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Brazil’s Amazon forest is the largest in the world and plays an important role in regulating climate. It is also home to rich biodiversity and hundreds of indigenous peoples and traditional communities. The accelerating pace of deforestation and biodiversity loss in Brazil is a growing concern. The country is nearing a critical threshold, having lost 21% of its native vegetation to deforestation. The Cerrado, an important biome, has lost half its native vegetation,1 with 75% of the destruction having occurred very recently, between 2019 and 2023.2
Beef and soy production are the main causes of deforestation and biodiversity loss, but both commodities are integral to Brazil’s economy. Agribusiness is responsible for around 25% of the country’s GDP.3 The country also plays a vital role in meeting the world’s growing food demands, as the number one global crop producer4 and the second largest beef producer in the world.5
Deforestation, particularly illegal deforestation, is often related to poverty and need. Financially vulnerable farmers in remote areas frequently lack the know-how and tools to implement good farming practices, and as a result, the land quickly degrades. Within a few years, many move on to deforest new land.6,7,8 Sub-optimal farming is widespread. According to the Brazilian Beef Exporters Association (ABIEC), 76% of farms in Brazil have below average productivity.9 This represents an opportunity to train farmers to optimize farm productivity and prevent further deforestation.
The duality and complexity of operating in environments like this is one reason why deforestation and biodiversity are key topics within Morningstar Sustainalytics’ Global Standards Engagement program. In October 2024, we conducted an engagement trip to the country. We met with nine companies with which we have ongoing engagements and seven diverse stakeholders across three cities – São Paulo, Brasília and Rio de Janeiro.
Our objectives were to advance deeper, more nuanced understandings of the Brazilian deforestation and biodiversity context among investors, companies and other stakeholders. Through in-person meetings, we aimed to foster a space for new connections and potential solutions to further mitigate deforestation and biodiversity risks and impacts, share the viewpoints and expectations of stakeholders, and enhance relationships between companies and institutional investors. In this article, we share insights from our on the ground engagements in the region.
Multi-Stakeholder Dialogue as a Driver for Stewardship Impact
A key premise of the engagement trip was to gain a more holistic understanding of local context, community perspectives, challenges and proposed solutions through multi-stakeholder dialogues. In addition to the 30 institutional investors that participated in person and virtually, the stakeholder meetings gathered important players that shape the Brazilian ecosystem and economy.
Participants included representatives from the corporate sector, including several of the largest beef and soy suppliers in the world: JBS, SLC Agricola, Minerva, Marfrig, and BRF. We also met with industry groups and government agencies such as ABIEC, which accounts for 98% of the country’s beef exports and the Brazilian Forest Service, the key government agency responsible for managing Brazil’s public forests.
Other stakeholder participants included civil society groups such as WWF Brazil, an environmental non-profit organization, Instituto Socioambiental, which represents indigenous peoples and quilombola10 communities in protecting their territories and interests, and the National Wildlife Federation, developer of Visipec, a critical tool used by the beef industry to combat illegal deforestation.
Our dialogue also included meetings with representatives from the financial services industry, which plays a critical role in enabling or preventing activities related to deforestation and biodiversity loss. We met with Banco do Brasil, which accounts for about 60% of Brazil’s agricultural sector financing.
Five Insights From the Brazil Engagement Trip
Insight One: Despite Challenges, Supply Chain Transparency Remains a Top Priority
The current system for identifying and monitoring the origins of soy and cattle is complex and faces challenges. The outcomes from our many meetings confirmed this.
The main solutions consist of using two government databases, the Cadastro Ambiental Rural (CAR) and the Guia de Trânsito Animal (GTA), together with satellite georeferencing data and other tools. Both systems have issues related to their mapping and tracing capabilities for soy and cattle. For example, the systems are not interlinked and there are data quality concerns. Based on discussions with multiple stakeholders, it’s clear that the currently available tools are not sufficient to reliably map and trace 100% of indirect suppliers within the soy and beef supply chain, particularly for the tiers closer to the start of the beef supply chain. These are often a key source of risk, with a higher concentration of small, economically vulnerable suppliers responsible for illegal deforestation.
Table 1. Brazilian Soy and Beef Companies' Reported Progress on Mapping Direct and Indirect Suppliers11
Company | % of total supply from direct suppliers | % of total supply from indirect suppliers | % of total direct suppliers mapped and traced | % of total indirect suppliers mapped and traced |
| Soy | ||||
| Bunge | N/A | N/A | 100% | 100%a |
| Cargillb | 58% | 42% | 100% | 98%b |
| SLC Argicolac | 100% | 0% | 100% | N/A |
| Beef | ||||
| JBSd | <50% | >50% | 100% | 72%d |
| Marfige | 70% | 30% | 100% | 73% |
| Minervaf | N/A | N/A | N/A | <25% |
Source a: Bunge 2024 Global Sustainability Report.
