12 Aug 2020 Local and international investors and authorities are pressuring Bolsonaro to fight deforestation
Bolsonaro has imposed a ban on forest fires during the dry season and arranged military operations against deforestation practices. This decree comes after pressure from financial investors, international companies and foreign governments on the need to improve Brazil’s environmental commitment and to stop deforestation, a practice that is severely endangering the ecosystem.
Last July, Jair Bolsonaro, the current President of Brazil, has imposed a ban on forest fires during the dry season and arranged military operations against deforestation practices. This decree comes after pressure from local and international investors and European governments on the need to improve Brazil’s environmental commitment and to stop deforestation, a practice that is severely endangering the ecosystem. Only a year ago Bolsonaro declared that only his country was entitled to decide on the fate of the Amazon rainforest.
Environmental experts fear that these actions will at best act as damage control systems, as they are not enough to reverse the negative trends in deforestation and recover the environment.
The deforestation rate has spiked since the beginning of Bolsonaro’s administration in 2019. In the first semester of 2020 only, around 1,184 square miles of the Amazon rainforest have been razed down. An area that is 25% bigger than the forest area lost in the same months of the previous year.
Brazil’s highly negative position on environmental protection has put in jeopardy two important foreign goals, the trade deal with the EU and the admission of Brazil to the OECD, both of which require the South American country to meet defined standards on social and environmental policies.
In the last months, many international investors have asked the Brazilian government to raise environmental commitment. Over forty European firms, among which the British companies Tesco and Marks and Spencer, threatened to boycott Brazilian products if the government did not stop deforestation.
Thirty financial institutions, including Legal & General Investment Management and Sumitomo Mitsui Trust Asset Management, cumulatively controlling over $3.7 trillion in assets, signed a letter in which they expressed the intention to divest from Brazil if the government did not act to preserve the environment. They wrote in the letter: “As financial institutions, who have a fiduciary duty to act in the best long-term interests of our beneficiaries, we recognize the crucial role that tropical forests play in tackling climate change, protecting biodiversity and ensuring ecosystem services. […] the escalating deforestation in recent years, combined with reports of a dismantling of environmental and human rights policies and enforcement agencies, are creating widespread uncertainty about the conditions for investing in or providing financial services to Brazil“. Adding that: “Considering increasing deforestation rates in Brazil, we are concerned that companies exposed to potential deforestation in their Brazilian operations and supply chains will face increasing difficulty accessing international markets. Brazilian sovereign bonds are also likely to be deemed high risk if deforestation continues”.
This action follows Nordea’s decision to stop purchasing Brazilian state bonds in 2019 after the spreading of wildfires in the Amazon forest.
Last month, a group of seventeen former Brazilian Finance Ministers and Central Bank Presidents, expressed publicly their dissent from the environmental policies of the current President. In a letter they argued for an urgent need to shift the country toward a greener economy, putting forward four proposals regarding: public and private investments in a low carbon economy, zero deforestation in the Amazon and the Cerrado, an increase in climate resilience, and a boost in new technology research and development.
Earlier in July, the Brazilian government proposed to create a programme called “Adopt a Park” in which private companies are invited to pay for preserving areas in the Amazon rainforest in order to stop the illegal deforestation. The programme will be open to national and international investors and it aims to preserve 15% of Brazil’s area of endangered ecosystem.
An European portfolio management has raised concerns on the effectiveness of the programme to attract investors as “funds have a fiduciary responsibility, and such a program would be akin to philanthropy“. Other investors are unsure of the scalability of the programme and share the idea that the Brazilian government first has to demonstrate that it is able to stop illegal deforestation before they would grant more funds.
For further information see the following links: