DECEMBER 2020

Monitor's seventh issue, a bulletin that disseminates Repórter Brasil sector and production chain studies, analyzes the envi- ronmental impacts of livestock and the connections that link the sector to national and international investors.

. 30 . MONITOR #7 STAFF EDITOR Marcel Gomes

“The Money that Feeds the Cattle’”

RESEARCH AND TEXT André Campos (Coordination) Piero Locatelli

PHOTOS João Laet (capa, p.16 e p.17) Avener Prado (p.03 e p.04) Sidney Oliveira (p.06) https://pt.wikipedia.org/wiki/Ficheiro:Black-rock-hq.jpg (p.07) https://br.freepik.com/fotos/fundo'>Fundo foto criado por mindandi (p.08) Alvaro Rezende (p.10 e p.21) Redes socias ( p.11) Bruno Cecim (p.15)

GRAPHIC DESIGN AND LAYOUT Elaine Almeida

This publication was supported by Global Witness

REPÓRTER BRASIL ORGANIZATION OF COMMUNICATION AND SOCIAL PROJECTS

GENERAL COORDINATOR Leonardo Sakamoto

EXECUTIVE SECRETARY CONTACTS Marcel Gomes [email protected] FINANCIAL COORDINATOR Marta Santana ONGReporterBrasil

ASSISTANT COORDINATOR @reporterb Marília Ramos (55 11) 2506-6570 ADDRESS (55 11) 2506-6562 Rua Bruxelas, 169. (55 11) 2506-6576 São Paulo - SP - Brasil (55 11) 2506-6574 Postal Code 01259-020 . 30 . . 01 . INTRODUCTION

This report addresses the envi- ronmental impacts of the livestock industry in – especially in ter- ms of deforestation – as well as the sector’s connections to Brazilian and foreign investors. It includes five case studies conducted in the state of and related to the supply chains of Brazil’s three largest meatpacking companies – JBS, Marfrig and Minerva. Currently, two of its main sha- reholders are major international financial groups: fund manager Bla- ckRock and investment bank Mor- gan Stanley, both based in the Uni- ted States. The report provides details of their financial inputs to the beef segment as well as the companies’ – meatpackers and investors – stan- ces on the environmental challen- ges faced by the industry.

. 03 . LIVESTOCK AND DEFORESTATION

Deforestation is a major driver of methane (CH4) produced by fermen- 8.4 million head in 1978 – then equiva- global warming and accounts for about tation in the animals’ rumen. But its lent to 8 percent of Brazil’s total – to 87 20 percent of greenhouse gas emis- indirect impact – resulting mainly from million in 2018. This figure now accou- sions worldwide1. Protecting and res- forest conversion into farms – accounts nts for 41 percent of all cattle raised in toring forests, in turn, could mitigate for most of those emissions. Brazil4. global carbon emissions by 25 percent, Bovine cattle also play an impor- According to the most recent data according to data from the UN Intergo- tant role in this context. The segment provided by the Brazilian government, vernmental Panel on Climate Change. is now considered the main cause of the state of Mato Grosso has more than In Brazil, the consequences of de- Amazon deforestation. About 65 - per 30 million head of cattle. It is the state forestation for the climate emergency cent of the area deforested in the bio- with the largest number – 7 percent of are even more important. Agricultu- me is covered by pastures, according the country’ s total5. – and the scene re and livestock provide the largest to the most recent official data on land for important agriculture and livestock contribution to climate change in the use change mapped by the Brazilian expansion fronts in three of the Brazi- country – it accounted for 80 percent government3. The situation reflects the lian biomes affected by deforestation of greenhouse gas emissions between vertiginous expansion of bovine cattle in recent decades: the Amazon, the 1990 and 20182. in the world’s largest tropical forest in Cerrado and the Pantanal. That percentage includes both di- the last 40 years. The number of oxen rect and indirect emissions. Livestock and cows grazing in the states of the farming is the main source of direct so-called Legal Amazon has increased emissions due to the high amounts of tenfold in the period. They went from

