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Sep 05, 2023

Environmental group petitions SEC to halt JBS listing on climate grounds

Brazilian food giant plans dual-listing in New York and São Paulo

Climate-change pressure group Mighty Earth has written to the SEC calling for greater scrutiny of a planned IPO by Brazilian meat giant JBS.

The group describes the  listing – announced in July and expected to happen by the end of the year – as potentially the ‘biggest climate risk IPO in history’, citing both environmental and governance concerns. JBS is the world’s largest meatpacker and is already listed on the São Paulo Stock Exchange. It is seeking a dual listing of Brazilian DRs in São Paulo and class A shares on the NYSE.

A spokesperson for JBS, which has annual revenues of around R$375 bn ($76 bn), tells IR Magazine it ‘is confident our dual-listing proposal will create opportunities for our company, team members, shared communities and all stakeholders. The proposal accelerates our efforts to enhance corporate governance and transparency through adherence to SEC standards and the formation of a majority independent board.’

Announcing its plans in July, JBS said the proposal would ‘enhance transparency and strengthen corporate governance, attracting a broader base of investors with greater financial capacity, and provide flexibility to finance growth through the issuance of equity while reducing the cost of capital.’

SEC building
SEC building, Washington, DC

Multiple complaints

Mighty Earth, however, claims there are several issues with JBS’ prospectus and has written to the SEC asking that the regulator at least put the listing on hold. Mighty Earth in January filed a separate complaint regarding green bonds, on which it claims JBS misled investors,

‘Mighty Earth is calling for JBS’ IPO to be scrutinized and at minimum postponed until a decision is reached by the SEC on Mighty Earth’s existing whistleblower complaint,’ the organization says in a statement. ‘Any sanctions by the SEC could have a significant impact on the IPO process and the financial outlook of the company, leaving US investors open to risk.’

Among the issues it has raised with JBS’ IPO prospectus, Mighty Earth says the firm underestimates the impact of climate change on future trading and ‘fails to acknowledge the risks to global food production from climate change’. The food giant is the world’s largest beef producer, with operations in Australia, Brazil, Canada and the US – and a significant methane and greenhouse gas footprint.

Kevin Galbraith, US securities attorney for Mighty Earth, adds: ‘We urge the SEC’s division of corporation finance not to give JBS the green light on its plans to move forward with the IPO without first considering the existing submission [that] is with the SEC’s division of enforcement.

‘In that complaint, we demonstrated how JBS accessed US capital markets to raise billions from unsuspecting investors, including asset managers who had signed on to a pledge to avoid issuers whose conduct fuels climate change. We believe that evidence alongside our recent analysis of the IPO prospectus shows that JBS is once again hell-bent on harming US investors and misleading markets.’

Net-zero goals

JBS has a published aim to be net-zero by 2040, an ambition that spans its global operations as well as its diverse supply chain. Its initial five-step plan to reach net-zero includes investing more than $1 bn in facilities and equipment by 2030 and $100 mn in research and development projects by 2030.

It aims to reduce emissions in all JBS facilities by 30 percent by 2030 and use 100 percent renewable electricity by 2040. The firm also says it will tie environmental performance to executive compensation to ensure accountability.

Responding to Mighty Earth's claims, the JBS spokesperson adds that the company recognizes ‘the important role of civil society and we are always open to dialogue with thoughtful stakeholders who share our commitment to a more sustainable future. We look forward to enhancing our collaboration with NGOs and other key stakeholders during this next phase in the company’s evolution.’

SEC settlement

In 2020, the SEC charged JBS majority shareholders Joesley Batista and Wesley Batista – and their companies J&F Investimentos and JBS – with securities violations. They paid a near $27 mn settlement related to charges ‘arising out of an extensive bribery scheme that took place over multiple years…in part to facilitate JBS’ 2009 acquisition of US issuer Pilgrim’s Pride Corporation’.

While not a common tactic, this is not the first time campaigners have called for an IPO to be halted on ESG grounds. Earlier this year, a bipartisan group of US lawmakers asked the SEC to put the brakes on a rumored listing by Chinese fast fashion retailer Shein until it verifies it does not use forced labor from China’s Uyghur population.

Garnet Roach

An award-winning journalist, Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of...