Stockholm (NordSIP) – A letter endorsed by 29 investors representing US$3.7 trillion in assets under management has been sent to Brazilian embassies across the world to start a dialogue with the Brazilian government regarding deforestation. The co-signatories include Sweden’s AP2 and AP4 National Pension Funds, AP Pension, Handelsbanken, Nordea Asset Management, SEB Investment Management, Sparebank 1 Forsikring and Storebrand Asset Management.
Two Controversial Legal Proposals
The letter was motivated by a controversial proposal to legalise the private occupation of land in the Amazon rainforest. “We are deeply concerned about the Provisional Measure 910 (now changed to PL 2633/2020), that has been submitted to the Brazilian Congress for a vote, and which would legalise the private occupation of public lands in the past, mostly concentrated in the Amazon,” the letter warns. “Should the measure pass, it would encourage further illegal occupation of public lands and widespread deforestation which would jeopardise the survival of the Amazon and meeting the targets of the Paris Climate Change Agreement and undermine the rights of indigenous and traditional communities.”
“Recent statements from the Environment Minister Ricardo Salles using the COVID 19 crisis to push through environmental deregulation and the controversial legislative proposals to legalize occupation of public lands and forests, to open indigenous peoples’ territories for mining and to reduce requirements for environmental licensing are but a few examples reported by the media on the threat of deregulation of environmental and human rights policies in Brazil.”
Despite the aforementioned concerns, the letter is framed in a positive light, with the investors expressing their willingness to dialogue with the Bolsonaro government. “As financial institutions, we see deforestation and the associated impacts on biodiversity and climate change as systemic risks, that have the potential to negatively impact long term returns,” Jan Erik Saugestad, CEO Storebrand Asset Management commented. “We want to continue to source from and invest in Brazil and help ensure that protecting the Amazon can be economically productive for all.”
“However, the current administration is putting this record at risk by deregulating forest management and weakening enforcement of environmental laws. This is creating widespread uncertainty about the conditions for investing in or providing financial services to Brazil. We urge the Brazilian government to reconsider its stance and hope to continue working with partners in Brazil to demonstrate that economic development and environmental protection are not mutually exclusive.”
Unlikely to Bear Fruit
However, despite these efforts, the likelihood that the Brazilian government will respond constructively is quite small. Environmental deregulation has been one of the centre-pieces of the Bolsonaro agenda since the beginning of his campaign. As a result, the country is expected to see a 10-20% rise in carbon emissions from 2018, at a time when global COVID-19 lockdowns are actually expected to have facilitated a 7% cut in global emissions.
On the forest front, figures published in May estimated that 1,200 sq Km – an area 20 times the size of Manhattan – had fallen victim to deforestation during the first 5 months of 2020. This represents a 55% increase from the previous year’s figures.
Moreover, past investor engagement efforts with the Brazilian government proved unfruitful. Back in August 2019, NordSIP reported on the dissolution of the German and Norwegian funded Amazon fund following an attempt by the Brazilian government to redirect funds to compensate farmers who needed to be evicted from land they had illegally occupied in the Amazon forest. The issue was further coloured by the world’s reaction to the Brazilian forest fires and devolved into a mud-slinging fight that triggered a diplomatic crisis between France and Brazil after the first French lady was insulted on social media. Hopefully, the letter will trigger a more measure reaction this time around.