Brazilian banks pushed to limit credit for meatpackers tied to deforestation

The aim is to foster "sustainable finance"
calendar icon 31 May 2023
clock icon 2 minute read

Brazilian banks are being asked to meet minimum information requirements to help combat illegal deforestation when offering credit lines to meat processors, Reuters reported, citing the Brazilian Federation of Banks (Febraban) on Tuesday.

The group said the move is tied to rules approved by its self-regulation council to foster "sustainable finance" in Brazil, the world's biggest beef exporter.

Banks that agree to participate in the scheme will be required to ask meat processors in the legal Amazon and Maranhao regions to implement a traceability and monitoring system that will allow them to demonstrate by December 2025 that their cattle purchases don't come from areas of illegal deforestation.

Companies will be required by the banks to disclose periodical cattle traceability indicators, Febraban said.

Abiec, a trade group representing global beef-packers including JBS and Marfrig, said it supports initiatives to raise standards in the Brazilian cattle supply chain, but it called on banks to demand environmental compliance from all customers, including farmers.

"We have approximately 20,000 (cattle) suppliers blocked for socio-environmental non-compliance," Abiec said. It added that beef companies have to end commercial relationships with rogue cattle suppliers, while banks may not be doing the same with their customers, some of whom are farmers with potentially bad environmental track records.

Financing activities associated with deforestation can increase credit, reputational and operational risks, Febraban said.

In the event of non-compliance with the regulations, banks will be subject to administrative sanctions that may result in the payment of a fine or exclusion from Febraban's self-regulation system, the group said.

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