By Sofia Tomljanovic, ESG McGill Analyst
The Amazon Rainforest is crucial to a rain cycle caused by trees that humidify the area with subterranean water. When this humidity concentrates in the atmosphere, it starts to rain (Sandy). As the largest rainforest in the world and often called the planet’s lung, it holds 10% of the world’s known species (Sexton). About 17% of the forest has been cut down, rapidly reaching the tip of the irreversible fall that lies at 20% of deforestation. At that point, the area will start suffering from extreme dryness, and the cycle will break (Sandy).
With 64% of its surface in Brazil and the rest reaching Peru, Ecuador, Venezuela, Suriname, Colombia, Bolivia, Guyana and French Guiana (Elisha Sawe), the Amazon is reliable on these countries’ economies and politics. In Brazil, current president Bolsonaro pushes the agriculture and cattle business for economic prosperity. As told by the NYU Journal of International Law and Politics, “Bolsonaro has also stated that no portion of rainforest land should be reserved for indigenous peoples, instead asserting that it should all be opened to agriculture and mining” (Corcoran). In a similar interest, Ecuador’s president Guillermo Lasso signed Executive Decrees 95 and 151 less than a year ago to deregulate “operational processes in the oil and gas industry, aimed at doubling the country’s oil production” and to “increase mining exports and make Ecuador more appealing to foreign investors” (Jarrin). These legislations put the Amazon’s wilderness at risk, with a major oil spill occurring just this year.
While it is primarily up to these political representatives to defend the forest, demand for its exploitation is at the heart of the problem. In today’s global economy, it is hard to have a prosperous system while staying behind on foreign investments, which is what is at stake. Various known international businesses and their shareholders are profiting from the destruction of the Amazon, as reported by journalist Olivia Lai on EARTH.ORG, which names only a few of all those involved. In particular, American-based corporation Cargill destroys entire ecosystems and exploits workers for soil and beef in Brazil, Argentina, Paraguay and Bolivia (Lai). Its exploitation illegally reaches Côte d’Ivoire, Ghana, Indonesia and Malaysia for other commodities (Lai). Walmart’s supply chain includes Cargill, JBS, and many others as a source for beef, palm oil, pulp, paper, and soy. The corporation does not have a system to track the origin of these products. Furthermore, Walmart does not consider it a business priority, despite their zero-deforestation goal in their supply chain aimed for 2020. Next, JBS, Brazil’s largest meat exporter, has a reputation for abusive environmental and labour practices. “In July 2020, JBS reportedly acquired cattle from a farm in the Brazilian Amazon which is under sanction for illegal deforestation, the fifth time in a year that the company has been linked to illegal deforestation” (Lai). Moreover, in a study conducted by a supply chain research firm called ‘Stand.earth’ in 2021, JBS was found in popular fashion companies’ leather supply chain (Pitcher). These companies include Coach, LVMH, Prada, H&M, Zara, Adidas, Nike, New Balance, Teva, UGG, and Fendi (Pitcher).
In the article ‘How Your 401(K) Is Helping Destroy The Amazon Rainforest,’ Andrew Fishman analyses Brazil’s economic reliance on its agriculture industry, which Bolsonaro intends to protect at all costs. It also analyses how this deforestation is fueled by international companies, primarily American, that end up in people’s retirement funds directly and indirectly. He shares that “through the Climate Bonds Initiative, or CBI, an organization funded in part by global banks, they have rebranded some of the world’s most ecologically and ethically problematic companies as “green,” “sustainable,” and “climate-aligned” investments — meaning purportedly socially conscious 401(k) retirement funds can buy in. Stocks and bonds of most of Brazil’s agribusiness leaders are publicly traded on Brazilian and U.S. markets” (Fishman). Fishman also explains that “most of the 56% of American households who own stock, mainly through index and mutual funds that spread investments across many assets, are financing companies, directly and indirectly, responsible for destroying Brazil’s tropical forests” (Fishman).
A second exceptionally informative article by BBC Future creates a strong argument for demanding responsibility from financial stakeholders, who need to verify that their investments are not financing deforestation because they can make the real difference in what is accepted in business practices and what is not. Writer Alexander Matthews highlights the existence of sites such as the one set up by organizations Friends of the Earth and As You Sow, Deforestation Free Funds, offering a tool that allows investors to check if the projects supported by their investments contribute to deforestation or other unsustainable practices and proposes alternatives that have higher ratings in ethical practices. Another positive aspect of the future of the Amazon and nearby regions is painted in The Nature Conservancy, with an article that discusses the newly implemented initiative for Innovative Finance for the Amazon, Cerrado and Chaco (IFACC) signed by eight companies (The Nature Conservancy). The companies are funding the beginnings of a transition into sustainable practices in the area, incentivizing the initiative with green bonds (The Nature Conservancy). Nonetheless, the transition and the ethical origins of the funding needs to be done in a timely matter, something that is not suggested in the article that quotes DuAgro’s CEO Fernanda Mello, who promises that “by 2025, 30% of the entire financial volume of [their] operations will be in compliance with IFACC requirements, and over the next five years, the percentage is expected to reach at least 35%” (Mello & The Nature Conservancy).
With one in ten animal species at stake, and the WHO announcing that nine out of ten people are breathing polluted air worldwide (Osseiran and Lindmeier), this complex situation is likely to get more expensive and dangerous in terms of respiratory diseases, among other consequences. This environmental genocide is in Latin America, but the financial fuel starts much further in the world and deeply in the system. Legislations are the last step to environmental disasters, and even then, illegal practices happen every day. The problem needs to be addressed with financial transparency, company values and informed, principled investors. ESG conscious investing aims to implement this change, not only for the Amazon’s sake but for all ecosystems.