Note a: Bunge reports that 100% of indirect suppliers have been mapped and traced in "higher-priority regions", but it has not mapped 100% of indirect suppliers. Bunge has committed to end deforestation in its supply chains in 2025.
Source b: Cargill Impact Report 2024
Note b: Cargill's reported figure for indirect suppliers is different from peers as its figure is not based on its own mapping and tracing to the farm level, but is a rough estimate based on historical data for the full soy sector in every municipality or region, which is then applied to Cargill's market share in the local area to arrive at an estimate of a deforestation and conversion free percentage for its indirect suppliers.
Source c: Correspondence between Morningstar Sustainalytics and SLC Agricola, July 2022 and May 2024.
Note c: SLC Agricola owns, leases or JVs all its lands to grow its own soy crop. It does not utilize indirect suppliers. SLC Agricola states that while formally its Zero Deforestation Policy applies from Aug 31, 2021, it has not deforested any lands after December 2020.
Source d: JBS in-person meeting, October 2024.
Note d: JBS does not disclose the percentage of its suppliers that are direct vs. indirect, but a minority of its suppliers are direct suppliers. The 72% figure reported under '% of total indirect suppliers mapped and traced' technically represents total suppliers mapped and traced across both direct and indirect suppliers. JBS has committed to delivering zero illegal deforestation in all Brazilian biomes by the end of 2025 for direct and tier 1 indirect cattle suppliers.
Source e: Martig 2023 Sustainability Report; Marfig In-person meeting, October 2024.
Note e: Marfrig has committed to map and trace its entire supply chain by 2025.
Source f: Minerva 2023 Sustainability report; Minerva Foods in-person meeting October 2024.
Note f: Minerva does not disclose what percentage of its suppliers are direct suppliers or indirect suppliers. 50% of all suppliers (direct and indirect) are mapped, but Minerva does not provide disclosure on tracing for them. No figures are given for indirect suppliers mapped and traced, but by Dec. 2025, Minerva aims to define traceability tools for indirect suppliers and monitor all tier 1 indirect suppliers. It aims to monitor indirect suppliers for 25% of the animals purchased in the South American countries of operation by 2027.
Note: Compiled and summarized by Morningstar Sustainalytics. Many companies listed in the table above report customized data or use unique methodologies that make it challenging to compare directly between peers. Some companies also use third-party sources to support mapping and tracing indirect suppliers, for which there are very limited disclosures on methodology and processes.
Compliance with EU Regulation 2023/1115 on Deforestation-Free Supply Chains (EUDR) is an important consideration for Brazilian companies wishing to continue exporting to the European Union. In our view, all beef and soy companies in our engagement coverage take supply chain transparency seriously and are making extensive efforts to prepare to comply with EUDR. Soy companies, such as Bunge and SLC Agricola, are relatively well prepared to meet this regulation. Bunge has mapped and traced 100% of its direct suppliers and is also making good progress with indirect suppliers, and SLC Agricola has no indirect suppliers and completed nearly all its legal deforestation plans prior to the EUDR cut-off date. Among the beef processors, it is more difficult to estimate EUDR preparedness given the 7 to 10 tiers in the beef supply chain and rapid changes to different ranches during different cattle life cycle phases.
From a systemic perspective, we believe that a complete solution to address deforestation will require continued, deep collaboration within the entire industry, the many levels of government, and other stakeholders to rectify the issues with the CAR and GTA. In our opinion, the beef industry will eventually need to implement individual animal identification instead of the current batch system of the GTA to ensure 100% traceability. This is perhaps a decade away from becoming a reality, but two companies that we met with, Minerva and JBS, have initiatives piloting individual animal identification solutions, which is a step in the right direction.
Insight Two: Legislative Challenges Could Hinder Progress
We gained important insights into the Brazilian political and legal system after meeting with a legal expert from Instituto Socioambiental (ISA). We learned that lobbying from the Brazilian cattle, agribusiness and mining sectors could weaken the legislation that underpins the Brazil Forest Code and other key pieces of legislation addressing deforestation, and environmental and indigenous rights.
Lobbying efforts gained traction in 2021 when Bill 2159/2021 was passed in Brazil’s lower house (Chamber of Deputies). It is a landmark piece of legislation focused on reforming the environmental licensing process and proposes no longer requiring environmental impact assessments for a wide range of activities, including cattle ranching and agriculture. Environmental impact assessments systematically evaluate the potential effects of proposed projects on both the environment and society and help enable informed decision-making, so eliminating this step would make it difficult for companies and others to manage deforestation and indigenous rights risks.
