Deforestation and the Beef Giants: Navigating Regulatory and Financial Risks in a Shifting Market

The global beef industry, long entangled with deforestation, now faces a reckoning as regulatory pressures, traceability challenges, and shifting consumer sentiment converge to reshape capital flows and stock valuations. For Brazil’s largest meatpackers—JBS, Marfrig, and Minerva—the stakes are particularly high. These companies, which dominate the world’s beef supply chain, are grappling with a perfect storm of environmental scrutiny, financial exposure, and reputational risks that could redefine their long-term viability.

Regulatory Pressures: A Global Tightrope

The European Union’s Deforestation Regulation (EUDR), set to take effect in late 2024, has become a pivotal force. It mandates that beef and other commodities exported to the EU must not originate from deforested land after December 31, 2020. This has forced Brazilian meatpackers to confront their indirect supply chain vulnerabilities. Despite pledges to monitor direct suppliers, companies like JBS and Minerva remain exposed to deforestation via indirect suppliers, with JBS alone linked to 231,808 hectares of deforestation in 2020 [1]. Brazil’s own traceability systems, such as the Rural Environmental Registry (CAR) and SISBOV, are still fragmented, leaving gaps that regulators and investors are increasingly unwilling to overlook [3].

Meanwhile, the U.S. is navigating its own legislative landscape. The FOREST Act, reintroduced in 2023, seeks to prohibit imports from illegally deforested land, aligning with the EUDR but facing political delays. For JBS, which recently listed on the New York Stock Exchange, the U.S. regulatory environment adds another layer of complexity. The company’s history of greenwashing allegations and past fines for sourcing from illegally deforested areas has drawn scrutiny from both Wall Street and environmental groups [4].

Financial Risks: From Bonds to Borrowing Costs

The financial implications of deforestation-linked risks are stark. A pessimistic scenario analysis estimates that Minerva could see a -7.7% decline in enterprise value, while JBS and Marfrig face -2.3% and -4.8% drops, respectively [5]. These risks are compounded by the rise of sustainability-linked financial instruments. For example, Marfrig secured a $30 million sustainability-linked loan with a 100 basis point interest rate increase if it fails to achieve full supply chain traceability by 2025 [6]. JBS, despite its ambitious 2025 deforestation-free pledge, has a history of breaking similar commitments, raising questions about its ability to meet these financial conditions [2].

Credit ratings also reflect growing concerns. JBS’s 2017 credit downgrade by Moody’s, triggered by deforestation-related penalties, increased its borrowing costs and serves as a cautionary tale for other meatpackers [2]. Marfrig’s credit risk profile has improved slightly, with its probability of default dropping from 1.404% in 2021 to 1.210% by 2025, but the sector remains sensitive to regulatory shifts [7].

Investor Sentiment and Market Dynamics

Investor sentiment is further complicated by the disconnect between ESG branding and reality. ESG funds, including those managed by State Street and Northern Trust, hold significant stakes in JBS, Marfrig, and Minerva, despite these companies’ deforestation footprints [3]. This misalignment has sparked criticism, with some analysts warning that reputational damage could lead to divestment or boycotts from major retailers.

Consumer demand in the EU, already sluggish post-pandemic, is expected to decline further as deforestation-free regulations take hold. EU beef imports from Brazil are projected to fall to 345,000 tonnes in 2025, down from 363,000 tonnes in 2023 [8]. The U.S., meanwhile, benefits from its “low-risk” classification under the EUDR, but this advantage may erode if Brazil’s traceability systems fail to meet international standards.

The Path Forward: Compliance or Collapse?

For JBS, Marfrig, and Minerva, the coming years will test their ability to balance growth with sustainability. Brazil’s government has taken steps to strengthen enforcement, including blacklisting 545 farms in Pará for illegal deforestation in 2025 [9]. However, without a unified, public birth-to-slaughter traceability system, these efforts may fall short of international expectations.

Investors must weigh these risks carefully. While JBS’s recent $3.5 billion bond offering signals confidence, its track record of environmental violations and the looming EUDR deadline create a volatile outlook. Marfrig and Minerva, with their 2030 deforestation targets, have more time but face the same fundamental challenges: indirect supply chain transparency and the cost of compliance.

Conclusion

The global beef industry stands at a crossroads. For JBS, Marfrig, and Minerva, the path to long-term success lies in addressing deforestation not as a regulatory hurdle but as a core operational risk. As the EUDR and similar laws reshape markets, the companies that invest in traceability, transparency, and accountability will likely outperform those clinging to outdated practices. For investors, the message is clear: deforestation is no longer a peripheral issue—it is a central determinant of financial and reputational value in the 21st-century meat industry.

Source:
[1] Trase: Brazilian beef exports and deforestation [https://www.sei.org/features/trase-brazil-beef-exports-deforestation/]
[2] JBS Environmental Justice Risks in 2022 [https://www.responsiblealpha.com/jbs]
[3] How forest-friendly are ESG funds? [https://trase.earth/insights/how-forest-friendly-are-esg-funds]
[4] Now on Wall Street, JBS eyes growth amid scrutiny on deforestation and graft [https://news.mongabay.com/2025/07/now-on-wall-street-jbs-eyes-growth-amid-scrutiny-on-deforestation-graft/]
[5] NINT: Deforestation-related risks in the Brazilian meatpacking industry [https://www.unpri.org/the-pri-awards/nint-deforestation-related-risks-in-the-brazilian-meatpacking-industry/10811.article]
[6] JBS, Marfrig, and Minerva: Material Financial Risk from Deforestation in Beef Supply Chains [https://chainreactionresearch.com/report/jbs-marfrig-and-minerva-material-financial-risk-from-deforestation-in-beef-supply-chains/]
[7] Marfrig Global Foods [https://martini.ai/pages/research/Marfrig%20Global%20Foods-1b6aa35dd63712584a0ef53cbb31f988]
[8] EU beef imports to fall in 2025, accentuated by deforestation-free demands [https://euromeatnews.com/Article-EU-beef-imports-to-fall-in-2025,-accentuated-by-deforestation-free-demands/7748]
[9] Brazil antideforestation operation blacklists more than 500 farms in the Amazon [https://news.mongabay.com/short-article/brazil-antideforestation-operation-blacklists-more-than-500-farms-in-the-amazon/]