Brazilian meat processing company JBS faces accusations of issuing $3.2 billion worth of “misleading and fraudulent” sustainability bonds in a whistleblower complaint filed with the Securities and Exchange Commission (SEC).
Mighty Earth, an environmental advocacy group, said in a Jan. 17 press release it filed the complaint alleging JBS engaged in greenwashing with the bonds, which were issued in 2021. Mighty Earth said its SEC whistleblower complaint is the first issued against a sustainability-linked bond.
The complaint, which Compliance Week viewed, said the value of JBS’s sustainability-linked bonds, also known as “green bonds,” are tied to the company’s promise to reduce its overall greenhouse gas (GHG) emissions and its goal to become “net zero” by 2040.
Mighty Earth said the company’s GHG emissions have increased by an estimated 17 to 56 percent from 2016-21 and that JBS is not reporting Scope 3 GHG emissions as part of its carbon footprint.
Scope 3 emissions are indirect emissions generated by “upstream and downstream activities” in a firm’s supply chain, as defined by the SEC. By excluding its Scope 3 emissions, which Mighty Earth claimed represents 97 percent of JBS’s carbon footprint, the company is “denying U.S. investors vital information to make fully informed decisions about JBS’s net zero and climate-related claims” regarding the bonds, the press release said.
“JBS seduced investors with sustainability pledges, but those pledges had practically zilch to do with the actual source of JBS’s supersized climate impact,” said Mighty Earth Chief Executive Glenn Hurowitz in the release. “Companies simply shouldn’t be able to ignore the environmental impact of 97 percent of their operations and then market themselves as green.”
“This is greenwashing so severe that we hope the SEC investigates it as securities fraud,” added Alex Wijeratna, senior director at Mighty Earth. “We’re urging the SEC to conduct a full investigation into these $3.2 billion of JBS green bonds, in order to protect investors from wrongdoers who mislead, conceal, and massively underreport their climate emissions.”
As part of its complaint, Mighty Earth cited a report on the bonds and JBS’s GHG emissions by ISS ESG, a ratings agency in the field of sustainable investment.
The report, dated June 2021, was commissioned by JBS. It said the company has “taken steps toward understanding its own Scope 3 footprint in some of its geographies and expects to introduce measurement and reduction strategies” as part of its GHG reduction strategies.
The complaint also highlighted JBS has not disclosed its animal slaughter numbers to investors and the public since 2016. Failing to produce animal slaughter numbers “omits material information that investors need in order to evaluate the truth of its emissions-related claims,” the complaint said.
“In summary, while JBS consistently claims in its public and investor materials that it is on a path to ‘Net Zero by 2040,’ there is no evidence of any credible plan to achieve that stated goal,” the complaint said. “The company has made no commitment to fully measure, disclose or, most importantly, aggressively cut Scope 3 emissions.”
Public companies are not currently required by any U.S. regulator to disclose the climate-related risks posed to their organizations. Many, but not all, large public companies disclose their GHG emissions in public statements and/or in annual reports that focus on environmental, social, and governance (ESG) issues; sustainability; or corporate social responsibility.
The SEC released its proposed climate-related disclosure rule in March that would order public companies to include disclosures about how climate-related risks affect their strategy, business model, and outlook; how the company’s board and management oversee climate-related issues; and any plans for transition to a lower carbon footprint.
Under the rule, companies would be required to assess, track, and measure Scope 1 (direct) and 2 (indirect from purchased electricity) GHG emissions. Large companies would also have to disclose Scope 3 emissions if the company either deemed those emissions material to their business or included them in an emissions reduction target or goal.
The SEC has yet to approve the proposed rule but fined multiple financial firms last year for not backing up ESG-related claims.
JBS did not respond to a request for comment.
Editor’s note: This story was updated Jan. 25 upon Compliance Week’s receipt of the complaint.