. 04 . THE FINANCIAL SECTOR AND LIVESTOCK

Bank9, conditioned all loans to farm PUBLIC At the same time, no policies were owners in the Amazon biome to state- INVESTMENTS adopted that could mitigate the envi- ments that “there are no current eco- ronmental damage caused by livestock nomic interdictions for illegally defo- The three largest companies in farming. Federal Government-control- rested areas on [their properties].” The Brazil’s livestock industry went public led Banco do Brasil remains the largest measure applied to all banks operating on the stock market in the 2000s, in funder of commodity companies at risk in the country, but focused only on lan- a context of economic growth and ex- of deforestation in Brazil. This is mainly downers, without considering the su- pansion of credit in the country. JBS, a result of its role as an operator of sub- pply chain in which they were included. Minerva and Marfrig – the three lar- sidized rural credit for rural producers7. In the following year, BNDES an- gest Brazilian meatpackers – started Federal investment bank BNDES nounced that it would condition its su- offering shares on the São Paulo Stock plays a prominent role in corporate in- pport to individual tracking of all bovi- Exchange in 2007. vestments linked to the risk of defores- nes10. The measure would help control Much of these companies’ growth tation – mainly due to its relations to the so-called indirect suppliers, which took place in the Legal Amazon region. the beef industry. Through BNDESPAR, are still the main bottleneck in com- In Mato Grosso, the three companies the bank is now JBS’s second largest bating deforestation in the livestock together gained a market share of two shareholder, with 21.82 percent of the industry. According to the guidelines, thirds of the total slaughters during the company8. Until 2019, it also had signi- all animals slaughtered by meatpacke- last decade6. ficant shareholding in Marfrig. rs that received financial support from Brazilian state-owned banks were Over the past 20 years, the finan- the bank should be traced from birth essential for their growth in the period cial sector, especially its private seg- to slaughter by January 2016. The de- by granting them credit or acquiring ment, had modest participation in dis- adline, however, was never met, as the their shares. The federal government’s cussions on combating deforestation in bank itself admits11. policy of creating international players, Brazil. Even so, specific measures were which led to higher concentration in taken, with different degrees of suc- the industry, played a central role in cess. state financing for livestock. A 2008 resolution of the National Monetary Council of Brazil’s Central

. 04 . . 05 . for being listed is the presentation of legislation to prevent products linked PRIVATE an inventory of greenhouse gas emis- to deforestation from being impor- INVESTMENTS sions. JBS – Brazil’s leading meatpacker ted13. The European Union, meanwhi- – is one of 25 companies with shares le, conducts consultation on how to Regarding private investments, traded through the index. address deforestation in its legal fra- despite all the problems, the Brazilian But the inventory that validates mework, after a report on the subject beef industry continues to benefit from companies’ listing in the index focu- was published earlier this year14. financial funds supposedly linked to ses only on their direct operations. In both cases, several civil society sustainable practices. Emissions associated with their supply organizations have been pushing for The chief examples are the Envi- chains are not considered. the financial sector not to be excluded ronmental, Social & Governance (ESG) This is a relevant gap, out of step from this process. Voluntary agree- funds, whose criteria in Brazil are disse- with the reality of emissions in the Bra- ments signed by companies and banks minated mainly by the Brazilian Asso- zilian case. As already explained, the have repeatedly failed to provide solu- ciation of Financial and Capital Market agricultural sector – that is, supply of tions to deforestation in commodities’ Entities (Anbima). ESG funds announce raw materials – is the largest source of supply chains. And legislation aimed that they are based on social, environ- greenhouse gases in Brazil. only at product importers, leaving out mental and management responsibility funders and investors, would not be parameters. But in several cases, their able to contain the problem15. portfolios distort these concepts to INTERNATIONAL Distinctions between agricultural include Brazilian meatpacking compa- LEGISLATION and financial companies are not always nies12. clear, as the former may be fully con- Investments linked to the Carbon Internationally, a number of cou- trolled by the latter or even fund their Efficient Index (ICO2) are an example ntries have been discussing legisla- producers and suppliers. Thus, if due di- of that. That is one of the main sustai- tion that would make due diligence ligence legislation excludes the financial nability indexes of B3 – Brazil’s official on environmental issues mandatory sector, it may result in scenarios where stock exchange. It was created by B3 in to importers, including the issue of a company is prevented from engaging partnership with BNDES. deforestation. This would compel in harmful practices that drive defores- ICO2 is advertised as a fund that companies to check their suppliers’ tation while a separate arm of the same “favors companies with lower emis- chains in order to prevent, mitigate company is able to fund itself and profit sions of greenhouse gases” and provi- and inform about deforestation risks. from the same activities16. des a “low-cost, socially responsible in- The United Kingdom is currently vestment solution.” The main criterion consulting on whether or not to adopt

