May 31, 2023

Brazilian banks join EU in denying credit to meatpackers linked to illegal deforestation

In a move echoing new European Union regulations aimed at protecting rainforests, Brazilian banks have committed to refusing credit to meatpackers that source cattle from illegally deforested areas, Fortune reported.

The sustainability standard, released by Febraban, Brazil's bank federation, on Tuesday, requires slaughterhouses to implement a tracking system to monitor their entire supply chain in the Amazon region and Maranhao state by December 2025. This requirement applies to both direct and indirect suppliers.

Leading meatpackers, JBS SA and Marfrig Global Foods SA, have already pledged to cease purchasing cattle from indirect suppliers associated with illegal deforestation in the Amazon by 2025. These companies have already prohibited direct purchases from illegally cleared areas.

Brazilian beef exporters' group, Abiec, has raised objections, pointing out what it considers a double standard imposed by the banks. The group highlights that landowners do not face the same financing requirements.

In response, Abiec said in an emailed statement that banks should adopt the same environmental requirements for all account holders, including owners of rural areas.

The group further noted that beef producers have already banned over 20,000 ranchers from selling cattle to its members due to engaging in illegal environmental practices.

As of now, 21 banks, including Itau Unibanco, Banco do Brasil, Bradesco, Santander, and Caixa Economica Federal, have signed the protocol. Febraban said that financing activities linked to deforestation can pose credit, reputation, and operational risks.

This development comes after the European Union imposed regulations in December, demanding that exporters provide evidence that agricultural commodities, such as beef, soy, and coffee, have not contributed to deforestation.

-      Fortune