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In late June, the World Bank’s private sector arm, the International Finance Corporation (IFC), approved a US$200M loan to agribusiness giant Louis Dreyfus Company (LDC). Under the guise of “sustainable development,” the loan will be used to purchase soy and corn—mostly destined for factory farms—grown on industrial mega-farms in Brazil’s heavily threatened Cerrado.
A biodiversity hotspot that is home to 5 percent of the world’s animals and plants and 216 Indigenous territories, the Cerrado has already lost half its native vegetation to cattle ranches and mechanized soy and corn mega-farms. LDC is just one of many agribusinesses, including Cargill, Bunge, JBS, and Marfrig, whose beef and animal feed operations are threatening to drive this ecosystem towards total destruction by 2030.
While IFC claims that its loan to LDC will “address higher demand and escalating food prices in an environmentally sustainable and socially inclusive way,” in reality, this investment will drive further environmental destruction and disenfranchisement of local and indigenous communities while enriching one of the world’s wealthiest and most powerful industrial agribusinesses. In 2020, LDC generated US$49 billion in revenue and has US$3.5 billion in public and private financing available. With limited public investment in sustainable agriculture, one must ask why taxpayer funds are being used to support this well-resourced mega-corporation that has contributed to Cerrado ecosystem destruction over the past decade.
Since late May, Friends of the Earth, members of the Stop Financing Factory Farming (SFFF) Campaign and 230+ civil society organizations (CSOs) from around the world have fought to block the investment. In numerous letters to the IFC and its government shareholders, groups documented how this investment is at odds with the bank’s own environmental policies and its commitment to align lending with the Paris Agreement and United Nations Sustainable Development Goals (SDGs).
Supporting industrial animal feed production does not advance the UN Sustainable Development Goals
The IFC justified its US$200 million loan by claiming that the funds would help to reduce deforestation through “support [for] a portfolio of eligible soy and corn farmers in Brazil that are committed to zero deforestation and conversion of native vegetation.” But these “eligible farmers” are multi-thousand-acre industrial operations located in the states of Goiás, Mato Grosso, and Minas Gerais, which are already largely deforested. Even if incentives set up under the loan could prevent future land conversions, deforestation is only one of the many environmental and social impacts that should be addressed by public financing for a company like LDC.
Completely ignored in IFC’s loan analysis are the additional negative impacts of industrial farms’ use of pesticides and fertilizers on climate and air, soil and water resources. Also ignored were harmful social impacts of these operations, including pesticide-related illness and death, including among children, as well as the potential for land-grabbing, local community conflicts and the displacement of smallholder farmers.
Failure to address these serious issues undermines the IFC’s stated commitment to help achieve the Sustainable Development Goals. A 2019 German government report documents how large-scale soy operations in the Cerrado and elsewhere “are associated with social injustice and…environmental degradation that hinders the achievement of the UN Sustainable Development Goals (SDGs).” According to this report, agribusiness operations in the region threaten at least 8 of the 17 SDGs, including: 1: No Poverty, 2: Zero Hunger, 3: Good Health and Well-Being, 12: Responsible Consumption and Production and 13: Climate Action.
A coherent strategy to make LDC’s soy and corn operations more “sustainable” would have required a shift in agricultural practices that reduce fossil fuel, pesticide and synthetic fertilizer use, as CSOs explained. A more “inclusive” and food security-centered strategy would ensure at least some support for smallholder, lower-carbon, regenerative crop systems and increased land access for traditional communities.
Diverting resources to feed animals instead of humans also threatens to aggravate the current global hunger crisis. As the crisis intensifies, the world’s 800 million+ hungry people would be better served by public development banks using taxpayer funds to support the production of diversified, truly sustainable and nutritious food rather than feed for factory farms that churn out cheap meat and dairy products for consumption in higher-income countries.
Paris Agreement misalignment: LDC is a major laggard on climate
The IFC’s support for a company that has failed to set sufficient GHG reduction targets is at odds with the bank’s commitment to aligning its investments with the Paris Agreement.
Unlike some of its peers, LDC has yet to set Paris-aligned reduction targets for its GHG emissions. The company has committed to only meager 1 percent reductions in its Scope 1 and 2 emissions (those generated by the operations or activities the company controls). Even more important, LDC has yet to calculate its Scope 3 emissions (those generated by operations or activities a company does not control, including soy production), which likely make up more than 90 percent of the company total. At a minimum, the IFC and other public development banks should require any company benefiting from its preferential financing to set Paris-aligned GHG reduction targets.
Now that the LDC loan has been approved, IFC must be held accountable for its impacts
Together with global allies and partners on the ground in Brazil, the Stop Financing Factory Farming Campaign will continue to track LDC’s activities and demand accountability from the IFC for the harmful impacts of its lending. In a letter responding to the loan approval, more than 100 organizations have asked that the IFC disclose the names and locations of the industrial operations its funds will support so that groups on the ground can monitor the impacts of its investment. We have also asked that the IFC urge LDC to cut ties with suppliers known to be involved in illegal deforestation, land grabbing and/or other human rights violations.
The campaign will also continue to urge the IFC and its government shareholders to shift lending away from industrial livestock and monoculture feed production and toward smallholder, lower-carbon regenerative mixed crop systems. Such a shift would square with the World Bank’s own guidance concerning development banks’ role in encouraging capital investments that “incentivize more sustainable practices—properly valuing ecosystem services and mobilizing resources, knowledge and technology for smallholders, indigenous peoples and other producers to support a more equitable way of producing and consuming food.”
About SFFF: The Stop Financing Factory Farming Campaign is a coalition of development, environmental and animal protection groups that works in partnership with locally affected communities and organizations to shift development finance away from industrial livestock production.
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Kari Hamerschlag is the Deputy Director of Friends of the Earth’s Food and Agriculture Program.
Kelly McNamara is the Senior Research and Policy Analyst for Friends of the Earth’s International Climate and Agriculture Finance Program.
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