Deforestation in Brazil, including of the Amazon, has grown at an alarming clip since 1985, denuding an area just shy of the size of Texas and Florida combined. Only one phenomenon has seen a larger geographic takeover since Brazil’s military dictatorship came to an end: agriculture. New farms have taken over an area only slightly larger. The correlation is no coincidence.
The steady drumbeat of growing agriculture and deforestation has accelerated in recent years and is now poised to reach a more frenzied pace, driven in part by the search for investment returns by Americans who put money into index and mutual funds for their retirement.
Far-right President Jair Bolsonaro and his congressional allies have implemented policies that they hope will entice even more foreign investors to look past the smoldering rainforest ashes to focus on the opportunities for tax-free profits in the $359 billion agriculture industry.
Major international financial firms, eyeing a global commodities boom, have been eager to grow their agricultural portfolios in places like Brazil, the world leader in soy and beef production. Firms like BlackRock, Vanguard, and JPMorgan have pumped $157 billion into firms directly tied to deforestation in the five years since the Paris climate agreement was signed.
Deforestation is pushing two interconnected biomes — the Amazon rainforest and the Cerrado tropical savanna — dangerously close to the point of environmental collapse. The likely resulting desertification, continentwide drought, and gargantuan carbon dioxide releases would be catastrophic, scientists warn.
Dozens of the world’s largest investors have formally partnered with the climate change-denying Bolsonaro government on agriculture. Through the Climate Bonds Initiative, or CBI, an organization funded in part by global banks, they have rebranded some of the world’s most ecologically and ethically problematic companies as “green,” “sustainable,” and “climate-aligned” investments — meaning purportedly socially conscious 401(k) retirement funds can buy in. Stocks and bonds of most of Brazil’s agribusiness leaders are publicly traded on Brazilian and U.S. markets.
Even nominally “green” investments can finance more deforestation.
Even nominally “green” investments, however, can finance more deforestation. Most of the 56 percent of American households who own stock, mainly through index and mutual funds that spread investments across many assets, are financing companies directly and indirectly responsible for destroying Brazil’s tropical forests, pushing the Earth ever closer to an avoidable climate apocalypse.
The rising influence of global finance, a process known as financialization, in Brazilian agricultural practices can exacerbate social problems in the affected regions. Jennifer Clapp, a political economist at the University of Waterloo focused on global food security and sustainability, said, “This kind of financial investment has also been associated with an expansion of production in lands not previously under cultivation, which can lead to deforestation, soil degradation, and biodiversity loss.”
In July 2019, Bolsonaro dismissed environmentalism as a “psychosis” — “only vegans,” he said, care about environmental issues. As he spoke, huge swaths of the Amazon were on fire. Land grabbers illegally cut down forests and burned them to convert them into new cattle pastures. At least 15,000 square miles of the Amazon rainforest have been destroyed under Bolsonaro’s watch, a much higher rate than under recent past administrations.
Major meat processors like JBS, Marfrig, and Minerva do not track whether the cattle they slaughter and export is raised on illegally deforested land, even though the methodology exists to do so. JBS, the world’s leading animal protein producer, also leads the Brazil soy and cattle deforestation tracker by environmental group Mighty Earth, with nearly 250,000 acres deforested from March 2019 to March 2021, three-quarters of which researchers labeled as “possibly illegal.” Joining them high on the list are Bunge and Cargill, U.S.-based producers of soy, 80 percent of which is used as animal feed.
Due to lax enforcement and a permissive legal system, illegally produced goods systematically mix into supply chains. “If the market does not solve a problem itself, then there must be regulation,” said Gerard Rijk, an equity analyst at Profundo, a nonprofit that evaluates sustainability risks in international supply chains. “We see that the market is currently not adjusting quickly enough to get greener.”
Under Bolsonaro, bad actors have been given the green light to do their worst. In Brazil’s Congress, his allies have pushed forward an array of legislation to increase deforestation, like a bill passed by the lower house in August that would allow land grabbers to gain legal title to stolen public lands and immunity from prosecution for past offenses. With a whiff of impunity for the land grabbers, violence stemming from land conflicts soared to the highest levels recorded since tracking began in 1985, and Indigenous groups are the most common target.
Another proposed piece of legislation known as the “Marco Temporal” would invalidate and significantly roll back Indigenous land claims. It is vigorously backed by the agribusiness caucus and Bolsonaro. Trading volume in major agribusiness stocks has spiked dramatically in weeks when these and similar bills have advanced through Congress.
The rules changes, Brazilian environmentalists say, will lower risks and potentially increase returns on investments in the most destructive forms of agribusiness, but at a greater social cost. “The weakening of social and environmental rules in Brazil,” wrote the Forest & Finance Coalition in a letter to financiers in August, “hampers compliance with current and proposed legal requirements related to due diligence in export markets such as the EU and the UK.” The coalition called on financial institutions “to move away from investments that threaten forests and the rights of Indigenous peoples, and thus not contribute further to deforestation and human rights violations in Brazil.”
