 2019, Bolsonaro\u2019s first year in office, and has risen a further 34% in the first five months of 2020, according to preliminary data from government space research agency INPE. The right-wing populist has weakened environmental protections and called for more mining and farming in the Amazon region.<\/p>\n<p>\u201cThe trends we\u2019ve seen in Brazil are very concerning,\u201d said Daniela da Costa-Bulthuis, Brazil portfolio manager for Netherlands-based asset manager Robeco. \u201cYou have a dismantling of the regulatory mechanisms of environmental control since last year.\u201d<\/p>\n<p>Bolsonaro\u2019s press office declined to comment on the investors\u2019 concerns. He defended Brazil\u2019s environmental record against criticism from world leaders last year as destructive fires in the Amazon drew global outcry. So far, corporate pressure has proven more effective in turning Brasilia\u2019s attention to the environment.<\/p>\n<p>A bill originally proposed by Bolsonaro to grant property deeds for irregularly settled public land, a measure seen encouraging deforestation, failed to reach a vote in May and is now delayed indefinitely after more than 40 mostly European companies threatened to boycott Brazilian exports.<\/p>\n<h3>UNDER SCRUTINY<\/h3>\n<p>In September, 230 institutional investors signed a letter calling for urgent action to combat the fires surging in the Amazon rainforest, capturing global attention.<\/p>\n<p>However, the seven asset management firms that spoke to Reuters &#8211; Storebrand, AP7, KLP, DNB Asset Management, Robeco, Nordea Asset Management and LGIM &#8211; went further in laying out the threat of divestment if there is not progress. The firms hold over $5 billion in investments linked to Brazil, including global grains traders with major operations in the country.<\/p>\n<div>\n<div class=\"DPSlot_container StandardArticleBody_dp-slot-inline StandardArticleBody_inline-canvas\" data-ad-type=\"other\">\n<div id=\"dpslot_canvas_4106248_USKBN23Q1MU\" class=\"DPSlot_slot\" data-google-query-id=\"CK7L34CWmOoCFdMCiAkdzUINaw\"><\/div>\n<\/div>\n<\/div>\n<p>Norway\u2019s largest pension fund KLP said it was engaging with trading firms Archer Daniels Midland (ADM) (<span id=\"\u201dsymbol_ADM.N_0\u201d\"><a href=\"https:\/\/www.reuters.com\/companies\/ADM.N\">ADM.N<\/a><\/span>), Cargill and Bunge (<span id=\"\u201dsymbol_BG.N_1\u201d\"><a href=\"https:\/\/www.reuters.com\/companies\/BG.N\">BG.N<\/a><\/span>) and judging if their environmental policies are adequate.<\/p>\n<p>\u201cIf our conclusion is negative, divestment can be the likely result, potentially as soon as this year and we\u2019d expect such a move to trigger other larger investors to follow our lead,\u201d said Jeanett Bergan, KLP\u2019s head of responsible investment, via email.<\/p>\n<p>In response to questions on divestment, Bunge and Cargill described a range of efforts to root out deforestation from their supply chains, citing their adherence to the \u201cAmazon Soy Moratorium.\u201d<\/p>\n<p>In that voluntary agreement, major trading firms including Cargill, Bunge and ADM pledged not to buy soy from parts of the Amazon deforested since 2008.<\/p>\n<p>ADM did not respond to request for comment.<\/p>\n<p>Norwegian insurance and pension provider Storebrand and Sweden\u2019s largest national pension fund AP7 also said they could divest from ADM and Bunge if the companies do not take adequate measures to combat deforestation.<\/p>\n<p>Norway\u2019s DNB Asset Management AS said index funds it manages, which include holdings in Bunge, could exclude companies that fail to meet its sustainability standards.<\/p>\n<p>Other investment firms mentioned concerns related to Brazilian meatpackers, which have drawn scrutiny in the past for sourcing beef from deforested areas of the Amazon.