. 06 . MAJOR INVESTORS

achieved the progress expected in re- disclose any initiatives” to achieve defo- BLACKROCK ducing their environmental impacts. restation-free supply chains. It also asks As the world’s largest investment None of them, however, belonged that results be disclosed “ideally with fund manager, BlackRock is also among to the livestock industry. BlackRock’s some degree of independent audit19 ”. the largest shareholders of JBS – Bra- investments in Brazilian agribusiness Some of BlackRock’s investments zil’s largest beef meatpacker. were completely ignored in the an- in Brazilian companies are made pre- While its shareholding fluctuates, nouncement. The words ‘livestock’ cisely through the Carbon Efficient BlackRock became JBS’s third largest and ‘deforestation’ were not even Index (ICO2), whose portfolio includes shareholder in May this year – behind mentioned18. JBS shares. The fund manager opera- J&F Investimentos, controlled by the Before its announcement about tes strongly by providing various in- company’s founding family, and the the climate crisis, BlackRock published vestment funds to allocate resources Brazilian state bank BNDES. a new sustainability policy for agribusi- made available by clients. In July 2020 , BlackRock announ- ness. Livestock is not addressed even in ced a broad policy to combat global its policy for the sector, and deforesta- warming17. Its main point was the tion is only mentioned twice. In one of sanction of 53 companies that had not these mentions, it asks that “companies

. 06 . . 07 . Morgan Stanley published an update provided to Brazil’s Securities and - Ex MORGAN STANLEY to its environmental policies in August change Commission (CVM) in March Morgan Stanley has shares of two 201923. It states: “We mobilize capital this year, Morgan Stanley Administra- of Brazil’s three largest beef industries. to scale sustainability solutions, drive dora de Carteiras says that “currently, The US-based bank owns 3.4 percent private capital into sustainable invest- it does not exercise asset management of Marfrig20, the second largest in the ments, and address environmental and activity for third parties24". sector, and 4.94 percent of Minerva, social risks across the firm.” The com- According to the company’s po- the third in this ranking. pany’s sustainability policy, however, licy posted on its Brazilian website, In addition to being a shareholder, does not include clear parameters and “the funds and portfolios managed the bank also has a history of providing criteria for investing in the beef industry. by MSAC [the company’s Brazilian financial services to Marfrig. Between There are specific guidelines for some subsidiary] come from resources ex- 2014 and 2017, it subscribed to a series sectors related to agribusiness, such as clusively owned by companies of the of securities issues for the company, palm oil, but not for livestock. Morgan Stanley conglomerate. The worth an estimated US$ 947 million. To The company that owns the shares management of third-party resources Global Witness, a spokeswoman confir- of the two meatpacking companies in is not part of its scope, nor the distribu- med that the bank had also financed the Brazil is Morgan Stanley Administradora tion of securities25." meatpacker, stressing that the risks of de Carteiras – one of the bank’s subsi- deforestation were carefully analyzed22." diaries in the country. In a document

. 08 . EXAMPLES OF DEFORESTATION

lities in the Brazilian Amazon." A recent Environmental Register (Cadastro Am- report published by The Intercept Bra- biental Rural, CAR) – the Brazilian go- BRASÍLIA FARM sil listed him as the 11th largest defores- vernment’s land register designed to ter in the Amazon in the last 25 years27. enforce environmental laws on rural properties. PROBLEMS The properties are registered to his THE CASE own name, to family members and to Illegal deforestation and cattle two companies owned by the family. ‘triangulation’. Rodrigues and other members of All of them – except for the smallest his family control a contiguous area one, the Brasília Farm – included are- of 85,000 acres in São José do Xingu, as where livestock farming is officially THE RANCHER northeastern Mato Grosso. This large banned because illegal deforestation area of Amazonian land was divided has been found (see map below). José Carlos Ramos Rodrigues has as four separate farms on the Rural one of the largest environmental liabi-

Purple areas indicate the sections of the farm that were closed due to illegal deforestation (Source: MPF, Amazônia Protege, http:// www.amazoniaprotege.mpf. mp.br/)

