In 2021, JBS, the world’s largest meat processor with operations in over 20 countries, issued $3.2bn in four separate debt issuances or ‘green bonds’ in 2021, referring to them as Sustainability-Linked Bonds (SLBs), that were tied to its stated goal to achieve net zero emissions by 2040.
Mighty Earth’s evidence submitted to the SEC claims that those bonds were misleading to investors and allegedly fraudulent.
Central to the campaigners’ complaint is that JBS based the bond offerings on that net zero emissions commitment but that the company’s emissions have, in fact, increased in recent years. In addition, Mighty Earth argues that the meat group excluded ‘Scope 3’ supply chain emissions, which comprise upwards of 97% of its climate footprint.
The complaint cites the official Second Party Opinion on JBS’ Sustainability-Linked Securities that concluded that the bonds “were not material to the whole corporate value chain as the KPI does not include Scope 3 emission."
The environmental activists said JBS omitted key information from investors as well about the actual number of animals it slaughters each year, thus denying them vital information to make fully informed decisions about JBS’s net zero and climate-related claims as they decided whether to purchase these SLBs.
A report from the Institute for Agriculture and Trade Policy (IATP), published in April 2022, claimed that JBS increased its annual greenhouse gas (GHG) emissions by 51% between 2016 and 2021, from 280 million metric tons (MMT) to 421.6 MMT.
Commenting on the complaint, Mighty Earth’s CEO, Glenn Hurowitz, said: “JBS seduced investors with sustainability pledges, but those pledges had practically zilch to do with the actual source of JBS’ supersized climate impact. Companies simply shouldn’t be able to ignore the environmental impact of 97% of their operations and then market themselves as green.
“The fact that the meat company arguably responsible for more climate pollution and deforestation than any other in the world was able to raise $3.2bn through green bonds is an indictment of the utter lack of safeguards in the world of ESG investing.”
The SEC needs to step in right away to set clear rules about what does or doesn’t count as sustainable, he added.
Kevin Galbraith, attorney for Mighty Earth, said the campaigners were confident that when the SEC’s Climate and ESG Task Force carefully examines the case, it will take appropriate action to hold JBS accountable and ensure that it lives up to its environmental promises.
Some 17 US State Treasurers have requested Scope 3 emissions be explicitly required in the revised SEC climate reporting requirements, as outlined in a letter to SEC chairman, Gary Gensler, published in October 2021.
A spokesperson for JBS told us the company's Sustainability-Linked Bonds scopes are explicitly and transparently limited to scope 1 and 2 reductions, something that is clearly outlined in the frameworks and was directly communicated to all potential investors.
And the representative said that, at the time the bonds were issued, it was not possible to include scope 3 because of calculation limitations, noting comments in the ISS ESG Second Party Opinion: “While JBS acknowledges the importance of measuring and ultimately reducing scope 3 emissions, a widely-accepted method for measuring scope 3 emissions does not currently exist for its industry.”
ISS ESG, noted the spokesperson, also found “that the KPI selected by the issuer is consistent with the overall company’s sustainability strategy” and that “[JBS’s] target is set in a clear timeline, is benchmarkable and supported by credible strategy and action plan."
The representative said it was important to highlight that while the bonds that were issued are consistent with JBS's global sustainability strategy, they are not intended to fund the entire decarbonization process as part of the company's net zero commitment. "Our strategy goes far beyond the debt market. We have numerous partnerships in place with academic institutions, feed additive research to reduce methane emissions, a blockchain platform to trace the cattle supply chain, and 17 Green Offices to support good environmental practices on Brazilian farms, just to name a few initiatives to date."
JBS is currently working with "expert, internationally-recognized" consultants to complete its global scope 3 emissions calculation, according to SBTi and GHG Protocol rules. The meat processor said it was on track to submit that this year, within the standard SBTi timeframe.