<\/p>\n<p>LGIM is pushing Brazilian companies, including the world\u2019s largest meatpacker, JBS (<span id=\"\u201dsymbol_JBSS3.SA_2\u201d\"><a href=\"https:\/\/www.reuters.com\/companies\/JBSS3.SA\">JBSS3.SA<\/a><\/span>), and smaller rivals Marfrig (<span id=\"\u201dsymbol_MRFG3.SA_3\u201d\"><a href=\"https:\/\/www.reuters.com\/companies\/MRFG3.SA\">MRFG3.SA<\/a><\/span>) and Minerva (<span id=\"\u201dsymbol_BEEF3.SA_4\u201d\"><a href=\"https:\/\/www.reuters.com\/companies\/BEEF3.SA\">BEEF3.SA<\/a><\/span>) for \u201crobust climate targets and land-use policies, with inaction potentially leading to voting sanctions and targeted divestments,\u201d said Yasmine Svan, senior sustainability analyst at LGIM, in an emailed statement.<\/p>\n<p>JBS, Minerva and Marfrig said in separate statements they are committed to eliminating Amazon deforestation from their supply chains and detailed their efforts.<\/p>\n<p>The asset management arm of Nordea (<span id=\"\u201dsymbol_NDAFI.HE_5\u201d\"><a href=\"https:\/\/www.reuters.com\/companies\/NDAFI.HE\">NDAFI.HE<\/a><\/span>), one of the Nordic countries\u2019 biggest banks, halted purchases of Brazilian sovereign debt last year after forest fires flared, putting its roughly 100 million euros ($112 million) of Brazilian government bonds in \u201cquarantine.\u201d<\/p>\n<p>Thede Ruest, head of emerging-market debt at Nordea Asset Management, said the firm could go further.<\/p>\n<p>\u201cThe next level of escalation from quarantining actually means selling our Brazil government bonds, which could trigger other funds following suit,\u201d Ruest said. \u201cWe are disappointed by the lack of progress by the current administration, with deforestation rates continuing to soar ahead of another major fire season.\u201d<\/p>\n<p>Da Costa-Bulthuis of Robeco, which manages at least 3 billion euros in Brazilian equities and up to 5 billion euros when including debt and other assets, declined to comment on specific holdings.<\/p>\n<p>But she said the firm could reduce its exposure to Brazil if its environmental record deteriorates further.<\/p>\n<p>Da Costa-Bulthuis, along with LGIM\u2019s Svan and Nordea\u2019s Ruest, expressed alarm about a recent video of a Brazilian cabinet meeting, made public due to a federal investigation.<\/p>\n<p>In the recording, Environment Minister Ricardo Salles suggested to Bolsonaro and other ministers that the government should accelerate environmental deregulation while the public is distracted by the current coronavirus pandemic.<\/p>\n<p>\u201cHe\u2019s working against the environment. What he said was unacceptable,\u201d da Costa-Bulthuis said. \u201cIf they (the government) will be sensible or not, I think one way to start would be to change the environment minister because this guy does not have credibility.\u201d<\/p>\n<p>Salles and his press office did not respond to requests for comment on the statement. At the time, the minister said he was only calling for cutting unhelpful bureaucracy that hinders investment.<\/p>\n<p>Bolsonaro dispatched the military last month to combat destruction of the Amazon, although deforestation rose again in May compared to a year earlier for the 13th straight month.<\/p>\n<div>\n<div class=\"DPSlot_container StandardArticleBody_dp-slot-inline\" data-ad-type=\"other\">\n<div id=\"dpslot_flex_11367902_USKBN23Q1MU\" class=\"DPSlot_slot\" data-google-query-id=\"CMjF0Y2WmOoCFeYGiAkd820JKA\"><\/div>\n<\/div>\n<\/div>\n<p>Da Costa-Bulthuis said that the deployment was \u201cthe minimum\u201d the government could do and not an adequate replacement for strengthening agencies specialized in environmental enforcement.<\/p>\n<p>\u201cWe don\u2019t think they\u2019re doing enough.\u201d<\/p>\n<p>Stay Safe!!<\/p>\n\n<div class=\"wpcf7 no-js\" id=\"wpcf7-f16536-o1\" lang=\"\" dir=\"ltr\" data-wpcf7-id=\"16536\">\n<div class=\"screen-reader-response\"><p role=\"status\" 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