. 08 . . 09 . Rodrigues was fined for environ- area illegally deforested at the Califór- sold hundreds of animals to Marfrig mental issues at least 13 times between nia farm. and JBS in the past two years. 2007 and 2016, totaling about R$ 104 In addition to environmental cri- However, before selling cattle for million in debts. In addition to defores- mes, the rancher was also charged with slaughter, the farm received animals tation, illegal fires were also found on employing slave-like labor in 200828. transferred from another neighboring his farms. The crime was also found in São José property belonging to the family – the In such cases, Brazilian law provi- do Xingu. At the time, Rodrigues’s Moinho/Califórina farm, which does des for the interdiction of areas illegally lawyer claimed that he had not been to have hundreds of acres interdicted exploited, in order to stop agricultural the property in eight months and that as a result of illegal deforestation and activities and thus allow native vege- he had not authorized the hiring of the where inspections found livestock. tation to regenerate. Because of this, workers rescued. Both meatpacking companies are inspectors interdicted about 37 acres signatories to agreements in which of Rodrigues’ farms in São José do Xin- they undertake not to purchase catt- gu – explicitly banning, therefore, the SUPPLY le from interdicted areas. However, continuity of livestock farming. CHAIN the lack of total traceability prevents Even so, federal inspectors repea- effective enforcement, even in clear tedly found animals in the interdicted As stated above, of all contiguous situations like this – in which the divi- areas – the last time was in January this properties, only the Brasília farm has sion of a huge rural property into se- year. Before that, in 2016, Rodrigues no records of illegal deforestation. veral smaller farms helps to mask, on had already been fined R$ 28 million And it was precisely that farm that has paper, the real origin of cattle. for preventing forest regeneration and for keeping livestock in a 15,000-acre

. 10 . Amazon rainforest in the Estrela do Ari- Estrela do Sangue, in turn, sent ani- ESTRELA DO puanã farm, located in Aripuanã, nor- mals during the same period to be slau- ARIPUANÃ FARM thwest Mato Grosso. ghtered at JBS’s meatpacking plants in The Estrela do Aripuanã farm is a the towns of Juína and . 9,000-acre property with only about 13 This is a typical example of the risk PROBLEM percent of native vegetation left and of supply chain contamination throu- 39 percent of its area interdicted. The gh indirect supplier farms. However, Indirect supplier with illegal defo- area controlled by Cunha in the region, there is another relevant peculiarity in restation. however, is much larger. As in the pre- the case. vious case, he also owns contiguous Information published on social land – the Estrela do Aripuanã I and II media indicates that JBS itself transfer- THE RANCHER farms – which are registered in the Ru- red animals from Estrela do Aripuanã ral Environmental Register (CAR). Toge- to Estrela do Sangue in 2019. The case In addition to raising cattle for slau- ther with the Estrela do Aripuanã farm, was originally reported in July, in a joint ghter, Ronaldo Venceslau Rodrigues da they cover a 23,500-acre estate. investigation involving The Bureau of Cunha owns a company focused on bo- Investigative Journalism, The Guardian vine genetics. His family’s brand in this and Repórter Brasil29. business – Aliança – is well known in SUPPLY CHAIN JBS has a subsidiary that provi- the market of bulls for breeding. des livestock truck services, including In 2028 and 2019, Ronaldo Ven- transfers between farms. In July 2019, a ceslau Rodrigues da Cunha transferred truck driver from the company posted THE CASE thousands of animals from Estrela do photos and information on social me- Aripuanã for fattening and breeding dia about transfers between the two In 2012, Cunha was fined R$ 2.2 at another of his properties in Mato properties mentioned. The animals million by Ibama, Brazil’s federal envi- Grosso – the Estrela do Sangue farm, in were transported in JBS’s own trucks. ronmental agency. The reason was the Brasnorte (MT). illegal deforestation of 3,700 acres of