Due to public pressure, many investors and agribusinesses have tried to put forward a more climate-friendly image, issuing promises to shun investments that contribute to deforestation and shift to green-friendly options. Experts have found, however, that these voluntary commitments often do not go far enough, move too slowly, or are simply not followed.
JBS, for example, after being linked to deforestation and slave labor through third-party suppliers, promised to implement supply chain monitoring by 2025 — it had already pledged to reach this goal by 2011 — and go deforestation-free only by 2035. The targets are not legally binding. Major shareholders, including the American financial firms Fidelity Management, Vanguard, and BlackRock, saw net revenue from their investments in JBS exceed $48 billion last year, an all-time high.
As part of its effort to rebrand itself as a company dedicated to “environmental stewardship,” JBS issued a $1 billion “sustainability-linked bond” in June. Investor interest far exceeded supply. This kind of bond is supposed to finance investments that reduce a business’s environmental impact, but JBS didn’t mention deforestation and carved out the company’s supply chain, which produces most of its emissions, according to the environmental group Amazon Watch. An outside analysis commissioned by JBS largely agreed and noted the company did not follow established methodologies.
“We are calling them ‘greenwashing bonds,’” said Merel van der Mark of the deforestation watchdog Forests & Finance, using a term for rebranding ecologically destructive practices as sustainable with marketing.
Rijk, of Profundo, said the problem was common in purportedly environmentally friendly investments: “In green financing, there’s a lot of greenwashing going on.”
One group attempting to develop and promote standards for “sustainable” or “green” finance is a London-based organization called the Climate Bond Initiative, or CBI. The group is funded by many of the financial industry’s heavy hitters, including BlackRock, State Street Global Advisors, Citigroup, Goldman Sachs, HSBC, Credit Suisse, Barclays, and BNP Paribas. It also partners with philanthropic organizations like the Rockefeller Foundation and the Gordon and Betty Moore Foundation, as well as the Inter-American Development Bank and the European Union.
Though it puts out standards and certifies some bond issuances, CBI does not independently verify or investigate claims. CBI certified bonds are reviewed by third parties, which are commissioned by the bond’s issuer. This setup creates a potential for conflicts of interest akin to the arrangement between issuers of mortgage-backed securities and credit rating agencies that helped spur the 2007 financial crisis, CBI’s CEO Sean Kidney acknowledged to the Financial Times.
JBS is the fourth largest sustainability-linked bond issuer in the Latin America and Caribbean region, according to data from CBI. Most green bond issuers in Brazil, like JBS, do not seek CBI certification and some do not bother with any third-party verification of their green claims, according to the initiative’s data. The terms are voluntary, legally nonbinding, and frequently ignore larger environmental impacts to focus on self-defined narrow metrics of sustainability.
Multiple trade groups that represent BlackRock and other major investors associated with CBI lobbied against mechanisms that would prevent greenwashing and in favor of voluntary, rather than mandatory, standards. “We’re open to both approaches,” said Leisa Souza, CBI’s top official for Latin America. “Of course, we’re not going to say there has to be regulation and this has to be done, because, even if we consider just the market as a whole, you know, self-regulation has worked very well.”
“It’s completely open season. There is currently no robust or binding regulatory framework for what counts as ‘green’ or ‘sustainable,’” said Adrienne Buller, senior research fellow at the think tank Common Wealth. “Private companies get to devise their own rules and designations, and that includes CBI.”
Bolsonaro has repeatedly argued that international pressure to protect the Amazon is a veiled attack by foreign nations on Brazil’s sovereignty and its agriculture industry, which he has called “the engine of our economy.” Simultaneously, his administration has worked hard to open the region to foreign capital. CBI partnered with the Bolsonaro government on its plans to expand Brazil’s agricultural capacity and related infrastructure, projecting “$163 billion worth of opportunities” through 2030.
Last June, CBI celebrated the government’s announcement that it intends to issue CBI certified bonds to fund the construction of a grain railway project, known as Ferrogrão, to more efficiently transport soy from the agricultural heartland to a tributary of the Amazon to be loaded onto ships for export — a plan opposed by climate and Indigenous rights activists. In response to these concerns, CBI’s Souza noted that a formal proposal has not yet been submitted yet, so the group has not certified the project. “If this moves forward,” Souza said, “we’re going to consider all the different elements, because, of course, we would not certify something that has a negative impact.”
An analysis by the Climate Policy Initiative think tank determined that, absent government intervention, the Ferrogrão project will dramatically increase demand for land in the affected area — likely to deforest some 1,200 square miles and raise carbon emissions. It will also impact 16 nearby Indigenous communities.
CBI plays an “important” and “very positive” role in fixing the climate crisis, explained Anna Lucia Horta, a former credit analyst at multinational banks and corporations like food giant Cargill, who is now senior finance manager at the Nature Conservancy, a prominent environmental NGO with a billion-dollar annual budget. “They are associated with the government and the goal is to avoid greenwashing,” she told The Intercept.
