Profit or water? Belgian financing of “green” steel exacerbates drought in Brazil

02 September 2022

The steel producer Aperam, a company that until ten years ago was part of ArcelorMittal, promotes itself as a pioneer in sustainable steel. But this 'green' steel has a dark side: water scarcity in an already vulnerable region in Brazil and land expropriation of local farmers.

Aperam likes to put itself in the spotlight as a sustainable steel producer. In Belgium they make stainless steel from scrap, and their factory in Brazil produces "‘green" steel: they burn eucalyptus-based charcoal in their blast furnaces instead of polluting 'coke'. However is that as green as they claim?

Aperam grows the eucalyptus from which they make this charcoal in plantations in the Cerrado. This savannah-like area in Brazil has a great natural biodiversity and the plants and animals are adapted to the long dry periods in the region. The local farmers also know their land well and know how to maintain the groundwater level. But Aperam's water-guzzling eucalyptus plantations are upsetting this balance.

Heavy environmental impact

Eucalyptus is not a native plant and is not adapted to the dry climate. In the case of local vegetation, half of the rainwater seeps into the groundwater, however with eucalyptus plantation less than a third does so. That means a world of difference in this dry region.

Therefore, several Brazilian universities and civil society organizations (led by IDEC one of FairFin's partners in Brazil) decided to take a closer look at the environmental impact of Aperam and it's activities. What the research discovered is that in the vicinity of Aperam's eucalyptus plantations, the groundwater level drops significantly: the water in the rivers is lower and the water sources dry up. This has major consequences for the biodiversity of the region and for the local population.

Water shortage and expropriation

Most families in the neighborhood live from small-scale agriculture, with which they feed both themselves and the neighboring cities. But due to the water scarcity, they have to scale back their agricultural activities or even stop them altogether.

In addition, several families have already been expropriated from their land to make more space for the plantations of Aperam. These families end up in an extra vulnerable situation: without their own agricultural land and with a shortage of water. The situation is so extreme that the government has had water transported to the region via trucks.

So it is the locals and the taxpayer who pay the price for these eucalyptus plantations, while Aperam absorbs the local water supply and makes a profit with their 'green' steel.

From 'green' to green

We can only applaud the fact that Aperam wants to produce 'green' steel. But not at the expense of man and nature. That is why we also ask the banks to take their responsibility and be more critical of Aperam's green ambitions.

Banks and asset managers in Belgium have invested 600 million euros in Aperam over the past five years. BNP Paribas in particular stands out, with 297 million euros in loans and investments. But ING also financed Aperam for 159 million euros, KBC for 62 million euros, Deutsche Bank for 58 million euros and Argenta for 9 million euros.

As long as these banks do not demand improvement from the company, they contribute to the water scarcity, land expropriation and loss of biodiversity in the Cerrado in Brazil.

Send a complaint to your bank here.

This article is taken from Belgian Fair Finance Member FairFin's website.