A JBS truck arriving at Estrela do Aripuanã Farm

. 10 . . 11 . Pequizal Indigenous Land, sanctioned tions were rescued in 2003 by federal THE TRÊS RIOS FARM by presidential decree in 2016. government’s labor inspectors. But a July 2019 Ibama inspection PROBLEMS showed that the area occupied by pas- tures was in fact much larger. The ins- SUPPLY Illegal deforestation and encroach- pectors found that Aldo Pedreschi Filho CHAIN ment on indigenous lands. was raising thousands of animals within the neighboring indigenous land. During the first half of 2019, Aldo The damage caused by the activi- Pedreschi Filho sent animals for slaugh- THE RANCHER ty reached an area of 5,390 acres – al- ter several times at the JBS unit in Barra most 10 percent of the total area of the do Garças, MT. In the same year, he also Aldo Pedreschi Filho. Pequizal do Naruvôtu Indigenous Land. sent cattle for fattening to another farm As a result, Aldo Pedreschi Filho was in Água Boa, MT – a JBS supplier. fined R$ 10.9 million. The animals sold were registered to THE CASE In addition, 84 percent of one of the Boa Vista farm, one of the proper- the family’s four properties in the area ties bordering the Três Rios farm and In August 2019, Ibama found cattle – the Três Rios farm – was interdicted the Pequizal do Naruvôtu Indigenous linked to the Três Rios farm in Canara- for illegal deforestation. Since 2006, the Land. There is no environmental inter- na, MT, being raised in an indigenous family has received at least seven fines diction within the property’s perimeter. territory neighboring the farm. for that reason in this group of proper- But considering the history of illegalities The Pedreschi family raises cattle in ties, totaling more than R$ 20 million. found in its surroundings, added to the a large area of that municipality, loca- In 2009, the Ministry of the Environ- traceability gaps in the bovine chain, the ted in the transition between the Cer- ment listed Aldo Pedreschi Filho and possibility that animals that grazed in in- rado and the Amazon rainforest. Accor- his father Aldo Pedreschi among the 75 digenous lands or in illegally cleared are- ding to official records, they own four largest deforesters in Mato Grosso. as are being sold through the Boa Vista contiguous farms, totaling 8,500 acres. In addition to environmental issues, farm cannot be ruled out. The properties border the Naruvôtu the Três Rios farm has a history of using slave labor. Eight workers in such condi-

Satellite image of properties belonging to the Pedreschi fa- mily – the Mata Linda, Bela Vista, Três Rios and Lago Grande far- ms – bordering the Indigenous Land

. 12 . AMOR DO THE CASE SUPPLY

ARIPUANÃ FARM Sidney Gasques Bordone raises CHAIN cattle on several farms located in se- The Amor do Aripuanã Farm is a ven municipalities in the state of Mato PROBLEMS typical example of property that indi- Grosso. One of them is the Amor do rectly supplies the industry. Illegal deforestation and indirect Aripuanã farm, in Aripuanã, MT, with In August 2019, Sidney Gasques supply relations. 2,167 acres interdicted by Ibama. Bordone transferred 190 animals from Bordone has already been fined R$ that farm to be fattened on another of 1.8 million due to illegal deforestation his properties – the Rio Azul farm, in Vila RANCHER of the Amazon rainforest in Aripuanã Bela da Santíssima Trindade, (MT). – first in 2005 and again in 2013. After that, in September 2019, Rio Azul sold animals to Marfrig’s slaugh- Sidney Gasques Bordone. terhouse in Várzea Grande, MT. During the second half of that year, it also supplied Minerva’s unit in Mirassol D’Oeste, (MT).

Fazenda Amor do Aripuanã: in red, the area interdicted as a result of illegal deforestation (Source: Ibama)

. 12 . . 13 . for various environmental violations. The BIANCHIN FARM/ problems found include unauthorized SUPPLY AGROPECUÁRIA GPC deforestation and non-compliance with CHAIN environmental interdictions. Between 2012 and 2017, about 3,000 acres of Under a new name and manage- ISSUES Amazon rainforest were cleared on the ment, the property started to supply farm according to satellite monitoring by animals to JBS’s slaughterhouse in Illegal deforestation, direct and in- the Prodes/INPE system30. , MT. Cattle from the lea- direct supply relations. The fines were given to the farm’s sed area were also sent to another of original owner. But in 2017, the pro- Piccoli’s properties, the Da Pedra farm, THE RANCHER perty was leased by another large rural which, in turn, supplies cattle to two producer – Gustavo Vigano Piccoli, for- JBS units. mer president of the Mato Grosso As- It is important to note that the sociation of Cotton Producers (Ampa). Gustavo Vigano Piccoli. change in management does not annul It was then renamed as Agrope- environmental interdictions. As already cuária GPC. The lease is described in explained, cattle are banned from tho- a technical report on livestock mana- THE CASE se areas in order for the native vegeta- gement on the farm, published by the tion to recover. Ibama has already fined the Bianchin Federal University of Paraná (UFPR), farm, in Nova Ubiratã, MT, R$ 29 million to which Repórter Brasil had access.

