NGO demands in Court reduction of emissions by BNDESPar

Case filed by NGO Conectas requests a plan to reduce greenhouse gas emissions in shareholdings of BNDES investment arm

© Ubirajara Machado Amazon Forest (Photo: Ubirajara Machado/Federal Government)

The NGO Conectas Human Rights filed in the Federal Courts of Brasília (Federal District) a lawsuit in which it calls on BNDESPar – the subsidiary of the BNDES (Brazilian Development Bank) responsible for managing the shareholder interests in companies held by the bank – to publish a plan to reduce greenhouse gas emissions that will guide its investments according to the targets of the Paris Agreement and the PNMC (National Policy on Climate Change). This is the first lawsuit of its kind against a development bank anywhere in the world.

Although BNDESPar follows an Environmental and Social Policy for Operating in Capital Markets, which bans support for companies with a track record of environmental crimes and modern-day slavery, this policy does not include climate criteria. The company also does not report the carbon emissions associated with its investment portfolio.

In the case, the NGO requests that BNDESPar be given 90 days to present a plan capable of reducing carbon emissions by 2030 in the sectors currently financed by the company, in accordance with the international commitments assumed by Brazil. In addition to presenting concrete goals, the plan should be prepared together with civil society, public bodies and academics, and it should provide for environmental and social compensation whenever the targets are not achieved.

According to Júlia Neiva, coordinator of the Defense of Socioenvironmental Rights program at Conectas, the case is intended to promote a debate on the need for state-owned companies to incorporate the climate crisis as a key part of their investment plans and, at the same time, operate with transparency and in accordance with social and environmental responsibility criteria.

“BNDESPar has significant shareholdings in the oil and gas, meat production and electricity sectors and, until recently, in mining. These are all sectors with sizable environmental and social impacts and greenhouse gas emissions,” said Neiva. “What we want is for the bank’s investment portfolio to be aligned with the Paris Agreement and to start contributing to the reduction of emissions in accordance with the National Climate Change Policy,” she added.

Neiva said a change in attitude by an institution such as the BNDES and its subsidiaries could be paradigmatic in terms of guiding the market towards the adoption of sustainable practices, energy transition and investments in low-emission sectors.

“Big corporations, particularly state-owned ones, need to assume their share of responsibility in curbing climate change, which is already affecting society and, to a greater extent, more vulnerable populations. They need to submit to a high standard of transparency that is compatible with government, by directing investments with funds from the National Treasury to projects in the collective interest, in this case the reduction of greenhouse gas emissions.”

The case filed by Conectas also calls for the creation by BNDESPar of a Climate Situation Room to assess compliance with the targets established in the plan to reduce greenhouse gas emissions, while publishing the progress or setbacks in the sectors that have investments from BNDESPar. One of the requests made in the case is for the Room to be accessed by representatives of civil society, traditional peoples and communities, the Public Prosecutor’s Office, the Public Defender’s Office, academics and members of the Judiciary.

Investment in carbon-intensive companies

A study conducted by the Center for Integrated Studies on Environment and Climate Change (Climate Center), of Coppe/UFRJ, found that at least 65% of the assets held by BNDESPar are in companies that have intensive greenhouse gas emissions.

The calculation was made from an analysis of reports published by the companies themselves and was based on a sample of 85% of the investment portfolio of BNDESPar that, until March 2021, was concentrated in ten companies from the oil and natural gas, electrical energy, meat production, mining and pulp and paper sectors.

The technical opinion from Coppe also reveals that BNDESPar is not very transparent and does not include climate criteria and risks in its investment and divestment analysis.

The sample analyzed in the study of the ten companies in the bank’s portfolio represents between 5% and 6% of all the country’s greenhouse gas emissions, according to the companies’ own carbon inventories. The estimate, however, may be underestimated, according to the Coppe experts, if the carbon footprint across the entire production chain is considered, including the impact on deforestation, methane emissions from cattle and the management of waste from the production and burning of fossil fuels, among other factors.

Under the Paris Agreement, Brazil has committed to reducing greenhouse gas emissions by 37% by 2025 and by 50% by 2030, from 2005 levels.

BNDES group’s official statement

In response to the case filed by Conectas against BNDESPar, the organization issued a statement, which we published in full as follows:

“The requested actions are already part of the strategic planning of BNDES and its subsidiaries, BNDESPar and Finame,  and are published on the institution’s website. It is possible to follow through the NDC Panel all the contributions made by the Bank to the achievement of the Brazilian goals in the Paris Agreement (https://www.bndes.gov.br/wps/portal/site/home/desenvolvimento-sustentavel/resultados/emissoes-evitadas/emissoes-evitadas). It is important to mention that BNDES is a signatory to the CDP (Carbon Disclouse Project), a global institution that promotes best practices for mitigating the effects of climate change. The bank has already started to incorporate the analysis of climate aspects into its operations, seeking to assess the impact of physical and transition risks on financing activities, as provided for in CMN Resolution 4,943 / 2021. It is good to remember that the legislation does not allow current rules to change contracts signed prior to the beginning of their term. It should be noted that 93% of BNDESpar’s current portfolio of investees was acquired by 2016. The Bank has already publicly declared its divestment plan for mature companies several times, having already fully divested its holdings in companies such as Marfrig, Suzano and Vale, in addition to large percentages of Petrobras and JBS, which represents an important decarbonization of the portfolio. The purpose of this divestment is to recycle this capital through the creation of investment funds, impact funds and even the purchase of carbon credits. All these investments already follow current policies, with socio-environmental and governance indicators. In terms of transparency, all operations, both sales and new investments, have been widely publicized in the press, in market information and in public calls. BNDESPar also publishes the Stewardship Report every year, an internationally recognized transparency document, where the application of resources and their governance are described. It can be consulted on the website https://web.bndes.gov.br/bib/jspui/handle/1408/20961. It is worth noting that a project is underway to calculate the carbon footprint of the BNDES System’s equity portfolio, as well as define strategies for its neutralization.”