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Brazil: The National Bank for Economic and Social Development extends veto to clients with environmental embargoes in force

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In brief

The National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social (BNDES)) has informed financial institutions of the extension of the prohibition on contracting rural credit operations and the suspension of the release of funds to clients with current embargoes registered in IBAMA’s Register of Environmental Charges and Embargoes and who have not taken effective measures to regularize them. SUP/ADIG Circular No. 76/2023-BNDES included this prohibition in SUP/AIDIG Circular No. 13/2022-BNDES, which sets out guidelines and general orientations for Accredited Financial Institutions. The Circular was published on 11 December 2023, and will come into effect on 10 March 2024.

More details

In December 2023, the Superintendent of the Digital Operations and Channels Area – ADIG communicated via Circular the adoption of additional measures to the social and environmental prohibitions and obligations already required by the BNDES. The new determinations complement the guidelines, obligations and annexes already existing in SUP/ADIG Circular No. 13;2022-BNDES, of 26 May 2022.

For new credit contracts, the regularization process needs to be active and meet the requirements set out in normative acts and the law. The Circular lists as effective regularization measures the filing of a Degraded Area Recovery Project (PRAD), Term of Commitment (TC), Conduct Adjustment Term (TAC), or other similar regularization document.

The new terms, in short:

  1. Prohibit the contracting of rural credit without due regularization of the embargo, in accordance with the normative act and law in force.
  2. Stipulate that if the embargo is identified after the contract has been executed, without the Final Client having a regularization document on file, the release of funds will be suspended until the necessary documentation has been filed, at the risk of early settlement.
  3. Stipulate that early settlement will take place if non-compliance is identified in the execution of any regularization measure that has been accepted by the Final Customer.

This information has been added to Item XXVII – Client Declarations to ensure that everyone is informed of the credit application conditions. The new measure will apply to operations contracted from 10 March 2024 on.

Our Environment, Climate Change and Sustainability team is following the issue closely and is at your disposal should you have any doubts and/or questions regarding the new rules.

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Renata Campetti Amaral joined the firm in 2002 and became a partner in 2013. She is the head of the firm’s Climate Change, Environmental Law and Sustainability group in Brazil, and the leader of Ablfs McKfnzif’s global climate change group in Latin America. Is also the coordinator of the sustainability initiatives conducted by the office’s B-Green Committee. Renata assists the major players in the Brazilian market in Nature-bases Solution (NbS) projects, transaction of carbon credits, implementation of decarbonization strategies and carbon-related advocacy and regulatory matters. Renata leads several of the largest environmental and regularization cases in the country. She has extensive experience in sustainability matters, as well as in managing crises and negotiating with stakeholders. Advises on negotiating with authorities; judicial and administrative litigation; reviewing environmental aspects of institutions and financial operations; drafting environmental provisions in contracts and other commercial operations. Renata has extensive experience in dealing with environmental management, legal auditing and other organizational practices; regulatory and institutional analysis and environmental control; negotiation and implementation of environmental remediation plans; environmental licensing; legal aspects of biodiversity protection; environmental crisis management; development of preventive policies and strategies for companies; negotiation and drafting of contracts for the purchase and sale of carbon credits and acting in transactions related to various aspects of the energy transition.
*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law.

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Giovani Bruno Tomasoni joined the Firm in 2008 and became partner of the Environment, Consumer and Sustainability practice group in 2020. He practices with focus on Environment, Public Law, Energy, Forestry, and helps clients in the internalization of concepts such as sustainability, ESG, circular economy, environmental compliance, among others.
*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law.

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Daniela Geib joined the Firm in 2023.She integrates the environmental practice group. Daniela has a wide breadth of experience in the due diligence projects, consultancy issues, judicial and administrative proceedings in themes such as environmental licensing, climate risks, environmental regulation, management of solid waste and reverse logistics, contaminated areas, among other subjects.
*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law.

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