Lula vetoes weakening of financial institutions’ liability

President Lula today signed the Environmental Licensing Law into law today, but vetoed 63 of the approximately 400 provisions approved by Congress. The controversial bill, known as the « Devastation Bill », eliminates or reduces requirements for environmental licensing in Brazil.

One of the vetoed points was the provision that weakened the liability of financial institutions in cases of environmental damage caused by projects they finance. The government argued that it is important for credit to be conditional on compliance with environmental, climate, and human rights legislation, encouraging damage prevention and aligning financing with sustainable development.

The government will submit a new bill to Congress, proposing revised wording on key points. Among others, the Executive Branch’s bill establishes that lenders must require environmental licensing from developers before granting credit.

« Blocking this provision that exempted the financial sector from liability was an important step, but it is necessary to extend this accountability, especially to private investors operating through Fiagro and CRAS, who currently surf on the lack of regulation, and are not implementing safeguards to protect tropical forests, community territories, quilombolas, and indigenous peoples, » said Tarcísio Feitosa – Coordinator of Forests & Finance in Brazil.