December 16, 2019

Warren, Colleagues Examine Role of Private Equity Firm Blackstone in Deforestation of Amazon Rainforest

Private-Equity Owned Brazilian Logistics Company Has Played Major Role in Destruction of Rainforest

Text of Letter (PDF)

Washington, D.C. - United States Senator Elizabeth Warren (D-Mass.), member of the Senate Banking Committee; Representative Mark Pocan (D-Wisc.); House Natural Resources Committee Chairman Raúl Grijalva (D-Ariz.); House Natural Resources Committee Vice Chair and National Parks, Forests, and Public Lands Subcommittee Chair Deb Haaland (D-N.M.); Representatives Rashida Tlaib (D-Mich.) and Jesús G. "Chuy" García (D-Ill.), members of the House Financial Services Committee; and Senator Sheldon Whitehouse (D-R.I.), member of the Senate Environment and Public Works Committee; sent a letter to private equity firm Blackstone Group raising concerns about the firm's investments in Hidrovias do Brasil, a company that is playing a significant role in the ongoing destruction and deforestation in the Amazon rainforest in Brazil, which exacerbates the climate crisis. The letter, which continues Senator Warren's investigation into the effects of private equity investments in a variety of industries, requested information about the firm's structure, business practices, and finances as they relate to Hidrovias and similar companies.

Reports show that Blackstone owns a significant stake in Hidrovias, a Brazilian logistics company that does business in and around the Amazon rainforest, through direct investments and investments in a Brazilian private equity fund. Hidrovias has contributed directly to Amazon deforestation by clearing hundreds of miles of forestland to modernize a controversial highway, BR-163, that leads to a company-owned export terminal. The controversial highway is also indirectly contributing to deforestation by incentivizing farmers to increase exports and clear Amazon forestland to cultivate grains and soy.  

The Amazon rainforest accounts for a quarter of the carbon absorbed by global forests annually, and it has sequestered as much as 140 billion tons of carbon in the ground. If destroyed through activities like clear-cutting or forest burning for roadbuilding or agricultural use, the rainforest could release the equivalent of up to 140 years of human carbon emissions.

"Given the immense global climate ramifications of deforestation in the Amazon rainforest, it is deeply troubling that U.S.-based private equity firms like Blackstone have taken advantage of the weakening of Brazil's environmental safeguards through your investments in the logistics and resource extraction industries to boost short-term profits, at the expense of our global climate and Indigenous communities," wrote the lawmakers.

In their letter, the lawmakers expressed concern with Blackstone's investments in Hidrovias, detailing the company's work on the construction and development of BR-163 and its contribution to deforestation. The lawmakers also criticized Blackstone for its attempts to avoid responsibility for the role of Hidrovias in the deforestation of the Amazon rainforest.

"By financing a company that profits from this destruction, through developing a road to export these agricultural goods, Blackstone's investments appear to pave the way for further deforestation and an exacerbated climate crisis," the lawmakers continued.

In July, Senator Warren and Representative Pocan, along with a number of Democratic colleagues, introduced the Stop Wall Street Looting Act, a comprehensive bill to bring greater responsibility to the private equity industry by holding private equity firms responsible for the liabilities of companies under their control and requiring greater transparency in private equity firms' practices.

The lawmakers asked Blackstone to provide the disclosure documents and information required under the Stop Wall Street Looting Act, along with other information regarding the firm's investments and their environmental impacts. The lawmakers requested a response to their letter by January 10, 2019.

Earlier this year, Senator Warren joined her colleagues on a letter calling for major companies and financial firms to wield their influence to combat runaway deforestation in the Amazon. The senator also signed a letter urging the White House to pressure the Bolsonaro government to protect the Amazon rainforest from deforestation.

Senator Warren has been a vocal critic of private equity abuses throughout her time in the Senate and is fighting for reforms that protect students, workers, communities, and investors:

  • Senators Warren, Amy Klobuchar (D-Minn.), Ron Wyden (D-Ore.) and Congressman Pocan sent letters to three private equity firms investments in election technology vendors, raising concerns about vulnerabilities and a lack of transparency in the election technology industry and the poor condition of voting machines and other election technology equipment. 
  • Senators Warren, Sherrod Brown (D-Ohio), and Bernie Sanders (I-Vt.) sent letters to two major private equity-owned commercial institutional review boards (IRBs), raising questions about whether for-profit IRBs are vulnerable to conflicts of interest that could inhibit their ability to protect research subjects, and whether the two companies are maintaining appropriate ethics standards. 
  • Senators Warren and Brown, along with Representative Pocan, sent letters to four private equity firms that currently invest, or have recently invested in, companies providing nursing home care and other long-term care services, noting research that shows facilities owned by private equity firms provide worse care.
  • Senators Warren, Tammy Baldwin (D-Wis.), and Sanders, along with Representatives Pocan, and Pramila Jayapal (D-Wash.), sent a letter to Ernst & Young sharply criticizing a misleading report the firm released in partnership with the American Investment Council, a trade group for the private equity industry, about the scope of private equity's influence in the economy.
  • Senator Warren and Representatives Pocan and Lloyd Doggett (D-Texas) wrote to five private equity firms with investments in physician staffing and emergency transport companies, questioning the role these companies play in patients receiving exorbitant surprise bills for out-of-network medical treatment.
  • Senator Warren and Representatives Pocan and Alexandria Ocasio Cortez (D-N.Y.) wrote to five private equity firms that own companies providing support services to prisons, including health care, food service, and telephone services, noting how private equity firms deliver poor-quality food and services at exorbitant prices, making huge profits off of incarcerated people, their families, and taxpayers.
  • Senator Warren and Representative Pocan wrote to six private equity firms with current or recent holdings in for-profit colleges, citing research about private equity's destructive role in for-profit colleges and student outcomes.
  • Senator Warren and Representative Dave Loebsack (D-Iowa) opened an investigation into private equity firms behind some of the country's largest manufactured housing communities to obtain information about their use of predatory practices to boost profits in the communities they own.
  • Senator Warren and Representative Ocasio-Cortez questioned Treasury Secretary Steven Mnuchin on his involvement in dubious financial engineering and other managerial decisions that enriched investment company executives while decimating Sears' long-term growth and sustainability -- ultimately resulting in Sears' bankruptcy and the loss of tens of thousands of jobs.
  • Senator Warren requested answers from Vornado Realty Trust and five major hedge funds on their role in the liquidation of Toys "R" Us, which resulted in 30,000 workers losing their jobs without severance pay, after the company went into bankruptcy as the result of a leveraged buyout in 2005.
  • In June 2015, Senator Warren was an original co-sponsor of the Carried Interest Fairness Act, legislation to close the carried interest loophole that allowed private equity fund managers to pay lower taxes. The legislation was re-introduced in March 2019 and is included in the Stop Wall Street Looting Act.