Investor Action Heats up Over Amazon

Collective opposition to Brazil deforestation reflects greater willingness to engage with governments, says AP7.

Opposition to legislation likely to increase deforestation in Brazil reflects the international investor community’s growing interest in tackling the loss of biodiversity, according to Flora Gaber, ESG Specialist at Swedish government-owned pension fund AP7.

The €65 billion AUM pension fund was a signatory of an open letter from retailers, food suppliers and investment companies sent to deputies and senators of the National Congress of Brazil on 5 May. The letter, also signed by EdenTree, LGIM and Skandia, expressed concerns about proposed legislation that could threaten the Amazon rainforest and its people.

As a universal owner, AP7’s investment approach is focused on the global, systemic issues such as climate change and biodiversity, said Graber. “Considering the role that the Amazon rainforest plays for both climate stability and biodiversity, we are concerned by any legislative measures that would weaken its protection and stability.”

The fund’s willingness to engage in advocacy is informed by AP7’s responsibility for securing the financial interests of both current and future savers, she added. “In other words, our main strategy is engaging in dialogue with companies, but also with lawmakers when warranted.”

Threat of further deforestation

The Brazilian proposal, PL 510/21, would apply to public land that has not yet been designated for a specific purpose such as conservation, indigenous territories or land reform. The concern is that the legislation, if passed, will favour privatisation of the land and further deforestation.

According to online monitoring platform Global Forest Watch, from 2001 to 2020, Brazil lost 59.8 million hectares of tree cover, equivalent to a 12% decrease in tree cover since 2000, and 20.4 gigatonnes of CO₂ emissions. “Since forests are also crucial for the climate stability (the Amazon in particular), deforestation has come into focus,” said Graber. “Well-known drivers of deforestation are cattle and soy production.”

It is not only climate stability that is of concern when it comes to deforestation. With globalisation and demand for certain commodities rising in some parts of the world, the impact of agricultural output can be detrimental to the quality of life of local populations, warn the authors of ‘Biodiversity and Re/Insurance: An Ecosystem at Risk’, published by France’s Museum Nationale D’Histoire Naturelle in collaboration with French reinsurer SCOR.

The report cites the indigenous people in Brazil who are suffering from the expansion of deforestation, “done in order to increase arable lands for soy crops intended to feed animals in intensive livestock farming for the populations of developed countries”.

Slow progress in cattle and soy supply chains

In March, climate disclosure platform CDP reported US$53.1 billion of deforestation risks and concerns about a lack of progress in eliminating deforestation from soy and cattle supply chains.

In a recent report, ‘Zeroing-in on Deforestation’, CDP said close to four million hectares of tree loss occurred from 2015-2017, across the regions of Brazil in which the companies in its report operated, on average. The ten cattle and soy companies covered produced more than 60 million tonnes of soy and 1.4 million of beef in the same period. The tree loss to production ration was ten times greater for cattle companies than it was for soy companies.

Putting pressure on the Brazilian government to protect the Amazon rainforest, said Graber, is “very important. As investors, we are starting to realise the value of crucial ecosystems and the risks linked with their destruction.”

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