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AmericasNovember 21 2022

Brazilian banks pledge to restore Amazon rainforest with carbon credit company

The alliance insists the move is of great ecological benefit, but historically banks have not held the agribusinesses they finance to proper account. A legislative response rather than individual efforts seems necessary. Philippa Nuttall reports.
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Brazilian banks pledge to restore Amazon rainforest with carbon credit company

Brazilian banks and corporations came together at COP27 in Egypt last week to announce the creation of a new company, which, they say, will focus on the “restoration, conservation and preservation of forests in Brazil” through the commercialisation of carbon credits. 

They insist the project, named “Biomas”, is resistant to greenwashing, even though a report from the UN last week warned against the “undue reliance on the use of offsets and potential unrealistic dependence on removals” to achieve climate goals. 

The Brazilian arms of Rabobank and Santander have joined a group of companies – private bank Itaú Unibanco, beef behemoth Marfrig, paper company Suzano and mining giant Vale – to, they claim, help protect the Amazon rainforest. 

The new firm will restore and protect, over the next 20 years, four million hectares of native forest in some of Brazil’s most valuable ecosystems, according to the press release announcing the initiative.

Each partner will initially commit 20m reais ($3.75m) through the “commercialisation of carbon credits”. After preparatory work, restoration and conservation projects will be rolled out “on a vast scale” from 2025. 

The project will prevent around 900 million tonnes of carbon from being released in the next 20 years (approximately double Brazil’s total annual emissions, but less than a fifth of the US’s) and help protect more than 4000 species of animals and plants, claims the alliance.  

The investment in Biomas reinforces the bank’s “commitment to the ESG agenda”, said Milton Maluhy Filho, CEO of Itaú Unibanco, in a press statement. The initiative chimes with the need for “ambitious actions and actors that have the capacity to execute swiftly and with quality”, to face the challenges of climate and biodiversity, stated Mario Leão, CEO of Santander Brasil. The project will have “a long-term positive impact for us and future generations”, said Mark Wiessing, CEO of Rabobank Brazil.

Neither Santander nor Rabobank would respond to questions about the project, with Cristiano Oliveira, executive manager at Suzano, acting as the sole spokesperson. Mr Oliveira was unable to share estimates about how much the project will likely cost. 

“We have financial modelling for internal use,” he says, that takes into account “different scenarios based on past projects by partners, and these will be further tested on the ground to calibrate”.

We must have standards

Launching the anti-greenwashing report in Sharm el-Sheik on November 8, UN secretary-general António Guterres said corporate climate action plans should be detailed and concrete, and expressed concern about the absence of standards, regulations and rigour in voluntary carbon market credits.

“Non-state actors cannot buy cheap credits that often lack integrity instead of immediately cutting their own emissions across their value chain,” states the report. “Financial institutions should have a policy of not investing or financing businesses linked to deforestation and should eliminate agricultural commodity-driven deforestation from their investment and credit portfolios by 2025.”

“A high-quality carbon credit should, at a minimum, fit the criteria of additionality,” adds the report, meaning the mitigation activity would not have happened otherwise, and must be permanent. The planting of trees is widely criticised in both respects. It is difficult to prove that trees would have not been planted without a specific project, and fires or other incidents make it impossible to ensure the longevity of a forest. 

In response, Suzano’s Mr Oliveira says: “Areas must be genuinely under threat of deforestation to ensure additionality. Activities will uphold the highest standards of transparency and monitoring, with independent verification to ensure permanence of removals over the long term.”

Poor past performance

Research by climate justice NGO Global Witness suggests banks do not have a good track record on deforestation. EU-based banks, including Santander, disbursed €7bn between 2013 and 2019 to “six of the most harmful agribusinesses groups involved in deforestation in the world’s three largest tropical rainforests”, says a report from the NGO. One of these agribusiness groups was Marfrig. 

“We cannot comment on details relating to individual clients,” says a spokesperson for Santander. “However, we expect all our beef processing clients to have a fully traceable supply chain that is deforestation-free by 2025. If this cannot be established, we will stop providing credit.”

individual voluntary projects like this will not be enough to turn the tide on deforestation and restore ecosystems

Chris Moye

Similarly, a January 2022 report by Friends of the Earth Netherlands says that between 2016 and March 2021, Dutch banks, including Rabobank, provided loans and underwriting services worth €3.1bn attributable to commodities linked to deforestation such as beef, palm oil, soy, pulp and paper, rubber, cocoa and coffee. 

“We have strict policies and monitoring systems on deforestation,” says Rabobank. “Farmers or companies who illegally deforest do not get a loan. However, we are not standing next to the farmers or companies 24/7 and a 100% guarantee of desired behaviour is unfortunately impossible.” 

Legal remedies

As for the Biomas initiative, “individual voluntary projects like this will not be enough to turn the tide on deforestation and restore ecosystems,” says Chris Moye, head of forest investigations at Global Witness. “Politicians must cut off the money pipeline financing forest destruction, starting with the EU anti-deforestation law.”

The European Parliament voted in September to strengthen European Commission proposals and oblige EU-based banks to conduct due diligence to prevent investment projects linked to deforestation, as part of the new anti-deforestation legislation being negotiated by the Parliament, the EU executive and the Council. This demand is unlikely, however, to make it into the final text. 

Speaking at an event in Brussels on Tuesday evening, the commission’s Helge Zeitler said it was important to agree a law with a “solid basis” that was “implementable”, suggesting due diligence demands on financial institutions would be a step too far.

She highlighted other EU instruments, such as the EU green taxonomy and tighter disclosure requirements, as potential solutions to ensure banks were not financing deforestation.

On November 9, sustainable bank Triodos, supported by eight other financial institutions with more than €175bn in assets under management, sent an open letter to the European Commission calling for the financial sector to be included in the deforestation law.

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