Banks, business, and bypassing Bolsonaro in Brazil

An international effort to clean up big agriculture and cattle farming is starting to take shape despite political turmoil.

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By Ilona Szabó, Julia Marisa Sekula and Ricardo Amatucci

(Ilona Szabó is co-founder and president of the Igarapé Institute, Julia Sekula and Ricardo Amatucci are advisers to the Igarapé Institute.)

GLASGOW- (Callaway Climate Insights) — After seven straight years of record-breaking global temperatures, and nearly three decades since the first United Nations consort on environment and development, concern over the gathering climate emergency has finally gone mainstream.

Farmers battling once-unthinkable droughts know it. Cities awash in flash floods or palled by the smoke of epochal wildfires know it. So do nations trying to bulwark their borders against growing waves of climate refugees.

These are the tragedies mobilizing international policymakers, civic groups and urgent global parleys such as COP 26 — as well they should. While everyone has a role to play, the producers, investors, traders, intermediaries and consumers who move world markets also leave behind a heavy carbon footprint and carry a particular obligation to up their game. It’s past time we made confronting the climate calamity business as usual. 

The Igarapé Institute, a Brazil-based think tank with a global security agenda, shares that conviction. There is no room for enterprise that razes forests, flouts the law, or ignores social justice while chasing quarterly gains and market share. Social and environmental predation can no longer be written off as externalities – inevitable if regrettable collateral damage in the scramble for the bottom line. 

21st century agribusiness needs a reset. To that end, policymakers, green-minded companies, and civil society groups are calling for a smarter game plan to bolster sustainability and convert exemplary practices into boilerplate across the rural economy. Transparency, traceability and legal compliance must be hardwired into commodities supply chains. So must the commitment to eliminating illegal deforestation on the way to a carbon neutral economy. More than red lines, this means laying down a path to help businesses and investors do good as they do well.

At a minimum, the new rules can serve as guideposts for companies and their clients as they navigate the demands of ESG, the complex checklist of sound environmental, social and governance practices that is the talk of boardrooms and bureaucrats. Yet we need to go further and prod the markets to raise the bar and make today’s greener aspirations tomorrow’s new normal.  

The stakes are high in Brazil, a latter-day frontier nation, where wilderness has long been treated as a speed bump to progress. Brazil was the fourth largest source of greenhouse gases from 1850 to 2021, and second to none in carbon released through clear cutting, burnings and conversion of woods to farms and pastures. Most of the devastation is in the Amazon, a fifth of which has already fallen. And because the Amazon is a rainmaking machine, sending life-giving moisture half a continent away, the felling and burning threaten the South American breadbasket and regional power supply, as hydroelectric dams dry up. This makes the destruction of the Amazon a tragedy of the global commons.

Here’s the good news. Some of the biggest international brands have survived the misinformation pandemic and the rote climate denialism that still contaminate partisan politics, and have begun to inject environmental safeguards into their market strategies. The most vigilant businesses have signed on to a robust agenda of transparency and integrity to marry competitive market strategies with clean, efficient production, and pledges to create value without trampling the land or the standards of social civility, justice and the rule of law. 

Greta Thunberg may demur, but major corporations are starting to put their portfolios where their Power Points are. Consider that the recent pledge by over 100 countries to roll back forest loss and degradation by 2030 includes $7.2 billion in private investment. The United Nations Glasgow Financial Alliance for Net Zero, a group of 450 banks, insurers and asset managers spanning 45 countries, and holding over $130 trillion in assets, is committing to transforming the global financial system for a carbon-neutral future.  

Even while Brazilian President Jair Bolsonaro skipped Glasgow for gnocchi, 18 blue-chip national investors — including Banco Itau Asset Management, JGP and Rio Bravo Investimentos — with R$873 billion($158 billion) in assets signed a statement last week calling on Brasília to take more aggressive action to reduce deforestation.

What’s less encouraging is the distance between the pledges and actions. Even with all the high minded talk  at COP 26, leading climate scientists are skeptical that nations will manage to rein in global warming. Scientists agree that there is no avoiding an overheated planet, never mind breaching the consensus 1.5 degree celsius temperature cap, without a resilient Amazon. Yet this year alone, another 860,000 hectares fell across the river basin which straddles eight South American nations and French Guiana. Brazil sustained fully 79% of the damage.

That’s hardly surprising. The thin presence of state institutions and law enforcement has created one of the world’s biggest blind spots. So much the better for clandestine miners, timber pirates, land grabbers and wild animal smugglers, who have turned the signature tropical wilderness into an active crime scene. Some of these scourges are as old as the New World. Add to them the escalating threat from predatory practices by some of the country’s agricultural breadwinners in the Amazon and the adjacent cerrado tablelands. 

Big Agro and Big Cattle need to be part of the solution not part of the problem. A recent study concluded that roughly 20% of Brazilian soy exports and at least 17% of the country’s beef exports to the European Union may be contaminated with illegal deforestation. Convoluted land tenure is also a problem. Our own research has shown that only a fraction of properties listed on the mandatory national rural land registry, known as CAR, have been validated by environmental authorities. As many as 30% of these official claims may be erroneously or fraudulently registered, when they don’t encroach on other properties, public preserves or parks. Indeed, were all the registered properties real, as the old frontier joke has it, stretches of the Brazilian Amazon would stand two stories tall. 

The challenge now is to scythe through the clutter and misinformation to implant transparent and verifiable rules for a healthier farming economy that treads more lightly on the land and keeps carbon out of the atmosphere. Agribusiness needs a management shock to offer producers, buyers, shippers and customers reliability, transparency and traceability all along the supply chain. We also need a new culture of compliance to assure economic fair play and workplace civility on our way to prosperity.

Brazil, rightly, boasts one of the most advanced suites of environmental laws and protections in the world. The nation’s pioneering agribusiness has also excelled at innovation and creating fabulous wealth from forbidding soils and circumstances. No longer can we afford to see those two transformative assets on a collision course.