JBS is accused of misleading investors with suspicious green bonds

JBS is accused of misleading investors with suspicious green bonds

  • The global NGO Mighty Earth has filed a complaint against the beef giant JBS with the U.S. Securities and Exchange Commission (SEC), accusing the company of misleading investors in a sustainability-linked bonds issuance that raised $3.2 billion for the company in 2021.
  • The bonds were attached to JBS’ promise to reduce its climate footprint and become net-zero by 2040. According to Mighty Earth, these targets don’t include cattle enteric fermentation and deforestation, which account for 97% of JBS’ emissions.
  • JBS argues it can’t measure its indirect emissions and that it has always been transparent with investors about the scope of its commitments.
  • The case will probably be analyzed by SEC’s recently created Climate and ESG Task Force, which has already punished heavyweights such as the mining company Vale and the international financial group Goldman Sachs Asset Management.

JBS’s sustainability-linked bonds may be audited after Mighty Earth filed a complaint against the company in the U.S. Securities and Exchange Commission, SEC, on Jan. 17. According to the NGO, a global advocacy organization, the world’s biggest meat company had used “misleading and fraudulent” information to persuade investors to buy debt bonds attached to its greenhouse emission reduction targets. The company denied the accusations in a statement sent to Mongabay.

In 2021, JBS raised $3.2 billion in the U.S. market after committing to reduce its emissions by 30%, compared with 2019’s baseline, in line with pursuing the goal of becoming net-zero in 2040. Mighty Earth said this good intention ignores the climate impacts of all its supply chain, which are part of the so-called scope 3 emissions. These account for all indirect emissions, except the ones from its power suppliers. By far, this is the largest share of the company’s footprint.

“To exclude this from a green bond target and still call it a green bond is a sham,” Gustavo Pinheiro, the coordinator of the Low Carbon Economy Portfolio of the Climate and Society Institute, the ICS, a Brazilian philanthropic organization working to tackle climate change, told Mongabay by video call.

According to the Corporate Climate Responsibility Monitor 2022, 97% of the JBS greenhouse footprint comes from the enteric fermentation of the cattle that supply its slaughterhouses and from the destruction of forests to open space for more pasture. “They are distorting their efforts in the arena of scope 3 emissions, in particular, regarding deforestation in the Amazon and other regions within Brazil,” Kevin Galbraith, the attorney for Mighty Earth, told Mongabay in a video call from New York.

The number of JBS’ slaughterhouses operating in the Amazon Rainforest has more than doubled since 2009, Bloomberg stated. Fourteen years ago, the company committed with Brazil’s Federal Public Ministry, the MPF, to monitor the environmental compliance of all the farms where cattle had passed through before reaching JBS’ slaughterhouses. The promise, which was never fulfilled, was repackaged in 2020 when the company announced it would eliminate illegal deforestation from its supply chain by 2025.

Mighty Earth accuses JBS of having misleading investors in its $3.2 billion issuance of sustainability-linked bonds, in 2021. Attorney Kevin Galbraith (the second from left to right) is one of the authors of the complaint, which is supported by the Indigenous activist and filmmaker, Edivan Guajajara (in the middle). Image courtesy of Michael Brochstein/Split Stone Media.

But there is plenty of evidence that the beef giant is far from tackling the problem, experts say. In November last year, for example, JBS admitted having bought almost 9,000 animals from a criminal described by prosecutors as “one of Brazil’s biggest deforesters.”

In a statement sent to Mongabay, JBS argued it had made clear to investors that the bonds were limited to scope 1 and 2 reductions (which account for direct and indirect emissions from power sources), adding that “it was not possible to include scope 3 because of calculation limitations.”

Measuring scope 3 emissions, which accounts for all indirect emissions excluding power sources, is a challenge, said Fabio Alperowitch, the portfolio manager at FAMA Investimentos, a Brazilian equity fund manager specialized in environmental, social and governance (ESG) investments. “But JBS hides behind this complexity to do whatever it wants, be it not reporting its emissions or sticking to the methodology that suits it best,” he told Mongabay by phone.

