June 29, 2022
NGO Files First-of-Its-Kind Climate Change Lawsuit against Investment Bank in Brazil
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In an additional chapter of climate litigation developments in Brazil, a non-governmental organization (NGO) filed a public civil action against the equity investment branch of the Brazilian National Bank for Economic and Social Development (BNDESPAR). The lawsuit demands the formulation of a greenhouse gas emissions reduction plan to guide the bank's investments in light of the Paris Agreement and the Brazilian National Policy on Climate Change (PNMC). This is the first climate dispute of its kind against an investment bank.
According to the plaintiff, BNDESPAR maintains equity positions in sectors considered to be the most carbon-intensive and allegedly is not sufficiently transparent about its investment data. In this sense, the plaintiff claims that BNDESPAR must include and report the climate criteria it takes into account when selecting its investments, as ignoring such criteria can negatively affect climate and ultimately compromise the bank's risk management and strategic-planning processes, in violation of the fiduciary duties imposed on controllers and administrators.
Thus, the plaintiff requires that BNDESPAR, within 90 days, submits a plan compatible with the objectives of the Paris Agreement and the PNMC, as well as discloses, within 30 days, data on the adoption of climate criteria in investment and divestment decisions, and on the progress of monitoring emissions reduction of companies in its portfolio. The plaintiff also requests that the bank should set up, within 60 days, a Climate Situation Room that can assess the implementation of the emissions reduction plan in a transparent manner, with the participation of representatives from civil society, traditional communities, public prosecutors’ offices, public defenders’ offices, academia and judiciary.
As expected, in addition to being based on principles of Brazilian law and international law that already provides for the protection of the environment, human rights and the fight against climate change, the lawsuit also uses international climate litigation precedents as grounds for its claims. In particular, it uses the first-ever decision against a corporation on a climate lawsuit—Milieudefensive et al. v. Royal Dutch Shell PLC, in which a decision determined Shell to reduce its emissions by 45 percent until 2030, compared to 2019 levels.
This is undoubtedly the most important corporate climate litigation lawsuit in Brazil so far, and its developments will certainly shed light on how Brazil’s judiciary will face this increasing global trend of climate litigation against the private sector.
According to the plaintiff, BNDESPAR maintains equity positions in sectors considered to be the most carbon-intensive and allegedly is not sufficiently transparent about its investment data. In this sense, the plaintiff claims that BNDESPAR must include and report the climate criteria it takes into account when selecting its investments, as ignoring such criteria can negatively affect climate and ultimately compromise the bank's risk management and strategic-planning processes, in violation of the fiduciary duties imposed on controllers and administrators.
Thus, the plaintiff requires that BNDESPAR, within 90 days, submits a plan compatible with the objectives of the Paris Agreement and the PNMC, as well as discloses, within 30 days, data on the adoption of climate criteria in investment and divestment decisions, and on the progress of monitoring emissions reduction of companies in its portfolio. The plaintiff also requests that the bank should set up, within 60 days, a Climate Situation Room that can assess the implementation of the emissions reduction plan in a transparent manner, with the participation of representatives from civil society, traditional communities, public prosecutors’ offices, public defenders’ offices, academia and judiciary.
As expected, in addition to being based on principles of Brazilian law and international law that already provides for the protection of the environment, human rights and the fight against climate change, the lawsuit also uses international climate litigation precedents as grounds for its claims. In particular, it uses the first-ever decision against a corporation on a climate lawsuit—Milieudefensive et al. v. Royal Dutch Shell PLC, in which a decision determined Shell to reduce its emissions by 45 percent until 2030, compared to 2019 levels.
This is undoubtedly the most important corporate climate litigation lawsuit in Brazil so far, and its developments will certainly shed light on how Brazil’s judiciary will face this increasing global trend of climate litigation against the private sector.
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