Map of Agropecuária GPC (Source: UFPR)

. 14 . THE OTHER SIDE

MEATPACKING company says that, in order to improve their implementation is simple and monitoring, it has discussed the cre- mainly because there is no risk of we- COMPANIES ation of a new procedure for issuing akening the GTA-based health control Animal Transit Guides (GTAs) with the system of Brazilian cattle.” JBS Ministry of Agriculture, Livestock and Recently, in September, the company Supply (MAPA). announced a new program called ‘Toge- GTAs are sanitary documents. Ac- JBS did not comment on any of the ther for the Amazon.’ It intends to deve- cording to Brazilian legislation, they specific cases but stated that “it is fully lop technologies for tracking 100 percent must accompany any transfer of cattle committed to eradicating deforestation of its production chain by 2025 – from across its supply chain.” The company between farms – or even from farms to slaughterhouses. But there are no birth to slaughter32. The meatpacker has said, however, that data on indirect su- not yet presented a detailed plan of how ppliers is difficult to obtain. public mechanisms guaranteeing the it intends to achieve this goal. According to the company, “while transparency of these guides in order the traceability of the entire meat su- to allow tracing indirect suppliers. pply chain is a complex task, it can be “JBS believes that the idea of ‘Gre- achieved in the medium term.” The en GTAs’ is very promising because

. 14 . . 15 . The company also stressed that, to our Mirassol D’Oeste unit, appro- MARFRIG “as of today, there are no tools for priate measures will be taken.” systematically controlling animal At the same time, the company Regarding the Brasília farm, the triangulation between farms.” Its stated that “the data that are legally company stated that “one of its com- measures to address the issue in- available for official use do not allow mitments is to not purchase animals cluded participating in negotiation the company to find irregularities in from areas interdicted by Ibama. For tables with other stakeholders to the cattle supply process.” this purpose, it checks the CPF or find solutions. It also said that it was The company says: “Neither Mi- CNPJ (Brazilian taxpayers’ registra- preparing a “Risk Mitigation Map.” It nerva Foods nor any other industry tion for individuals and companies, intends to cross-check information have effective means for unrestricted respectively) of suppliers and, if the- on areas with the highest rates of access to the GTA system; therefore, re is any Ibama restriction, a report breeding and recreating and those they cannot fully monitor the animal is generated to assure that the pro- regions most vulnerable and exposed transit chain in Brazilian territory for perty that will supply the animals is to deforestation. more than 2.6 million ranchers.” not the interdicted farm. The Brasília In particular, the company also The company points out that mo- farm does not have any type of so- announced its goal of tracking indi- nitoring carried out from animals’ cio-environmental restriction under rect suppliers a few months before birth would demand an individual Marfrig’s criteria.” JBS did. Its target is zero deforestation traceability system – “something that With regard to animal triangu- in the bovine supply chain by 203033, should be conducted and supervised lation between farms, the company but the company has not disclosed by the competent health authorities." stated that “today there are no effec- any concrete measures to reach it. tive tools that allow systematic con- trol of this type of event.” Marfrig said the same regarding Sidney Gasques Bordone’s farms. Ac- MINERVA FOODS cording to the company, “all slaugh- tering at the Rio Azul farm was regu- The company stated that it would lar. There is no socio-environmental “look into the facts using data legally restriction on the property under the available for this analysis,” stressing company’s criteria.” that “if any irregularity is found with cattle supplied by the Rio Azul farm

