In this dedicated section we explain how Santander Brasil applies the Group’s global policies and its local procedures to its activities in the Amazon.

Santander promotes the protection of the Amazon rainforest and sustainable development, which are both critical in tackling climate change and conserving biodiversity. We need economic growth, but it must be green.  Deforestation in the Brazilian Amazon has been taking place over several decades, in part due to the spread of ranching, fuelled by increasing demand for meat. Deforestation, however, cannot be attributed to a single cause. Logging, agriculture, cattle ranching, mining, property speculation, lack of clear land titles, large infrastructure projects in the region have all played a role. Out of these, however, the key drivers have been speculation and undefined land ownership: speculators, after burning the forest, will often raise cattle on land whose ownership is not clear as a way of strengthening their claim.

Given the growing concerns about climate change and biodiversity conservation, in addition to  the Santander Group’s Environmental, Social & Climate Change Risk Management policy (link) (ESCC) and its commitment to the Equator Principles, we detail below the additional care Santander takes when lending to Brazilian customers with operations in the Amazon.

Santander’s global ESCC policy applies to our activities in financing customers with operations in the Amazon region. It requires our customers who are lumber companies that harvest native tropical wood species to hold Forest Stewardship Certification (FSC); our conducting annual reviews of large companies involved in agribusiness; and places a special focus on the following activities:

• Extraction and sale of native tropical timber species.
• Forestry plantations in forests listed as protected by official bodies.
• Developments in any forested areas that have suffered forest fires or mass deforestation in the last five years.
• Potential expansion of the agricultural/plantations frontier to the detriment of natural forest.
• Activities with an impact on tropical forests, tropical savannahs, and savannah biomes or located in High Risk Geographies.
• Any projects or activities for oil & gas extraction, power generation or transmission, mining, manufacturing, plantations or other major infrastructure projects which put areas classified as Ramsar Sites, World Heritage Sites or by the International Union for Conservation of Nature (IUCN) as categories I, II, III or IV at risk.

Santander finances meat processors, lumber companies, farmers, and ranchers among many other business sectors in the Amazon region. As a responsible bank we constantly seek to eliminate or minimize possible social and environmental impacts of our financing.

Santander is working with customers, governments, regulators, and NGOs to help end illegal deforestation.

Beef processing clients

In 2021 Santander Brasil began engaging with more than a dozen beef processing customers about ending deforestation in their supply chain by 2025 under the Plano Amazônia, an alliance with two other major banks in Brazil. This engagement led to several customers declaring commitments online in 2022 and developing plans to monitor Tier 1 indirect suppliers.

In 2022 Santander Brasil and the Plano Amazônia banks shared with Febraban, the Brazilian banking association, the lessons learned from the pioneering work with meatpackers.  This experience supported Febraban in the creation and approval, in March 2023, of a sectoral protocol (NORMATIVO SARB 026/2023) that sets the standards for managing the risk of illegal deforestation in the bovine meat chain. The protocol defined guidelines to be adopted by its signatories.

This is a major step forward as it is the first sector-wide environmental protocol for financing beef processing. Since every major bank in Brazil is a signatory, it is considered a highly effective way of sustainable change and addressing deforestation.

All the 22 banks in Brazil that have agreed to comply to the protocol need to adhere to common minimum requirements to combat illegal deforestation in the Legal Amazon and Maranhão.

By signing the protocol, Santander has aligned its commitment with that of the Brazilian financial industry. This requires beef processing customers with slaughterhouses in the Brazilian Legal Amazon region to end illegal deforestation by December 2025 from direct suppliers of cattle and Tier 1 indirect suppliers (supplier of the direct supplier). Under this requirement, meatpackers must meet mid-term milestones, which consist of having a traceability and monitoring system, and continuously disclosing KPIs to demonstrate they are meeting their commitments.

Other soft-commodities practices

For years, the bank has been working with our customers to promote sustainable development. Santander was the first bank in Brazil to require native species logging companies to have FSC as a condition for becoming a customer. It was also the first private-sector Brazilian bank to develop, in 2002, credit analysis that looked at environmental and social risk. In 2016, Santander was also the first to formally incorporate a sustainability rating into the credit rating of its corporate segment customers.

Since then, the bank has been constantly progressing on how it addresses deforestation. There are further details below, but overall, our framework ensures the following: 

• All loan requests by farmers and ranchers to Santander in Brazil (not just those in the Amazon) are checked for embargoes issued by the government because of illegal deforestation, not only on the property financed but also on nearby properties. Since Q1 2022, we have been running daily checks for identifying potential recent deforestation on farms and ranches we have lent to (throughout the entire loan term), even before the government has imposed fines. In addition, these requests are screened to make sure that the properties do not overlap with officially-recognized indigenous peoples’reserves, parks and forests classified by the government as Type B.
• Customers’ practices are reviewed regularly: there are annual ESG reviews of more than 2,000 customers, including beef processors, soy traders and logging companies.