The bill also proposes centralizing authority in a way that would weaken the role of regulatory agencies like the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA). According to ISA, it is a potentially critical inflection point as the bill is being discussed in the senate and efforts are underway to approve it by Q1 2025.
Insight Three: Engaging on Financial Incentives
Many of the stakeholders we met with suggested that a more constructive approach to mitigating deforestation, biodiversity loss and other environmental concerns would be to offer financial incentives rather than imposing standards. Although Brazilian law requires landowners to keep a percentage of their properties undeveloped as a legal reserve, vast amounts of land remain available to legally deforest.11,12 While this runs counter to EUDR and other international norms and standards which call for zero deforestation, stakeholders may not be motivated to comply since they can export to other markets.
There are various financial incentives that can be used to motivate stakeholders to curb deforestation and mitigate biodiversity loss such as:
Restoration Credits
The Brazilian Forest Service (BFS) is developing restoration concessions, which involve taking public lands that have already been degraded, conducting environmental assessments, bringing in the private sector to restore the land, and then generating carbon credits to sell on the voluntary international carbon markets. The funds would be used to develop economic tools to promote the forest economy and support the Chico Mendes Institute for Biodiversity Conservation, the Brazilian federal agency responsible for managing national parks.
While BFS’s projects are not developed in traditional or indigenous lands, it states that it has safeguards for them and benefit sharing. We also discussed the importance of high-quality credits given the recent controversies in quality for forest-offsetting credits.13
Nature-Linked Bonds
Another company we met with, Natura, launched biodiversity bonds in July 202414 to source new bioingredients from the Amazon. This is the first sustainability-linked bond with sustainability performance targets linked to Amazon sourcing in Brazil.
Green Lines of Credit
WWF Brazil, in collaboration with others, actively promotes low-carbon agriculture policies, which focus on enhancing the productivity of degraded pastures in Brazil while reducing greenhouse gas emissions. They emphasize sustainable intensification of agriculture, soil restoration, and responsible expansion of crops and livestock into previously deforested areas, avoiding further deforestation. To support farmers in adopting these practices, WWF Brazil advocates for access to financial mechanisms such as lines of credit with low and affordable interest rates for producers.
Engaging to Strengthen Lending Due Diligence and Disclosures
We met with Banco do Brasil (BDB), which represents about 60% of Brazil’s agricultural sector financing. This bank plays a critical role in issuing rural credit and has BRL 200 billion (USD 323 million) to invest in sustainable agriculture by 2030. BDB acknowledges its high potential risks of providing financing for deforestation-linked activities and says it has a variety of measures in place to address them. During this trip, we continued to advocate for disclosures on its due diligence process prior to each transaction and its regular monitoring strategies, e.g., satellite images, credit policy, client engagement, etc. We also informed the company about the Global Reporting Initiative’s proposed biodiversity disclosure requirements that are part of the new GRI Banking Sector Standard to be released in late 2025 or in 2026.15
Insight Four: Regenerative Agriculture to Curb Deforestation
Regenerative agriculture is a broad term that covers farming approaches focused on restoring and enhancing soil health, biodiversity, water cycles, and overall ecosystem resilience to make land more productive and robust over time.16,17,18 All beef and soy companies in our engagement coverage are doing work in this area. Some techniques are ancient, such as no-till or crop rotation, and others are highly innovative. Other companies are using their knowledge to train farmers in regenerative agriculture.
For instance, at SLC Agricola’s Pamplonas farm in the Cerrado, the company has integrated autonomous drone technology for targeted crop spraying, which reduces overall chemical pesticide use. We also visited its onsite biofactories in which it grows custom mixes of biological factors for pest control.
Minerva presented its integrated crop-livestock systems, which it operates on a model farm in Barretos. The system incorporates eucalyptus plantations alongside its cattle-rearing and pasture management practices on the same land, to optimize productivity and sustainability. Minerva's approach includes sustainable land management practices designed to reduce greenhouse gas emissions, enhance carbon sequestration, and improve soil health and biodiversity.
Both JBS and Marfrig have initiatives to train farmers in regenerative agriculture. JBS runs twenty Green Offices which offer smallholder farmers free training on regenerative agriculture techniques, provide credit access, and work on regularization. Marfrig offers the Marfrig Club, which shares best sustainability practices with farmers.
Insight Five: Reflecting on a Growing Brazil-China Partnership
Our discussions with ABIEC, the Brazilian beef exporters association, reinforced our impression of its interest in China. This is understandable, considering that China is the majority purchaser of Brazil’s beef, soy and corn exports. In fact, our trip happened to coincide with the visit of a large delegation of government and business leaders from China, working to strengthen agricultural and trade partnerships in Brazil. We encountered the delegation while making coinciding visits to large agricultural players.
