“Considering increasing deforestation rates and recent fires in the Amazon, we are concerned that companies exposed to potential deforestation in their Brazilian operations and supply chains will face increasing difficulty accessing international markets,” the investors wrote.
They called on companies to establish a no-deforestation policy and to report on their suppliers’ compliance.
They did not advise funds against considering investments in Brazil. Still, the letter is the harshest rebuke from the international financial community since the country came under scrutiny this summer for spikes in deforestation and fires in the world’s largest rainforest.
Deforestation rates in the Amazon have nearly doubled since Brazilian president Jair Bolsonaro took office in January. The former fringe lawmaker campaigned last year on promises to cut environmental red tape and spur development in the Amazon — a message that found an audience in a nation mired in years of economic stagnation.
In August alone, Brazil’s National Institute for Space Research detected over 30,000 fires in the Amazon, triple the number for the same month in 2018. Bolsonaro has denounced government data as “lies” and fired the agency’s head this summer after an unfavorable report.
In response to the letter, Otávio Rêgo Barros, a spokesman for the Bolsonaro administration, told reporters Wednesday that the government was “adopting all measures to deal with the fire and deforestation crisis.”
Bolsonaro sent hundreds of soldiers to fight the fires and crack down on illegal deforestation, but the president also pushed back on calls for international collaboration in the effort: As fires spiked across the Amazon last month, he rejected an aid package offered by the Group of Seven and told foreign leaders to mind their own business.
Scientists call the Amazon the lungs of the planet, responsible for absorbing much of its carbon dioxide and emitting much of its oxygen. Bolsonaro has characterized international interest in the rainforest as an assault on Brazil’s sovereignty. His position has jeopardized a long-sought free-trade deal with Europe and has created the most serious diplomatic crisis of his presidency.
In August, Germany and Norway froze tens of millions of dollars in assistance for the Amazon after Bolsonaro said he would use the funds to aid farmers occupying the region. Soon, Finland called for a boycott of Brazilian beef in Europe. Then North Face, Timberland and H&M announced they would no longer buy Brazilian leather because of the cattle industry’s effect on deforestation.
“There is a legitimate worry amongst international investors about how business is being conducted, and that fear is growing,” said Marcos Lisboa, former president of Itau Unibanco, one of Brazil’s largest banks, and the head of Insper, a business university in Sao Paulo. The letter, he said, could make it harder for businesses in the farming and mining industries to gain access to financial resources.
The letter was signed by investors including Amundi, Europe’s largest asset manager; pension funds in Norway, Sweden and Switzerland; and the California Public Employees’ Retirement System.
“Their worry is that they will invest in a company that doesn’t have adequate control of its suppliers and in the future discover that its raw materials come from illegal deforestation. The company could be affected, and it could impact the fund’s returns,” said Joelson Sampaio, an economist at Brazil’s Getulio Vargas Foundation, a university in Sao Paulo. “It reflects a growing concern about the environment not only as it relates to Brazil but in the rest of the world.”
Bolsonaro is expected to address the international community next week at the U.N. General Assembly. Barros said the president planned to “deconstruct this narrative, particularly abroad, that Brazil is not interested in the Amazon, doesn’t take care of the environment and is not interested in it.”
In a television interview this week, Bolsonaro said he saw the speech as an opportunity to reassert Brazil’s sovereignty over the Amazon.
Bolsonaro’s critics welcomed the letter as a sign that the market can no longer ignore Brazil’s environmental issues.
“We are facing a two-pronged defeat in the government — we are losing both the forest and the country’s image,” said Marcio Astrini, Greenpeace Brazil’s public policy coordinator. “That loss of image will be expensive. It will cost business.
“There is a parallel between environmental preservation and the preservation of the markets. Both take a long time to build but a short time to destroy. And Bolsonaro’s destructive capacity is unprecedented.”