In a whistleblower complaint filed with the Securities and Exchange Commission, Brazilian meat processing business JBS is accused of selling $3.2 billion in "misleading and fraudulent" sustainability bonds (SEC).
Mighty Earth, an environmental advocacy group, announced in a news release on January 17 that it has filed a lawsuit alleging that JBS participated in greenwashing with the bonds, which were issued in 2021. Mighty Earth claims to have filed the first SEC whistleblower complaint against a sustainability-linked bond.
According to the lawsuit, the value of JBS's sustainability-linked bonds, often known as "green bonds," is connected to the company's promise to reduce its overall greenhouse gas (GHG) emissions and its ambition to achieve "net zero" emissions by 2040.
According to Mighty Earth, the company's GHG emissions climbed by an estimated 17 to 56 percent between 2016 and 21, and JBS does not record Scope 3 GHG emissions as part of its carbon footprint.
Scope 3 emissions are those caused by "upstream and downstream operations" in a company's supply chain, as defined by the SEC. According to the press release, by withholding Scope 3 emissions, which Mighty Earth alleges account for 97 percent of JBS's carbon footprint, the business is "denying U.S. investors crucial information to make fully informed decisions about JBS's net zero and climate-related claims" regarding the bonds.
A request to read the whistleblower complaint was not responded to by Mighty Earth.
“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.”
Mighty Earth referenced a report on the bonds and JBS's GHG emissions by ISS ESG, a ratings firm in the field of sustainable investment, in their complaint.
JBS commissioned the report, which is due in June 2021. The company has "taken measures toward understanding its own Scope 3 footprint in some of its locations and aims to adopt measurement and reduction strategies" as part of its GHG reduction strategies, according to the statement.
No US regulator presently requires public corporations to report the climate-related risks to their businesses. Many large public firms, but not all, disclose their GHG emissions in public comments and/or yearly reports focusing on environmental, social, and governance (ESG) issues, sustainability, or corporate social responsibility.
The most current JBS sustainability report covered the year 2021. In September, the business named its first global chief sustainability officer.
In March, the SEC proposed a climate-related disclosure rule that would require public companies to disclose 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 to reduce their carbon footprint.
Companies would be required to analyse, track, and measure Scope 1 (direct) and Scope 2 (indirect via purchased electricity) GHG emissions under the rule. Large enterprises would also be required to declare Scope 3 emissions if they judged them material to their operations or included them in an emissions reduction plan or aim.
Although the SEC has yet to approve the new rule, it punished several financial businesses last year for failing to back up ESG-related claims.
JBS did not reply quickly to a request for comment.
By fLEXI tEAM