Santander Brasil has an E&S Risk department of ten professionals in São Paulo, all of whom have expertise in this area. The unit has analysts with degrees in agronomy, biology, geology, environmental management and chemical engineering.

Santander Brasil has also a dedicated team focused on identifying and creating sustainable innovative solutions to support Santander customers transition to more sustainable practices in the region.

Farmers and ranchers

A large part of the forest that is being cleared is on land that does not have clear title or is government-owned property. To help prevent this, Santander verifies the land ownership or lease holder on that property before lending money to farmers and ranchers.

As part of its credit approval for loans to farmers and ranchers, Santander retains a leading-edge satellite-imaging firm to monitor all properties that are being financed or that have been taken as collateral. In December 2023, Santander has monitored at least 12,000 properties. This firm supplies us with daily information on embargoes issued by the government prohibiting production on specific illegally deforested plots.

The satellite-imaging firm also supplies us with data on customers about modern slave labour, as well as incursions into officially recognized indigenous lands, parks, conservation areas and forests classified by the government as Type B. If there are problems, we will contact the customer and require an explanation. If we uncover a material breach of environmental laws and regulations, our standard contracts dictate that we can demand the early repayment of loans.

In addition to these tools, Santander also uses the internet-based satellite-imaging tools Global Forest Watch and MapBiomas. These tools allow us to see satellite images of possible tree cover loss over a specific time period and with good detail on customer’s farms and ranches.

Plano Amazônia

In July 2020, Santander Brasil announced a plan to promote sustainable development in the Amazon in collaboration with the two other largest private-sector banks in Brazil. After completing three years since the creation of the Plano Amazônia, we evaluated the progress, challenges and lessons learned from this period, which led us to restructure the 10 measures initially defined around three strategic objectives:

• Forest Conservation: Advance monitoring, traceability, conservation, regeneration and good practices in production chains that reduce deforestation pressure and contribute to low-carbon agriculture;
• Promotion of the Bioeconomy: Foster a business ecosystem favourable to the development of the forest bioeconomy, contributing to entrepreneurial education, emergence and growth of innovative businesses, the development of markets and technical-scientific knowledge.
• Access to Connectivity: Support projects and initiatives to expand internet access for populations in the Amazon, contributing to increased connectivity and facilitating access to health services, education, territorial protection, and entrepreneurship.

In ‘Forest Conservation’, we shared with Febraban the lessons learned from implementing the document of good practices in the meat supply chain sector, which engaged Febraban in the creation of a self-regulatory standard that limits the granting of credit to meat-packing industries that have illegal deforestation in their supply chain. The regulation applies to 22 banks in Brazil, which will now comply with common minimum requirements to combat illegal deforestation in the Legal Amazon and Maranhão.

Regarding ‘Promoting the Bioeconomy’, the Jornada Amazônia Platform progressed as planned, with five announcements to launch the training of 529 people, the selection of 71 startups for the pre-acceleration cycle and 22 startups for the acceleration cycle. The first phase of the micro-corporate venture capital program was launched, with eight startups preselected for the acceleration cycle, with the possibility of investment up to BRL 3 million.

Regarding connectivity, in 2023 Santander supported the Instituto Povos da Floresta (Forest People Institute) to launch an ambitious project that aims to provide fast and quality internet service for around 4,000 remote communities in Amazon by 2025. Our support enabled a pilot project involving 30 communities to test the use of the Starlink service, as well as a photovoltaic panels and a kit of batteries. Connectivity will enable access to several services, such as telemedicine, education, productive inclusion, and environmental control. 300 communities now have access to the Internet, with 7,450 registered users and 23,000 beneficiaries.

Environmental and social reviews of companies 

For corporate customers across Brazil, not just in the Amazon, Santander has a set of ESCC processes and controls that take into consideration not only if our customers are legally compliant but also have good practices.

Over the past decade, Santander Brasil has conducted reviews of more than 2,000 corporate customer groups per year. Details of these numbers are available on the Santander Brasil website. This covers companies in every region of Brazil, including those that have operations in the Amazon such as large soy producers, soy traders, beef processors, mining, and logging companies. For beef producers, we follow their supplier practices closely.

Scope. These procedures require that the bank conducts periodic ESCC reviews in the Wholesale and Large Retail (E3) segments, that: 

• operate in certain economic sectors, including agribusiness, forestry, mining, energy, oil & gas and industry in general; and
• have annual sales revenues of at least BRL 20 million (roughly EUR 3.5 million); and
• have a debt exposure with Santander of at least R$ 7 million (~1 million euros).

