Fields of gold?

Last month, with much fanfare, the government announced its intention to legislate for ‘world leading new measures to protect rainforests’. The law, enshrined through an amendment to the Environment Bill, will require large businesses to ensure that they are not using products that drive deforestation considered illegal in the country where they were harvested.

Just two weeks after the announcement, an investigation by The Bureau of Investigative Journalism showed how flawed the governments approach is. The Bureau and its partners tracked soya grown on land owned and deforested by farm conglomerate SLC Agricola, sold to the ‘worst company in the world’ Cargill, who then shipped it to Liverpool, turned it into animal feed and fed it to chickens to supply to Tesco, Asda, Lidl, Nando’s and McDonalds. Because Brazilian legislation permits clearance of forest and other natural areas outside of the Amazon, all of this was perfectly legal, and the new forest law will do nothing to stop it.

As Feedback and many others argued in our response to the government, this is a terrible oversight, especially because the government’s consultation earlier this year recognised that half of global deforestation is legal where it takes place. The law is further flawed; while the new rules will require companies like Tesco to perform robust checks for illegal deforestation, shockingly, those who bankroll deforestation will get off scot-free. They will not be required to perform any checks.

So, how big a problem is this – just how much money from UK banks and investors goes to Brazilian soya mega-farms?

Background

Brazil’s soya trade is hourglass shaped, with a huge number of producers, a small handful of soya traders/exporters and many end users. Over 80% of UK soybean imports come from South America, covering the hugely important Amazon, Chaco and Cerrado biomes, and nearly all of this is used as animal feed[a].

Usually, investigations into soya focus on the big-player traders, processors, and exporters (Amagi, ADM, Bunge, COFCO, Cargill and Louis Dreyfus). But a small number of mega-farm companies wield considerable influence and attract heavyweight billionaire backers. The billionaire owner of Brazil’s largest soybean producer, Grupo Amaggi, was once Brazil’s agriculture minister and is a former governor of the Brazilian state of Matto Grosso. His cousin runs another major player, Grupo Bom Futuro. Major player Adecoagro is George Soros’ farmland speculation vehicle. Farm company Fazendas Bartiras is owned by the secretive $500 billion-dollar Canadian investment firm Brookfield Asset Management. The list goes on.

What we did

Feedback commissioned research firm Profundo to map the financial backers of Brazil’s largest soya producers. Through Bloomberg and Refinitiv databases, and by trawling company reports and websites, we used this data to shed light on the UK money behind the secretive players expanding Brazil’s soya monocultures. For a full methodology see our landmark report exposing the scale of international finance behind Big Meat and Big Dairy: ‘Butchering the planet’.

What we found

As of April 2020, 11 UK investors invested US$155 million in Brazil’s 3 largest publicly listed soya producers, Adecoagro, BrasilAgro and SLC Agricola. The largest shareholders of two of these businesses are British investors.

Odey Asset Management tops the list with its’ stake in SLC Agricola – the largest of any investor. Crispin Odey, the fund’s former manager dismissed SLC Agricola’s fines from the Brazilian regulator as “a parking fine” earlier this year. Autonomy Capital’s is the largest shareholder in BrasilAgro and invests in Adecoagro earning it second place – its founder has been vocal about the importance of climate change, and its importance in every investment analysis. Given the impact of Brazilian soya on the climate, both due to its deforestation footprint, and it’s propping up of greenhouse gas intensive models of industrial animal agriculture, as well as the industries vulnerability to the climate breakdown it helps drive, these investments seem like an odd choice. We also found two loans totalling $260 million from HSBC to Adecoagro both of which matured in 2018.

Table 1: Investors in Adecoagro, BrasilAgro and SLC Agricola as of April 2020

Why this matters

Adecoagro, SLC Agricola and BrasilAgro are high deforestation risk businesses, with an average score of 31% on Forest 500’s assessment of their deforestation policies.

Brasilagro and SLC Agricola have business models geared towards the transformation of native Cerrado vegetation into “productive” farmland, combining extractive land speculation with extractive agriculture to form a toxic business. Since 2015 over 50,000 acres of deforestation has been recorded on SLC Agrícola farms, that is an area nearly 150 times bigger than Hyde Park. And this year acquisitions by BrasilAgro have raised concerns of thousands of hectares of forest land on their new properties, given the organisations track record of clearances. Adecoagro is no different, called out by our allies at the Global Forest Coalition for their capturing of “financial incentives for deforestation” in Argentina, including from the International Finance Corporation, who have a deeply troubled approach to agriculture.

The Bureau’s investigation showed the direct link between deforestation on an SLC Agricola owned farm and the UK animal feed supply chain putting chicken on the shelves of major retailers and restaurant chains. Prior to this, Chain Reaction Research estimates that SLC Agricola had deforested nearly 25,000 acres during the first 5 months of 2020 alone. And while SLC says it will stop deforestation Cerrado by the end of 2020, and move to increasing productivity on already deforested land this new target will not happen immediately.

What needs to happen now

To ensure that due diligence legislation truly prevents British supply chains and British stakeholders’ risk of complicity in deforestation, we call on the government to ensure that such legislation:

• Abides by the Global Reporting Initiative’s recommendation to extend due diligence obligations to finance institutions financing any part of soft commodity supply chains, and therefore at as much risk of contributing to deforestation as the business operating directly in these supply chains
• Ensure that penalties for failing to comply provide a sufficient deterrent that cannot be absorbed into the normal costs of doing business
• Defines a fully comprehensive standard outlining all deforestation, environmental degradation and related practices (such as abusive labour practices, land grabbing, harm to environmental rights defenders) to be covered by comprehensive UK legislation, to exclude UK businesses from links to these practices
• Ensures important biomes and natural areas like the Cerrado, Chaco and others across the world are protected by a comprehensive definition of deforestation and environmental degradation that is science-based without paying heed to local legal status
• Includes requirements for Free, Prior and Informed Consent as a further mechanism for preventing environmental destruction and related human rights abuses

Annex: The soy barons

*Includes Argentina and Uruguay

• [a] Tesco’s 2018/19 UK soymeal footprint is circa 500,000 tonnes, 90% is from South America, 99% of this is as animal feed – Tesco claims 100% of own brand products covered by deforestation free credits
• Global soybean production for 2020: 360 million tonnes, of which 10% is used whole to feed animals or for soy milk, tofu etc. 90% gets crushed into
  • 250 Mt of soybean meal all of which is for animal feed.
  • 60 Mt is soybean oil, which is a by-product of the the soybean meal as prices for meal are going up much faster. Animal feed drives demand. (oil used as vegetable cooking oil in US, and ingredients in processed foods such as lecithin). All data from USDA. https://usda.library.cornell.edu/concern/publications/tx31qh68h?locale=en#release-items