Anecdotally, based on discussions with various stakeholders that we met with, many buyers from China do not currently emphasize deforestation-related international norms and standards in Brazil when buying soy and beef. Given China’s growing importance as Brazil’s trade partner, it is critical that the global investor community seek ways to engage with and include China in the dialogue on deforestation and biodiversity.
The Way Forward
Addressing deforestation and biodiversity is a polarizing topic in some parts of Brazil. Some question why they are being asked to take a different path from industrialized nations, curbing agricultural and industrial development, while also facing deep poverty and just transition concerns.
If investors wish to see deforestation and biodiversity in Brazil addressed from a long-term, systemic perspective, then solutions should also obtain support from the country’s domestic population. The current international norms-based goals to prevent deforestation are contentious. While these efforts to prevent deforestation are important, just transition concerns also need to be actively addressed as part of this dialogue.
The route to achieving this includes sharing more economic benefits with Brazilian stakeholders and respecting their rights. There needs to be an improvement in support for solutions and education, to increase the fertility and productivity of existing farmlands and ranches, especially for smallholder farmers. Lastly, engagement is more important than ever; we need to broaden the coalition and include more stakeholders from regions that don’t historically emphasize this topic, including China.
References
- de Albuquerque, A, Assunção, J, Castro, P, Hoover El Rashidy, N, Miranda, G. 2023. “Smallholders in the Caatinga and the Cerrado: A Baseline Analysis for a Rural Just Transition in Brazil.” Climate Policy Initiative. February 13, 2023. https://www.climatepolicyinitiative.org/publication/smallholders-in-the-caatinga-and-the-cerrado-a-baseline-analysis-for-a-rural-just-transition-in-brazil/.
- Prodes Amazon and WWF Brazil
- Ibid.
- Brazilian Beef Exporters Association - ABIEC.
- Climate Focus. 2020. “Company Progress in Engaging Smallholders to Implement Zero-Deforestation Commitments in Cocoa and Palm Oil.” March 4, 2020. https://climatefocus.com/wp-content/uploads/2022/06/20200312-Smallholder-Cocoa-Palm-Report-Edited_FINAL_0.pdf.
- Solidaridad. 2024. “Small-Scale Producers in South America Navigate New EU Rules on Deforestation.” July 30, 2024. https://www.solidaridadnetwork.org/news/small-scale-producers-in-south-america-navigate-new-eu-rules-on-deforestation/.
- Thompson, I. 2021. “Restore the Amazon? Small Farmers are Key.” The Nature Conservancy. https://www.nature.org/en-us/what-we-do/our-insights/perspectives/restore-the-amazon-small-farmers/.
- Information obtained during in-person meeting and presentation with ABIEC on October 21, 2024.
- Commisão Pró-Índio de São Paulo. “Quilombolas Communities in Brazil.” N.D. https://cpisp.org.br/direitosquilombolas/observatorio-terras-quilombolas/quilombolas-communities-in-brazil/.
- Brazil’s Forest Code (Law No. 12.651/2012).
- WWF Brazil. 2016. Brazil’s New Forest Code: A guide for decision-makers in supply chains and governments. https://wwfbrnew.awsassets.panda.org/downloads/codflorestal_engl_digital_1.pdf.
- Greenfield, P. “Revealed: more than 90% of rainforest carbon offsets by biggest certifiers are worthless, analysis shows.” The Guardian. January 18, 2023. https://www.theguardian.com/environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verra-aoe.
- IFC. 2024. “IFC Invests in Natura’s Bond to Improve Sourcing of Bioingredients from the Amazon.” July 6, 2024. Press Release. https://www.ifc.org/en/pressroom/2024/ifc-invests-in-naturas-bond-to-improve-sourcing-of-bioingredient.
- Angela Flaemrich is a member of the committee advising the Global Reporting Initiative on the new Banking Sector Standard.
- Regenagri. “What is regenerative agriculture?” N.d. https://regenagri.org/our-initiative/regenerative-agriculture/.
- SAI Platform. 2023. “Regenerating Together: A global framework for regenerative agriculture.” September 2023. https://saiplatform.org/wp-content/uploads/2023/09/sai-platform_-regenerating-together_september-2023.pdf?utm_source=chatgpt.com.
- NRDC. 2021. “Regenerative Agriculture 101.” November 29, 2021. https://www.nrdc.org/stories/regenerative-agriculture-101?utm_source=chatgpt.com#what-is.