Methodology. Santander Brasil uses an ESCC rating system for the companies it reviews. It directly affects the credit rating for customers in the corporate segment. This ESCC model includes an assessment of supply chain practices, fines, degraded land, and profile of E&S management. The model also includes climate factors in two ways: (1) a water stress calculator that considers the customer's economic activity, the river basin(s) in which it is located, as well as the measures adopted to save water and (2) an assessment of the customer's resilience to climate change in general, such as new weather patterns, legislation or consumer preferences.

Supply chain. A key part of the analysis of agribusiness customers in the Amazon is a thorough check of their supply chain. For this, Santander uses internet-based tools such as Trase and government data on fines or audits, as well as news reports. If any issues are uncovered, it questions customers on their practices and specific incidents. If material breaches of environmental law and regulations are identified, the terms of our standard contract specify that the bank has power to take remedial action including, where applicable, declaring the early maturity of the debt and demanding its payment. 

Working with others to stop deforestation. In addition to Febraban, Santander Brasil participates in two other external initiatives that propose solutions to stop deforestation. It is a founder of The Round Table on Responsible Soy (RTRS), and were its first president from 2006 to 2009, during the crucial phase of creating its first sustainability standard. The bank is also a founder and board member of the Brazilian Roundtable on Sustainable Livestock (MBPS, in Portuguese), a multi-stakeholder initiative founded in 2008 to promote better ranching practices in Brazil.

Alliances and innovative solutions

Santander is actively engaged in a number of influential alliances and has supported and developed innovative solutions applied to nature-based solutions in Brazil.

Biomas

At the COP 27 in Egypt, Santander announced the creation of Biomas, a new forest company with shareholders Vale, Marfrig, Suzano, Itaú and Rabobank. With the planting of 2 billion native trees, Biomas aims to protect and restore 4 million hectares in Brazil over the next 20 years and to reduce around 900 million tonnes of CO₂e from the atmosphere. It will generate high-quality carbon credits and employment in the regions most in need.

The first stage of the project will be to prospect areas, scale up native tree nurseries, engage local communities, discuss the use of public concessions as project development sites and implement pilot projects. Each shareholder is initially providing BRL 20 million in equity to set up operations.

In its first full year of operation, Biomas obtained all regulatory authorizations, assembled its team and governance, and selected three pilot regions and partners to begin operations in the field, which will begin in 2024 in the Atlantic Forest and Amazon regions.

IFACC Alliance

In December 2022, Santander became the first bank to join the Innovative Finance for the Amazon, Cerrado and Chaco (IFACC) initiative. IFACC is supported by The Nature Conservancy, the Tropical Forest Alliance, the World Economic Forum, and the United Nations Environment Programme.

Launched in Glasgow in November 2021, the IFACC seeks to accelerate financing for sustainable production and bring together complementary capabilities to design and scale up such mechanisms as farm loans, farmland investment funds, corporate debt instruments, and capital market offerings. It also shares lessons learned among members, who have committed to disburse USD 3 billion by 2025.

Under IFACC, we have issued two financial structures that work as revolving credit facilities in 2023.

A green CRA (Agribusiness Receivables Certificate) was launched with Grupo Gaia, Conexsus, Belterra, Vale Fund and the Good Energies Foundation worth BRL 17 million which seeks to provide credit aimed at agroforestry and nontimber forest product cooperatives and eco-businesses in five biomes in Brazil, with a strong presence in the Amazon. The certificate will provide working capital for 22 community-led businesses such as cocoa, bananas and cassava growers and will benefit around 4,500 producers that do not have access to traditional credit lines. It uses a blended finance model which allows credit takers to access cheaper capital to improve their production practices. This is the first structure of this kind that the bank has created focused on the Amazon bioeconomy.

And a second green CRA was issued worth USD 47.24 million, together with Rabobank, the AGRI3 fund and British retailers Tesco, Sainsbury's and Waitrose for the Responsible Commodities Facility (RCF) initiative, with the aim of producing deforestation-free soy in the Cerrado, following IFACC socio-environmental criteria. This financial innovation won the Environment Finance Impact Awards 2023 as the Impact Initiative from the Year – Latin America and Caribbean.

Brazil NBS Investment Collaborative

Created by Capital for Climate, the alliance was created to accelerate the large-scale implementation of nature-based solutions in Brazil.

Amazon Finance Network

Launched at COP28 by IDB Invest and International Finance Corporation (IFC), an alliance that bring together 18 financial institutions from 9 countries for increasing investment flows, mobilizing capital, sharing knowledge on innovative financial solutions, and generating synergies with the public sector, with the goal of generating sustainable impact across the Amazon region.

First version July 2021 and last update May 2024.