. 16 . control a majority of the shares, also INVESTORS limits the impact of proxy voting by a minority shareholder like BlackRock.” RANCHERS Finally, the company claims that its BLACKROCK34 ETF funds follow the investment results All five ranchers were contacted of indexes set by third parties, through directly or through their companies. A BlackRock spokeswoman infor- which its customers are the ones choo- Aldo Pedreschi Filho was the only one med Repórter Brasil that, in 2019, the sing how to allocate resources. who commented on the cases. company contacted large agribusiness He said that “the partial interdic- companies operating in Brazil – inclu- tion of the Três Rios and Mata Linda ding JBS – to discuss their specific prac- MORGAN STANLEY35 Farms bordering the Bela Vista farm tices and issues related to the Amazon did not preclude livestock farming in region, including supplier chain mana- The cases were brought to Mor- the area that is not interdicted and, gement. gan Stanley, but the company has not consequently, the sale of cattle to the “Since those engagements last commented on any of them. Without JBS meatpacking plant.” He says he year (2019), we have continued to providing details, it stated that Mar- does not agree with Ibama’s penalties closely monitor these companies to frig’s and Minerva’s shares are held “since the presence of cattle in the Pe- assess their operational standards and on behalf of clients. "These shares are quizal do Naruvôtu Indigenous Land progress.” the spokeswoman wrote in held on behalf of clients or are attri- has not been proven.” an email. “In recent engagements, we butable to other client-related activi- Pedreschi Filho also stated that discussed JBS’s efforts to eradicate de- ties in the ordinary course of trading “the indigenous reserve has never forestation throughout its supply chain activity and are not held as a strategic been delimited by the federal Govern- after the company provided an upda- or proprietary investment on behalf of ment – an issue he solved by installing te on these efforts and progress of its Morgan Stanley”. a wire fence around the areas to avoid advanced monitoring capabilities of new conflict with the environmental supplier farms in the Amazon. We are agency. Besides, the area interdicted closely monitoring progress and dis- by IBAMA is larger than that of the closures.” BlackRock also stated: “It’s indigenous reserve – that is why an important to note that the ownership appeal was filed with the agency to structure of many of the companies in challenge all these points." the sector, which have a single or small group of affiliated shareholders that

. 16 . . 17 . LIVESTOCK AND DEFORESTATION

1 IFAO, “The State of the World’s Forests 2018”: http://www.fao.org/documents/card/en/c/I9535EN/ (accessed on September 28, 2020)

2 SEEG Brasil, “Análise das Emissões Brasileira de Gases de Efeito Estufa e suas implicações para as metas do Brasil 1970 – 2018”: https://seeg-br.s3.amazonaws.com/2019-v7.0/documentos-analiticos/SEEG-Rela- torio-Analitico-2019.pdf (accessed on September 28, 2020)

3 Project Terra Class 2014: http://www.inpe.br/cra/projetos_pesquisas/terraclass2014.php (aaccessed on September 28, 2020)

4 IBGE, Municipal Livestock Farming Survey: https://sidra.ibge.gov.br/tabela/3939 (aaccessed on Septem- ber 28, 2020)

5 IBGE, Cattle figures by type:https://sidra.ibge.gov.br/tabela/3939#resultado (accessed on September 28, 2020)

THE FINANCIAL SECTOR AND LIVESTOCK

6 Folha se São Paulo, “Crise da carne recai sobre o bolso do pecuarista, e arroba despenca”: https://www1.folha.uol.com.br/colunas/vaivem/2017/06/1890822-crise-da-carne-recai-sobre-o-bolso- -do-pecuarista-e-arroba-despenca.shtml (accessed on September 28, 2020)

7 Forests & Finance, “Seu dinheiro está destruindo florestas tropicais ou violando direitos humanos?”: http://forestsandfinance.org/wp-content/uploads/2020/08/FF_Briefing_Sep_2020-PT.pdf (accessed on September 28, 2020)

8 JBS, Shareholders and Partners: https://ri.jbs.com.br/investidores-esg/governanca-corporativa/compo- sicao-acionaria-e-societaria/ (accessed on September 28, 2020)

9 Resolution 3545, Brazil’s Central Bank: https://www.bcb.gov.br/pre/normativos/res/2008/pdf/res_3545_v1_O.pdf (accessed on September 28, 2020)

10 BNDES, “BNDES amplia exigências para apoio à cadeia produtiva da pecuária bovina”: https://archive. is/wip/ueZU4 (accessed on September 28, 2020)

11 O Eco, “ BNDES: combate à pecuária insustentável em ponto morto”: https://www.oeco.org.br/repor- tagens/bndes-combate-a-pecuaria-insustentavel-em-ponto-morto/ (accessed on September 28, 2020)

. 18 . PRIVATE INVESTMENTS

12 O ECO, “Chancela da bolsa de valores atrai investimentos milionários para empresas com risco de des- matamento”: https://www.oeco.org.br/reportagens/chancela-da-bolsa-de-valores-atrai-investimentos-milionarios-pa- ra-empresas-com-risco-de-desmatamento/ (accessed on September 28, 2020)

