JBS faces ‘greenwashing’ lawsuit in the USA – 03/07/2024 – Market

JBS is facing growing opposition from politicians and activists to its plans to list shares in the United States, with New York authorities now accusing it of “greenwashing”, the English term for companies that give a false image of sustainability.

State Attorney General Letitia James announced she was suing the North American arm of JBS last week, alleging the company had minimized its environmental impact with “false sustainability claims to boost sales.”

The lawsuit claims that the company, the world’s largest meat processor, has committed to achieving net-zero greenhouse gas emissions by 2040, despite having no viable plan to achieve that goal.

James’ office said she is seeking to stop JBS US “from continuing these false and deceptive marketing practices [e] pay restitution of all illicit profits and fines.”

The case is yet another setback for the $10 billion food conglomerate, which revived long-held ambitions to list its shares on the New York Stock Exchange last July.

São Paulo-based JBS does not plan to raise money immediately from the move, but hopes to access cheaper capital and increase its equity valuation.

However, the proposals have been the target of criticism from environmental activists, who accuse the company of encouraging deforestation.

Cattle farming is one of the main causes of destruction in the Amazon, along with illegal deforestation and mining. A study by think-tank Imazon last year found that JBS was the meat processor most exposed to the risk of buying from deforested areas in the Brazilian Amazon.

“JBS’s climate and deforestation impact continues to disrupt its core business plans and expose it to major legal risks,” wrote Glenn Hurowitz, founder of the nonprofit Mighty Earth.

At the same time, a bipartisan group of US senators expressed “deep concerns” about the proposed listing in a January letter to the SEC (Securities and Exchange Commission).

They urged the financial regulator to consider how access to US capital markets could strengthen JBS’s market position, “increase its ability to engage in anti-competitive conduct and negatively impact US farmers and ranchers.”

The 15 politicians requested that regulators closely examine the accuracy of the draft’s filing. “If JBS does not correct any disclosure deficiencies, we ask that the SEC refuse to declare the company’s registration as effective.”

They also highlighted environmental concerns and past corruption scandals, which led to settlements and penalties for JBS’s controlling shareholder, J&F Investimentos, the holding company of the Batista family’s business empire.

In 2017, J&F agreed to pay a US$3.2 billion fine in Brazil after admitting to bribing politicians. Payment was suspended by the STF last year. The holding company also pleaded guilty to foreign bribery charges in the US in 2020.

JBS is one of the main meat suppliers in the USA, with brands such as Pilgrim’s Pride. Globally, it is one of the main suppliers of beef, chicken and pork, as well as processed foods, with annual revenues of over US$70 billion.

The company said it disagrees with the New York lawsuit, adding that it has been monitoring a network of 70,000 potential sellers across Brazil for nearly 15 years.

“Suppliers are checked daily to ensure that cattle from properties with illegal deforestation, embargoed areas or forced labor do not enter our supply chain. Today, more than 14,000 potential suppliers are blocked.”

JBS also said that last year it achieved its goal of eliminating deforestation from its direct cattle sellers in the Amazon and was addressing the problem in indirect supply chains.

“We will continue to collaborate with farmers, ranchers and other stakeholders toward a more sustainable future for agriculture that uses fewer resources and reduces environmental impact, while feeding a growing global population.”

The proposed dual listing structure will include depositary receipts on B3, where the shares currently trade.

“This presents a compelling opportunity for those interested in the company’s sustainable performance and growth,” JBS said.

Chief Financial Officer Guilherme Cavalcanti recently said JBS was “answering questions” from the SEC and that the next filing would be after full-year results, due March 26. “We are not in a rush because we don’t need to raise capital. We are here for the long term,” he added.

J&F said: “There is no substantial information available about the organization behind this campaign [contra a listagem de ações da JBS]your agenda or your funding source.

“We are fully compliant with all regulations and procedures established by authorities in the markets in which we operate.”

The listing proposal must be approved by minority shareholders.

JBS has already faced disagreements with US asset managers: Vanguard and BlackRock, its fifth and sixth largest shareholders respectively, voted against its board directors at last year’s annual meeting.

BlackRock said compensation committee members “have not responded to shareholder concerns regarding compensation policies,” adding that the company “does not meet our aspirations to have adequate climate risk disclosures.” Vanguard also voted against the members of JBS’s supervisory board.

JBS is just one of several large companies from outside the US that have recently sought new listings there, in search of greater liquidity and higher valuations. This year, fintech Kaspi, from Kazakhstan, and British gaming group Flutter joined American exchanges.

Additional reporting by Nicholas Megaw and Patrick Temple-West in New York.