In its sustainability reports, JBS has been reporting scope 3 emissions, although the company claims that it can’t count them to their full extent. The credibility of these figures, however, is under sharp criticism from civil society organizations, including Mighty Earth.

Galbraith said JBS deliberately sent mixed messages to investors by mentioning scope 3 in its public communications without including it in the bond’s target. “I am confident they were very, very intentional about choosing to speak out of both sides of their mouth,” he said.

But ESG expert Ana Luci Grizzi, a consultant and professor at Getulio Vargas Foundation (FGV), a higher education institution and think tank, said JBS was clear about the limitations of its commitments. Grizzi mentioned the second party opinion, an independent analysis issued alongside JBS’ offer, which stated the performance indicator chosen by the company “does not cover emission standing from Scope 3, estimated to represent the majority of the issuer’s GHG emissions, and therefore it is not material to the issuer’s scope of impact.”

“The information is there. The market was not misled, it bought the bonds because it wanted to,” Grizzi told Mongabay in a video call. “Whether these bonds can really be considered green is another discussion. But unfortunately, we still have no official norms in the financial world to say what debt bonds can and cannot be labeled as sustainable,” she added.

Deforestation and the enteric fermentation from the cattle that supply its slaughterhouses comprise 97% of JBS’ overall greenhouse emissions, according to the Corporate Climate Responsibility Monitor 2022. Even so, these impacts were ignored by the company’s climate targets. Image courtesy of Marcio Isensee e Sá/O Eco.

A spur for new complaints

Mighty Earth’s complaint, obtained by Mongabay, also accused JBS of omitting the number of cattle slaughtered in its facilities each year, a figure considered key to assess the company’s emission performance.

According to the NGO, JBS’ 2021 estimated total emissions exceeded the entire emissions of Spain, while its methane emissions — a greenhouse gas that is estimated to have around 80 times more warming potential than CO2 — were estimated to exceed the combined livestock methane emissions of France, Germany, Canada and New Zealand.

Mighty Earth’s complaint may be analyzed by the Climate and ESG Task Force, created by SEC in 2021 amid a series of measures taken by President Joe Biden’s administration.

The task force, created to “develop initiatives to proactively identify ESG-related misconduct,” has already tackled emblematic cases like the one involving the international financial group Goldman Sachs Asset Management LP, which had to pay a $4 million penalty for “policies and procedures failures” in allegedly ESG financial products. The task force has also charged the Brazilian mining company Vale SA, one of the world’s largest iron ore producers, with making false and misleading claims about the safety of its dams before the January 2019 collapse of its Brumadinho dam.

“It is a full staff task force and we do expect the complaint to end up in their hands,” said Galbraith, Mighty Earth’s attorney, adding that the penalties may range from a monetary fine to preventing executives from occupying boards of public companies.

As SEC’s ESG Task Force is relatively new, it is hard to predict whether JBS will be punished, said Viviane Muller Prado, a professor of corporate law and capital market regulation at FGV LAW, in São Paulo. “But what we see in the case of Vale, for example, is that the regulator is looking at this seriously.”

As ESG assets grow, however, complaints of greenwashing like the one from Mighty Earth should become more common, said Pinheiro. “This is just the beginning of a great movement. We will see more and more actions of this kind.”

Mongabay reached the SEC by email, but the commission declined comments.


Banner image: The JBS case may be analyzed by the SEC’s recently created ESG Task Force. The possible penalties range from monetary fines to preventing executives from occupying boards of public companies. Image courtesy of JBS.


NewClimate Institute. (2022). Corporate Climate Responsibility Monitor 2022. Retrieved from https://drive.google.com/file/d/1OvYWy17zWsYI2r0HfUN97_90mjlgDIMJ/view

JBS. (2021). JBS Annual Sustainability Report 2021. Retrieved from https://jbs.com.br/wp-content/uploads/2022/08/-sustainability-in-report-jbs-2021.pdf

Mighty Earth. (2022). The Boys from Brazil. Retrieved from https://drive.google.com/file/d/1BF6LgG_BmQe-vksAkIpieDsG7n_F6poe/view


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Foreign capital powers Brazil’s meatpackers and helps deforest the Amazon


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