"Brazilian financial group sells private securities indicating investment in deforesters", 06 December 2024

...FARMERS FINED FOR  illegal deforestation and with properties overlapping conservation units in the Amazon are listed as potential recipients of funds from Agribusiness Receivables Certificates (CRAs) issued by Genial Group...

According to financial market sources interviewed by Repórter Brasil, the offering prospectus—detailing the financial product—indicates that the funds raised from the sale of these CRAs will be used by Banco Genial to offer credit and financing to 37 rural producers and cooperatives. This information is included in an appendix of the public offering, which Repórter Brasil obtained. Among these 37 clients are farmers with a history of deforestation...

Repórter Brasil presented the cases of farmers with environmental irregularities listed in the appendix to Banco Genial. The institution stated that the “future allocation of funds by Banco Genial, as described in the prospectus schedule, is indicative and non-binding,” and that the bank “has a diligent operational evaluation process that considers various factors,” emphasizing that no credit or financing transactions had been made with the 37 producers mentioned in the prospectus...

The transaction involving these CRAs was structured based on credit rights owed to Banco Genial. These credit rights were transferred to Companhia Província de Securitização, the securitization company responsible for converting the debts into tradable financial instruments. The company did not respond to Repórter Brasil’s attempts for comment.

The fragmentation of responsibility among various financial agents—such as securitization companies, banks, and investors—makes it difficult to track the legality of the properties involved in these transactions...

By law, economic activities are prohibited in embargoed areas. The properties identified by Repórter Brasil as being in embargo status are located in the same municipality and under the same names listed in the state registrations of the prospectus...

In Brazil, the Central Bank prohibits the provision of rural credit for properties with environmental embargoes. However, these guidelines do not apply to private debt securities like CRAs, which are regulated by specific rules from the Securities and Exchange Commission (CVM)...

In response to Repórter Brasil, CVM stated that securitization companies are obligated to ensure the environmental compliance of securities issued, and that in cases of non-compliance, these companies may face sanctions. The agency also emphasized its ongoing efforts to modernize the regulation and oversight of capital market transactions...