The Nature Conservancy told The Intercept that “there is no formal collaboration” between them and CBI, but the two organizations have partnered on research and many of the Nature Conservancy’s senior specialists and executives sit on CBI working groups alongside bankers from Goldman Sachs.
“They are partnering with NGOs,” noted Rijk, of Profundo. “That’s not always about greenwashing, but that’s how companies, and also CBI, try to create credibility.”
“These bonds are basically going to business as usual, and these companies get cheaper money this way to expand more.”
CBI would not share its green bonds database with The Intercept, but promotional materials boast of billions of dollars in large sustainability-linked bond issuances from many of Brazil’s most notorious climate destroyers — highlighting a series of industrial agriculture giants. “These bonds are basically going to business as usual, and these companies get cheaper money this way to expand more, and their business model is often inherently problematic,” said Forests & Finance’s van der Mark.
Globally, the “sustainable” bond market reached almost half a trillion dollars this year. So-called ESG mutual funds — short for environmental, social, and corporate governance, which also pick up such investments — surpassed $2.3 trillion in assets.
In March, the U.S. Securities and Exchange Commission launched a task force to combat deceptive claims about sustainability.
“The barrier to change is access to capital,” said Horta, from the Nature Conservancy. From her point of view, foreign financial institutions are the key to saving the Amazon and the Cerrado because they can encourage the rehabilitation of depleted lands and more sustainable land management by providing financing and incentives for such approaches. “It’s good for everybody,” said Horta, “and it provides food security and climate justice because you’re protecting everybody.”
Longtime advocates of land reform see things differently. “We’ve never had a large-scale agrarian reform,” said Kelli Mafort, member of the national coordinating committee of Brazil’s Landless Workers’ Movement, or MST in Portuguese. As Latin America’s largest social movement, MST has fought since 1984 for such reforms: the breakup of massive farms and distribution of unproductive private or stolen public lands to landless peasants to perform small-scale, collective, organic agriculture.
The top 0.04 percent of farms — 2,400 in all — are larger than the 4.1 million smallest farms combined, 81.3 percent, according to recent government data. The small-scale family farms, including those run by MST, have an outsized role in producing the food that Brazilians actually eat, while the massive factory farms are disproportionately focused on monoculture of exportable cash crops, like soy and beef, as well as sugar cane and corn for ethanol production. Despite record harvests, Brazilians are increasingly going hungry: 19 million Brazilians were unable to put food on the table last year, and 117 million more — most of the country — face food insecurity.
Mafort sees the increased role of speculative foreign capital as a direct threat to the agrarian reform and broader social justice movement that she and her colleagues fight for. It has driven up land prices, accelerated conflict, and led to the push for laws like the land grabbing bill.
Since 2000, foreign investors have bought over 11,000 square miles of Brazilian farmland, an area larger than the state of Massachusetts, according to a report by Chain Reaction Research, a think tank focused on deforestation and commodities. Among the major buyers are the Teachers Insurance and Annuity Association of America, known as TIAA, and Harvard University. These foreign-owned farms have deforested an area larger than Rhode Island from 2000 to 2017. Major agricultural players have approached land speculation by foreign capital as a lucrative new business. Farmland prices have doubled and tripled in recent years.
“It is a privatization of agrarian reform,” said Mafort. She pointed to recent legislation that allows landowners to break their farms into parcels and use the fragments as collateral against loans, making it easier to get a loan, riskier to take one on, and easier to get dispossessed if you default.
The big farms will get the money they need at better rates, and smaller operations will be pushed to the brink of insolvency.
“It is an absurdly large risk for an activity that already is extremely risky,” warned Anderson Belloli, legal director of Federarroz, a rice growers association. “Open-air industry is very susceptible to climate and price problems.” Unlike soy, rice is grown mostly in Brazil’s extreme south by relatively small producers and almost entirely for domestic consumption. While the soy farmers are making a killing with their dollarized exports, rice farmers are largely struggling to scrape by.
Belloli said that the producers of this national staple crop have always had a hard time acquiring credit at reasonable rates. As government lenders which have traditionally dominated the market step back and are replaced by private banks, he thinks the situation will only get worse: The big farms will get the money they need at better rates, and smaller operations will be pushed to the brink of insolvency. “This is worrying, because the trend will be to increasingly concentrate land in the hands of those who really are large-scale producers,” said Belloli. “This evidently has a very significant social cost.” Brazil’s government projects a 60 percent reduction in rice cultivation by 2030. Beans and cassava, the nation’s other staples, will also decline.
Even some advocates for financialization say more needs to be done to prevent consolidation of wealth. Horta, from the Nature Conservancy, agreed that without additional measures in place, wealth concentration is inevitable. “If you’re going to just have financialization, money is going to flow to the better credit risk always and that’s the big ones.”