Brazilian Meat Giant Issues Sustainable Transition Bond

    Stockholm (NordSIP) – Marfrig Global Foods SA announced it issued a ten-year US$ 500 million sustainable transition bond at the end of July, through its American subsidiary, NBM US Holdings, Inc.

    The bond pays an annual coupon of 6.625%  and was assigned foreign-currency credit-risk ratings of “BB-” from Standard & Poor’s and “BB-” from Fitch Ratings. Order books closed above US$ 1.5 billion thanks to demand from investors in Europe, the United States and Asia. Proceeds from the issue will be invested in sourcing cattle from suppliers in the Amazon Biome, which comply with specific requirements of Marfrig. These conditions hope to ensure the control of deforestation areas, to eradicate slave or forced labour or child labour via cattle traceability. The Brazilian states affected include Mato Grosso, Pará and Rondônia.

    The bond was issued under Marfrig’s Sustainable Transition Bond Framework. The Framework received neutral reviews from VigeoEiris’s second opinion, which expressed “a moderate assurance on the issuer’s commitments and on the bond’s contribution to sustainable development”. “Moderate is the intermediate level of assurance in VigeoEiris’s range, between “Reasonable” and “Weak”.

    Given recent concerns about Brazil’s policies towards the Amazon, this transition bond might appeal to investors hoping to stem the tide of deforestation. However, the very nature of the food industry, particularly beef, might be too unsustainable for those most environmentally inclined.

    Marfrig and the Emissions of Agri-business Industry

    Marfrig Global Foods SA is Brazil’s second-largest food producer, with operations in over 80 countries and a workforce of 20,605 people worldwide. The company reported net revenues of BRL 18.6 billion and gross profits of BRL 2.2 billion for a net worth of BRL 2.4 billion in 2017. It has global operations with a slaughtering capacity of 33,000 heads of cattle per day (21,000 in South America, mainly in Brazil, and 12,000 in North America).

    According to the UN Food and Agriculture Organisation (FAO), global livestock is responsible for 7.1 gigatonnes of Co2 equivalent GHG emission per year, representing 14.5% of all man-made GHG emissions. The UN Food and Agriculture Organisation (FAO) estimates that the production of 1kg of beef requires the generation of 300kg of CO2-equivalent emissions. According to the Oklahoma Department of Agriculture, an average  454 kg (1,000 lbs) steer generates 195 kg (430 lbs) of retail cuts. Based on these figures, back-of-the-envelope calculations suggest that Marfrig’s capacity translates to 1,930 kilotonnes of CO2-equivalent emissions per day. This is equivalent to 704.6 kilotonnes of CO2-equivalent emissions per year.

    Given its position as the global leader in cattle stocks, Brazil struggles to avoid a substantial carbon footprint. Data from the World Resources Institute Climate Analysis Indicators Tool (WRI CAIT) reports that agriculture represents approximately 30% of Brazil’s GHG emissions. Despite a 6% decrease in the country’s aggregate emissions, emissions from the agricultural sector increased 46% between 1990 and 2014, driven by increases in enteric fermentation, manure left on pasture, and use of synthetic fertilisers. During the same period, the number of cattle increased by around 44%.

    As a reference, the trend is in the opposite directions in Europe. According to Eurostat, the EU28’s agricultural sector produced 426.5 thousand kilotonnes of CO2 equivalent greenhouse gases (GHG) in 2015, down from 553 thousand kilotonnes in 1990. That corresponds to a decrease from 1.12 kilotonnes of GHG per capita in 1990 to 0.84 kilotonnes of GHG per capita in 2015. By this account, the agricultural sector was equivalent to 10 % of the EU’s total GHG emissions during 2015. “Enteric fermentation of feed in the stomachs of livestock”, is the largest source of methane in the EU-28, according to the same source.

    The Netherlands, Belgium and Malta were the most polluting agriculture producers in Europe, topping the ranking of kilotonnes of CO2 equivalent per thousand hectares of utilised agricultural area in 2015. Bulgaria, Hungary and Estonia were the least polluting. Sweden ranked at number 9, just behind Denmark and Germany and ahead of Finland.


    VigeoEiris’s second opinion of Marfrig’s sustainable transition bond briefly mentioned the issue of controversies noting, without going into any detail that “Marfrig faces two isolated controversies (related to the Business Behaviour domain). The severity of their impact on both the company and its stakeholders is considered significant. Marfrig is considered reactive for both controversies (“Prevention of corruption” and “Anti-competitive practices” criteria). The Issuer is not involved in any of the 15 controversial activities under our scrutiny”.

    In the past, Marfrig was in the news due to a bribery scandal involving Marcos Antônio Molina dos Santos, its CEO. The Brazilian Federal police accused the executive of bribing Geddel Vieira Lima, a Brazilian government official involved in the Cui Bono scandal. A BRL 9 million bribe to Lima reportedly allowed the CEO of Marfrig to obtain a BRL 350 million loan from the Caixa Econômica Federal, the third-largest bank in Brazil by balance sheet size. The CEO made a commitment term of remediation to the Brazilian authorities at the end of May 2018, related to the Cui Bono investigation, under which Marfrig was exempt of “of any payment and financial impact in the future”.

    Picture from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

    Latest Posts


    partner insights

    Find out more >

    NordSIP Insights Handbook

    What else is new?

    ESG Leaders 2023