13 UK, Department for Environment, Food and Rural Affairs:https://consult.defra.gov.uk/eu/due-diligen - ce-on-forest-risk-commodities/ (accessed on September 28, 2020)

14 European Parliament, REPORT on the EU’s role in protecting and restoring the world’s forests: https:// www.europarl.europa.eu/doceo/document/A-9-2020-0143_EN.html (accessed on September 28, 2020)

15 Global Witness, “Why Eu Action To Tackle Deforestation Should Not Let Finance Off The Hook”: https://www.globalwitness.org/documents/19859/30012020_Forest_Finance_DD_Briefing_Lay_out_FI- NAL.pdf (accessed on September 28, 2020)

16 Ibid

MAJOR INVESTORS

17 BlackRock, “Our approach to sustainability”: https://www.blackrock.com/corporate/literature/publi- cation/our-commitment-to-sustainability-full-report.pdf?stream=top (aaccessed on September 28, 2020)

18 Ibid

19 BlackRock, “Investment Stewardship's approach to engagement with agribusiness companies on sus- tainable business practices”:https://www.blackrock.com/corporate/literature/publication/blk-commen - tary-engaging-on-sustainable-agriculture.pdf (accessed on September 28, 2020)

20 WSJ, Marfrig Global Foods S/A: https://www.wsj.com/market-data/quotes/BR/MRFG3/company-peo- ple (accessed on September 28, 2020)

21 WSJ, Minerva S/A: https://www.wsj.com/market-data/quotes/BR/BVMF/BEEF3/company-people (accessed on September 28, 2020)

22 Global Witness, “Money to Burn”: https://www.globalwitness.org/en/campaigns/forests/money-to- -burn-how-iconic-banks-and-investors-fund-the-destruction-of-the-worlds-largest-rainforests/ (accessed on September 28, 2020)

23 Morgan Stanley, “Environmental and Social Policy Statement”: https://www.morganstanley.com/abou- t-us-governance/pdf/Environmental_Policy.pdf (accessed on September 28, 2020)

. 18 . . 19 . 24 Morgan Stanley, “Formulário De Referência 2020”: http://www.morganstanley.com.br/prospectos/Morgan_Stanley_Formulario_de_Referencia_ICVM_558_ Marco_2020.pdf (accessed on September 28, 2020)

25 Morgan Stanley Administradora de Carteiras, “Manual de Normas e Procedimentos de Compliance, Conduta e Investimentos Pessoais”: http://www.morganstanley.com.br/prospectos/Manual_de_Compliance_558_Morgan_Stanley_ VF_2020.pdf (accessed on September 28, 2020)

EXAMPLES OF DEFORESTATION

26 http://www.reporterbrasil.org.br/rotadogado

27 https://theintercept.com/2020/01/31/maiores-desmatadores-amazonia/

28 https://reporterbrasil.org.br/2008/06/carro-de-equipe-que-resgatou-16-pessoas-e-apedrejado/

29 The Guardian, “Revealed: new evidence links Brazil meat giant JBS to Amazon deforestation”: https://www.theguardian.com/environment/2020/jul/27/revealed-new-evidence-links-brazil-meat-gian- t-jbs-to-amazon-deforestation (accessed on September 28, 2020)

30 The Brazilian government’s Official system to verify land use changes

31 They can be consulted at : https://reporterbrasil.org.br/rotadogado/

32 JBS, “Juntos pela Amazônia”: https://jbs.com.br/juntospelaamazonia/ (accessed on September 29, 2020)

33 Marfrig, “Marfrig Commitment”: https://www.marfrig.com.br/Uploads/Arquivos/Commitments_Marfrig_Vision_10_years.pdf (accessed on September 29, 2020)

34 BlackRock’s full answers to Repórter Brasil are available at: https://reporterbrasil.org.br/2020/09/respostas-da-blackrock-sobre-pecuaria-e-investimento-na-jbs/ (accessed on September 29, 2020)

35 Morgan Stanley’s full answers to Repórter Brasil are available at: https://reporterbrasil.org.br/2020/09/integra-das-respostas-sobre-a-morgan-stanly-estar-ligada-ao-des- matamento/ (accessed on September 29, 2020)

. 20 . . 20 . . 21 .