Farmers, Financiers Urged to Seek Pastures New
Livestock funding swells US banks’ financed emissions, research warns, as Brazil’s cattle sector told to get to grips with transition.
Livestock producers and their financial backers stand to benefit financially and strategically by accelerating their transition to more sustainable practices, according to new research.
But the reports also highlight the environmental and revenue risks from current finance flows, which are currently fuelling climate change.
US banks financed and facilitated 63.1 million metric tonnes of carbon emissions across global industrial livestock production last year, new research from by climate research think tank Profundo and campaign group Friends of the Earth has found.
The report identified the biggest US-based lenders and underwriters of 56 multinational meat, dairy and feed corporations.
Between January 2016 and March 2023, US banks contributed US$134 billion in loans and underwriting services to these companies, the report said. Ninety-seven percent of the financing came from 15 creditors, including the ‘Big Three’ US banks: Bank of America (US$26.5 billion), Citigroup (US$23.8 billion), and JP Morgan Chase (US$23.8 billion).
All three banks are members of the Net Zero Banking Alliance (NZBA), through which they have committed to reducing the operational and attributable greenhouse gas (GHG) emissions from their lending and investment portfolios to align with net zero pathways by 2050 or sooner.
“Major banks’ climate goals are not credible if they fail to treat industrial livestock as a high-emitting sector and take swift and meaningful action to reduce and ultimately eliminate relevant financed and facilitated emissions,” the report said.
It is estimated that animal agriculture’s contribution to global GHG emissions ranges from 11.2% to 19.6%.
“Methane bombs”
In addition, financing from the Big Three banks to major meat and dairy companies accounted for 12.7 million metric tonnes CO2e of methane emissions, the research found.
Bank of America’s financed and facilitated methane emissions from meat and dairy companies was more than those of Citigroup and JPMorgan Chase combined, “due to its relationship with methane bombs such as JBS”, it added. The bank’s underwriting of JBS – the world’s largest meatpacker – accounted for 87% of its facilitated methane emissions from meat and dairy companies.
The state of New York is currently suing the US arm of JBS, alleging that the Brazilian company is misleading customers over its climate goals.
In 2022, a report published by the Changing Markets Foundation and the Institute for Agriculture and Trade Policy said that only six of the 15 most methane-intensive food companies – including Danone and Nestlé – had disclosed the full scope of their methane emissions, including from animals in their supply chains.
Friends of the Earth and Profundo have called on the assessed US banks to halt all new financing that enables the expansion of industrial livestock production.
Although financing from the Big Three has provided significant support for unsustainable expansion of the sector, it constitutes just 0.25% of the banks’ total loans outstanding, the report highlighted. Livestock farming accounts for around 11% of the banks’ reported financed emissions.
“Taking immediate action to reduce and ultimately eliminate these emissions is not only necessary — but strategic,” the report suggested. “For each bank, further diminishing an already small proportion of their lending portfolio would reap outsized emissions reduction benefits and propel them toward meeting their climate commitments.”
It said banks should now ensure clients in the sector are disclosing third-party verified 1.5°C targets and transition plans, while also accounting for additional social and environmental harms from industrial livestock production.
Beefing up transition efforts
The livestock production sector is under mounting pressure to improve its sustainability as consumers, investors and policymakers increasingly look to mitigate climate- and nature-related risks.
It is expected that the Brazilian cattle sector alone could see beef production fall by 25% by 2050, as well as a 37% decline in available pastureland due to forest conservation strategies, according to a report by Orbitas, a research house focused on climate change and the land economy.
Brazil currently accounts for 20% of global beef exports and ranks second in the world for beef stock, with 232 million cattle. The sector contributes nearly 10% to Brazil’s GDP.
Investments in low-cost sustainable production efficiencies could support the economic resilience of the sector by driving an 18% increase in yields for cattle producers, the report estimated, alongside a 19% increase in producer prices and 9% increase in Brazilian beef exports.
The Orbitas analysis said that an 88% (US$157 billion) increase in agricultural investment could be on the table for Brazilian cattle farmers that transition to more sustainable practices and products by 2050. This would increase yields by close to a fifth, it said.
In comparison, producers who fail to increase production efficiency and diversify their revenue streams risk financial losses of over US$155 per hectare a year by 2050, the report said.
The Brazilian cattle sector can better align with a below 2°C temperature pathway by diversifying revenue streams through agroforestry and non-timber forest products, as well as biodiversity and carbon markets, the report said. In addition, regenerative soil restoration practices could increase the per hectare yield of pastures by up to 310%, it added.
“The sector has real climate risks it needs to contend with if it is to remain a significant contributor to Brazil’s GDP and also a key player in global ruminant markets,” said Niamh McCarthy, Director at Orbitas.
“There are many opportunities presented by new environmental technologies, sustainability-oriented land management practices and revenue diversification, meaning it could benefit substantially from climate transitions and capitalise on the higher prices offers by sustainably focused export markets.”
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