A group consisting of Senate leaders, British lords, environmentalists, and a covert lobbying organization is calling on the Biden administration to prevent a Brazilian meat processing company, connected to deforestation in the Amazon, from selling shares to American investors.

Critics of JBS claim that its decision to join the New York Stock Exchange would result in increased funds and decreased monitoring for a company with a history of scandals, known for contributing to climate change, and being the biggest meat producer globally.

Unfortunately, the company’s detractors face a single obstacle: The Securities and Exchange Commission does not possess the authority to prevent JBS from offering stock in the United States, as long as the company is transparent with shareholders about its potential effects on the environment and other hazards, as noted by financial analysts.

According to Ann Lipton, a former securities litigator and current business law professor at Tulane University, JBS could openly state their intention to completely destroy the planet without violating any securities laws, as long as their statement is truthful and comprehensive.

Environmentalists recognize that the SEC’s authority is restricted, however they believe that the agency should take action due to JBS’s lack of disclosure regarding the potential financial hazards of their proposed plan, which was announced in July. They assert that the agreement would greatly accelerate deforestation in Brazil and grant the controlling family of JBS virtually unrestricted control over the company, endangering both investors and the environment.

The JBS spokesperson, Nikki Richardson, stressed the company’s dedication to a more eco-friendly future and expressed their eagerness to collaborate with NGOs and other interested parties in the next phase of the company’s development.

She also mentioned that JBS’s proposal for listing would provide opportunities for “all interested parties” and that their disclosures comply with the Securities and Exchange Commission’s standards.

The SEC chose not to make a statement.

net deforestation

The leader plans to restore the Amazon rainforest by the end of the decade in order to position the country as a leader in addressing global climate change.

JBS, which is currently listed on the Brazil stock market, has faced accusations of purchasing cattle that were raised in protected areas of the Amazon without authorization. They have also been accused of bribing Brazilian government officials, including during former president Lula’s first term over ten years ago. Additionally, the company has been accused of fixing beef prices. As a result of these allegations, JBS has paid hundreds of millions of dollars in fines and settlements in both the U.S. and Brazil.

The company JBS was established in 1953 by José Batista Sobrinho and is named after his initials. Currently, Sobrinho’s sons oversee the company, which originally started as a small butcher shop near Brasília, the capital of Brazil. The company expanded globally with the assistance of the national development bank.

The company operates in 15 countries and employs over 240,000 people worldwide. In 2022, it brought in nearly $75 billion in revenue — more than the food businesses of Nestle, PepsiCo and Kraft Heinz. Environmental groups estimate that JBS’s carbon footprint is

Bigger than certain countries in Western Europe..

to

There is an increasing number of individuals who are speaking out against.

Four members of Senate leadership — Sens. Cory Booker (D-N.J.), Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.) and John Barrasso (R-Wyo.) — were among 15 lawmakers who earlier this month called on the SEC “to protect the integrity of U.S. capital markets and the legal rights of U.S. investors by exposing the risks that JBS poses to potential shareholders.”

The letter from the senators emphasized the accusations against JBS, including corruption, violations of human rights, domination of the meatpacking industry, and environmental hazards. Senators Marco Rubio from Florida and Josh Hawley from Missouri also added their signatures to the letter.

were charged with a total of 22 counts of false expenses claims

In December, 11 individuals who are currently or were previously members of the U.K. parliament and represent a variety of political beliefs were accused of making 22 fraudulent expense claims.

I sent a message that was similar.

The letter to the agency urged them to reject the JBS IPO application in order to send a strong message about the United States’ dedication to fighting against climate change.

Last month, a group called Ban the Batistas was formed to challenge JBS’s attempt to become listed on the New York Stock Exchange. The organization is led by an executive from a consulting firm and is known for its lack of transparency. Its name is a nod to the Batista brothers, who are the biggest shareholders of JBS. The dual class stock structure proposed by JBS would further solidify the brothers’ control, giving them 85 percent of the voting power.

In November 2023, the creation of Ban the Batistas was announced by executive director Kim Spell, who is also a senior vice president at Actum and has experience working for prominent political figures such as Michael Bloomberg and Al Gore. According to Spell, the success of the Batista Brothers in the future relies on a potential JBS U.S. IPO which could harm farmers and ranchers and give JBS a monopoly in the American market.

