Responsible Investment and the Fight Against Deforestation in Livestock, Soy, and Pulp and Paper Chains in Brazil
Agribusiness accounts for a significant portion of the Brazilian economy, representing 23.6% of GDP1 and 46.6% of total exports in 2016. Despite the important contribution from livestock and agricultural activity to the economy, they also exert intense pressure on the country’s natural vegetation. Between 2007 and 2014, 25% of the advance of soy in the Cerrado and 62% of the advance of soy in the Matopiba region took place on native vegetation, while over half of the 8,000 km² of deforested Amazon Forest in 2016 was used for creating new pastures.
Given the pressure of agricultural and livestock activity on forests, the companies which produce or acquire agribusiness commodities are exposed to risks associated with deforestation. Meat processing companies may be fined by regulatory agencies (legal risks) or lose market share (commercial risks) should it be proven that livestock was acquired through illegal deforestation. Similarly, investors in agricultural and livestock companies are exposed to financial risks, should the investee companies be legally penalised for deforestation practices.
In view of the context described above, the current report aims to systematically analyse risks associated with deforestation concerning the soy, beef production, and pulp and paper value chains of companies operating in Brazil. This document also aims to identify the potential risks to which institutional investors who invest in companies in these chains are exposed, as well as to make recommendations about how investors can manage those risks.
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