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Earlier this week NGO Mighty Earth filed an SEC whistleblower complaint against global meat processing company JBS – claiming the company:

“…issued $3.2 billion in four separate debt issuances or ‘green bonds’ in 2021, referring to them as Sustainability-Linked Bonds (SLBs) tied to its stated goal to cut its emissions … but that its emissions have in fact increased in recent years and it excluded ‘Scope 3’ supply chain emissions that comprise upwards of 97% of its climate footprint…

The complaint argues that JBS omitted material information in its bond offering and investor presentations about its Scope 3 emissions. The most recent published analysis shows that instead of JBS’ emissions footprint shrinking, it is estimated to have grown by between 17% and 56% between 2016 and 2021, to 288 million metric tons CO2 equivalent in 2021, and may be as high as 541 million metric tons CO2.”

The Second Party Opinion for the company’s SLBs stated that emissions in the scope of the SLBs are

“… material to the company’s direct operations but not material to the whole corporate value chain as the KPI does not include Scope 3 emissions…

JBS is focusing on Scope 1 and 2 emissions for the purposes of this Framework given that it can have the most immediate impact by focusing on our own operations and what JBS can control…

Scope 3 emissions are a majority of JBS’s total greenhouse gas emissions and a material issue for JBS and other protein-producing peers. While JBS acknowledges the importance of measuring and ultimately reducing scope 3 emissions, a widely-accepted method for measuring scope 3 emissions does not currently exist for its industry.”

The Opinion goes even further and is rather clear:

Opinion: ISS ESG finds that the Use of Proceeds financed through this Sustainability Linked bond are consistent with the issuer’s sustainability strategy and material to a limited extent to ESG topics for the issuer’s industry. The KPI selected by the issuer is material to mitigating direct emissions but not material to mitigating indirect emissions. The rationale for issuing Sustainability Linked Bonds is clearly described by the issuer.”

I don’t know if Mighty Earth’s claim has legs, but it does offer a cautionary tale at the very least. JBS was apparently clear enough to the issuer of the Opinion about Scope 3 emissions being excluded from “the Use of Proceeds financed through this Sustainability Linked bond.” I didn’t see JBS’ offering documents so I can’t make my own assessment. Even so, companies developing SLB offerings and publicizing them may want to keep the whistleblower threat in mind and make abundantly clear relevant limitations – especially in relation to inclusion/exclusion of Scope 3 emissions in the use of proceeds.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for almost 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one… View Profile