The organization Ban the Batistas has used over $10,000 to influence Congress on issues such as “IPO disclosure requirements,” “regulation of foreign owned companies,” and “anticompetitive conduct in the meat industry,” according to a report. The spokesperson did not reveal the source of the group’s funding.

Environmental and human rights organizations were among the first groups to publicly raise concerns about JBS’s planned listing. In September 2023, Global Witness, Greenpeace, Mighty Earth and 17 other advocacy groups signed off on a
briefing paper that warned “the global financial community about the significant risk to the climate, people, and investors associated with JBS and its operations.”

What is an appropriate level of disclosure?

JBS’s submissions to the SEC have mentioned several of the potential hazards raised by legislators and environmentalists, including the potential for the transaction to endanger forests and facilitate misconduct by the Batistas.

The company stated in a 384-page document for investors that the practice of raising cattle and other livestock can be linked to issues such as deforestation, encroachment on indigenous territories and protected areas, and other concerns regarding the environment and human rights.

JBS stated in their July filing that they cannot guarantee their suppliers of raw materials are following all environmental and labor laws and regulations, which may have a negative impact on their business, finances, and operations. Additionally, they may experience higher expenses due to defending against and settling legal claims and lawsuits related to climate change and the perceived effects of their operations on it, which could also affect their reputation.

The Batistas’ past involvement in bribery schemes was acknowledged by the company, along with a warning that implementing improved policies, practices, and personnel may not guarantee the prevention or detection of illicit activities in every instance.

Environmentalists argue that the disclosures provided do not sufficiently detail the potential environmental and shareholder impacts that would result from the deal.

Kevin Galbraith, a lawyer representing Mighty Earth, stated that it is not enough to just observe the connection between beef production and deforestation in a basic manner. This is because if a company is knowingly and actively incorporating illegally deforested beef into their supply chain every day and has been hiding this information from investors for years, it cannot be ignored.

The notion that they can easily state in a registration statement that they are unsure if their policies can properly manage this unlawful family is inadequate, or even worse, according to him. “What they have actually done is reorganize the company in a way that gives the Batistas even greater authority.”

Wall Street shrugs

Up until now, the overwhelming resistance to the agreement has had minimal impact on investors’ interest in the meat company. Following JBS’s announcement of its U.S. intentions, the company’s stock has risen by 30 percent as of the end of trading on Friday.

Jill Fisch, a professor of business at the University of Pennsylvania Law School, suggests that if legislators are worried about the JBS deal and similar ones, they may give the SEC additional power to take into account factors such as a company’s track record of compliance and the environmental impact of its business strategies.

According to Fisch, Congress holds the authority to modify the SEC’s responsibilities. However, if Congress is unable to garner enough votes to enact a legal alteration, simply having a few individuals sign a letter will not prompt the SEC to take action.

According to experts, the most favorable outcome for those against JBS would be if a mix of strict government oversight and negative media coverage causes the company to rethink its plans of drawing in American investors. There have been previous occurrences of both factors.

The SEC lacks the power to prevent companies from offering stock, but it can strongly advise against it. An example of this is when the SEC pressured real estate startup WeWork, which is now bankrupt, to drop its initial IPO plans. In 2021, regulators also reportedly intervened with rental car company Hertz’s attempt to issue new shares while in bankruptcy, in order to cater to the demand from meme-stock investors.

Adverse news coverage can also hinder the success of an initial public offering (IPO). In 2016, JBS explored the possibility of going public in the United States, as it generates the majority of its profits there. However, due to allegations connecting the company to various corruption and food safety controversies in Brazil, JBS ultimately decided against the IPO, resulting in lower demand for its shares.

Environmental advocates denied the idea that they are requesting the Biden administration to take a groundbreaking action, but acknowledged that JBS is a unique situation that may require new interpretations of regulatory authority.

Mighty Earth’s Galbraith states that if the agency were to take more action than in the past and attempt to prevent JBS from being listed, it would be completely justified due to the company’s status as one of the worst in the world. A fair resolution should address their current actions, rather than comparing them to a previous company.

This report first appeared in the initial publication of E&E News’ Climatewire.

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