Major US asset managers are channelling millions towards the world’s largest meatpacker allegedly responsible for deforestation, biodiversity loss, and human rights violations through environmental, social, and governance (ESG)-labelled funds, a report has unveiled.
Non-profit Global Witness released an investigation on Friday showing that six asset managers, including large investors such as BlackRock and Vanguard, are holding $11 mln in bonds issued by Brazilian meat giant JBS and its subsidiaries via 15 ESG funds.
The report revealed that the analysed funds’ documentation explicitly mentioned the exclusion of fossil fuels and controversial weapons, but did not completely rule out companies linked to deforestation in their screening process.
“This is despite forest loss contributing to up to 20% of global greenhouse gas emissions, with agricultural clearance driving more than 90% of global tropical forest loss,” the report said.
According to the organisations, the ESG label in fund names does not guarantee that climate and nature-harming companies are excluded from the portfolio.
“One of the clear issues with relying on self-reporting, self-managed ESG funds is the lack of standardisation on what exactly ESG means,” said Ashley Thomson, Global Witness’ US senior policy advisor.
“The fact that a company like JBS is included in an ESG-focused fund should speak volumes about the limitations of regulations governing these funds and the dangers of allowing companies to grade their own homework.”
In response to the investigation, JBS stated that the company maintains “an open and transparent relationship with its investors and bondholders” who are fully aware of its “zero-tolerance policy for illegal deforestation in all Brazilian biomes, or any other illegal activity” associated with its supply chains.
Earlier this year, the UK-based non-profit published a separate report linking JBS and other meatpackers to illegal deforestation in Brazil’s Cerrado.
According to the analysis, 42.8% of the farms supplying JBS, Marfrig, and Minerva Foods engaged in deforestation between 2008 and 2019 – with only 1% of the land cleared legally.
As well, New York-headquartered BlackRock was among the largest asset managers operating in Switzerland accused by Greenpeace of failing to take action in resolutions at companies on biodiversity loss and climate issues.
STRICTER RULES ARE NEEDED
A Bloomberg Intelligence (BI) analysis cited in the report showed that interest in ESG investing has significantly grown in recent years, with total assets under management reaching $30 trillion in 2022.
However, as Global Witness stressed, stricter rules are urgently needed to prevent such investments from fuelling deforestation and other environmentally harmful activities.
“The findings that so many ESG funds are investing in JBS highlight a critical need for new regulation in key financial centres like the EU, UK, and US, so that institutional investors screen out businesses driving biodiversity loss through deforestation from their portfolios and ESG funds specifically,” Thomson said.
A recent investigation by VoxEurope and the Guardian revealed that, in Q4 last year, EU-regulated sustainable funds held $18 billion in 200 companies considered the biggest polluters across the most carbon-intensive sectors, including fashion labels, fossil fuel companies, and SUV-makers.
By Giada Ferraglioni – giada@carbon-pulse.com
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