Business reiterate Brazil boycott as nation urged to set deforestation-linked bonds


14 July 2021, source edie newsroom

Nando's, Ocado and the Woolworths Group are the latest businesses to have signed a letter urging Brazilian policymakers to reject a new land-use proposal that could further spur deforestation in the Amazonian region, with a new report urging the nation to link efforts to combat deforestation to sovereign bonds.

Policymakers are discussing the controversial reforms this week

Earlier this year, a string of big-name supermarkets, food-to-go chains, suppliers and manufacturers threatened to boycott Brazilian products if lawmakers did not bolster laws designed to protect the Amazon rainforest. Brands such as Sainsbury’s Tesco and Marks & Spencer all signed the original letter, sent in May.

The businesses urged lawmakers not to pass a new legislative proposal known as PL 510/21. The measure has been dubbed a “land grabbers bill” by environmental groups including Fridays For Future.

Brazil is set to vote on some aspects of this legislation this week. Ahead of these negotiations, Nando’s Ocado the Woolworths Group and the entire Dutch animal feed industry have signed the letter threatening to boycott Brazil if the legislation is passed.

Under the new legislation, private-sector firms or individual asset owners would be permitted to transform lands that were occupied by local communities as recently as 2014. Under current rules, lands must have been vacant since 2011.

Moreover, to receive the title to the land, new owners would not need an on-site inspection – another alteration from current requirements. The bill would also enable those currently occupying land illegally to apply for formal ownership, while many green groups want to see such pieces of land made public once again.

Sovereign bond risk

In related news, a new report from Planet Tracker and the Grantham Research Institute has urged the nation to issue a “Deforestation-Linked Sovereign Bond to help fund a green recovery”.

Research from the organisations warns that Brazil could be left behind as other nations forge ahead with net-zero commitments and policies to tackle climate change and the ongoing ecological breakdown.

Currently, investors holding $113bn of Brazilian sovereign bonds would be exposed to risks as the capital markets shift towards greener standards. The report claims that historic approaches to depleting its natural capital base through deforestation is creating investment risk moving forwards.

In response, Brazil has been urged to reform public spending and end subsidies that incentivise unsustainable agribusiness practices. A key recommendation is the creation of a bond linked to performance to reversing deforestation.

“A Deforestation-Linked Sovereign Bond would be an effective way for Brazil to align its fiscal and sustainability ambitions with those of the capital markets,” Director of Fixed Income & Head of Land Use Programme at Planet Tracker's director of fixed income and head of land use programmes Peter Elwin said.

“Deforestation is depleting Brazil’s natural capital base, threatening its economic health, and issuing a DLSB would be a strong statement by Brazil that it was intent on following a different path.”

Matt Mace