Why parliamentary pensions investments in JBS matter for regulatory due diligence on deforestation

A new report analysing investments held by the Parliamentary Contributory Pension Fund (PCPF) reveals that Members of Parliament hold pensions investments in a fund holding US$67m in stock from companies among the top 35 largest global meat and dairy companies. The fund—iShares Emerging Markets Index Fund, managed by multinational corporation BlackRock—includes shares of JBS, one of the biggest meat producers in the world whose business practices have been repeatedly linked to deforestation in the Amazon rainforest and Cerrado region.

“I welcome measures in the Environment Bill to hold companies accountable for the illegal deforestation they cause. Indigenous people are being exploited by these companies and are in many cases being deprived of their land and livelihoods. But this new evidence proves that the bill must go further,” said Neil Parish, Member of Parliament (MP) for Tiverton and Honiton. “It is unacceptable that whilst MPs vote on this bill, our pension pots are being invested in companies fuelling deforestation. All pension funds should check where their money is being invested, and Parliament should be leading by example. However, we cannot rely on goodwill alone. This new evidence shows exactly why the bill must be toughened to include financial institutions in the due diligence obligation.”

“I am shocked to learn that MPs’ own pensions are funding companies which have been repeatedly linked to not only deforestation—legal and illegal—but also to terrible working conditions on Brazilian beef farms,” said Kerry McCarthy, Member of Parliament (MP) for Bristol East. “The UK’s complicity in deforestation overseas is a black mark on our record. We need strong regulation and leadership to stop this, and the Environment Bill is our best opportunity to get this right.”

Among the US$67m invested by the iShares Emerging Markets Index Fund in companies among the top 35 global meat and dairy companies, approximately US$8m was invested in JBS, a Brazilian company known for its role in deforestation. The PCPF is exposed to this invest in JBS through its shares in the fund. Though these figures represent only a fraction of PCPF investments, they signal the failure of voluntary measures aimed at reigning in the financial sector’s investment in companies posing serious and ongoing risks to forests and driving activities that contribute to climate change. Tropical deforestation increased 12% in 2020 even as the global economy shrank 3.5%, worrying scientists and advocates alike on the potential impacts of an economic recovery on the globe’s dwindling natural habitats.

Devastating yearly occurrences linked to deforestation, such as tropical forest fires, can destroy large swathes of land, people’s homes and endangered wildlife. According to the report, strong domestic laws to hold companies accountable for the deforestation they are fueling must not exclude the financial sector or risk failing to address one of the most integral parts of the supply chain.

In 2021, the UK government plans to introduce a new, ‘world-leading’ deforestation regulation. But so far, the plan excludes the financial sector. The European Parliament, on the other hand, recently recommended a regulatory approach to ending deforestation that incorporates the financial sector. A proposed due diligence obligation requires the sector to prove they do not profit from forest loss.

“The UK government prides itself in its domestic climate leadership, but isn’t sufficiently tackling deforestation, an integral part of global climate change mitigation”, said Carina Millstone, Executive Director at Feedback. “It rightly wants to ensure goods purchased in the UK are not linked to deforestation but is not taking the same action for UK pensions and investments. The exposure of MPs’ pensions to companies like JBS, repeatedly linked to deforestation, shows that any law that does not create due diligence requirements in the financial sector will fail to protect delicate forest ecosystems and all but preclude global climate goals.”

“Every day, indigenous peoples and forest communities are standing up to protect their climate-critical forests – often in the face of attacks, land grabs and violence,” said Shona Hawkes, Senior Global Policy Advisor at Global Witness, “The UK government has rightly recognised we need to end the UK’s complicity in global deforestation – but to achieve this we must cut off the money pipeline from UK banks and investors. The Environment Bill must be strengthened so there is absolute clarity that no UK businesses, including financial institutions, can back companies that are a threat to forests or the people who depend on and defend them.”

One-fifth of the 150 financial institutions with the greatest influence on tropical deforestation, including Rabobank and UBS, have published policies for all key forest-risk commodities, which indicates that they recognise this issue as a priority. However, the absence of legal regulation means that accountability is in question.

This year, as the UK government hosts the G7 and the UN Climate Summit COP26, it has the opportunity to help forge strong global agreements and action on deforestation. The private sector is also increasingly pressuring Brazil and other forest nations to end deforestation. More than 40 companies, including investors and major retailers, recently issued an open letter pressuring Brazilian President Jair Bolsonaro to kill proposed legislation that would open up the Amazon to greater destruction.

“These findings reveal that parliamentary pensions—like most—are invested in companies that are out of step with our values as a society. We know from our own research that the public does not want to see their pensions fund practices such as deforestation that contribute to climate change, drive biodiversity loss and harm our planet,” said Huw Davies, Senior Finance Adviser at Make My Money Matter. “In fact, over half of UK pension holders would switch to a green pension if they discovered that theirs was invested in companies with links to deforestation*. We hope that this report will encourage all schemes to green their pension by not only committing to net-zero emissions, but also scanning for – and removing—any links to deforestation within their portfolios.”

World leaders have noted that action on climate change and biodiversity loss this decade is critical. Deforestation is the second-leading cause of carbon emissions globally, after burning fossil fuels, and a major contribution to species extinction. Agricultural expansion drives three-quarters of deforestation worldwide, with beef, soya and palm oil responsible for 59% overall.

*Survey conducted by YouGov and commissioned by Make My Money Matter in March 2021