Bunge-Viterra merger: an ESG analysis

14 minute read

It has been confirmed that publicly listed Bunge (ticker BG) and privately-owned Viterra (ticker VITRRA) intend to merge, creating a giant in the agricultural sector. The sector has a significant influence on biodiversity, and both companies have substantial deforestation risks in their supply chains. The combined entity will possess the largest deforestation footprint associated with soy globally and with lawmakers around the world increasingly adopting deforestation regulations, it is a material risk for investors.

The merger will significantly expand the deforestation footprint of a single company. Transformative changes can take place if the new entity adopts more conservative deforestation and land conversion policies. Additionally, public-to-private transactions are raising concerns around sustainability transparency in the M&A market. Private-to-public transactions on the other hand offer a chance for enhanced ESG disclosure. This merger can bring greater scrutiny and engagement in Viterra’s previously opaque operations.

Bunge’s capital market activity suggests it could issue debt soon, which presents an opportunity for bond investors to have influence. Given increased policy focus on deforestation, investors should encourage the company to implement a stronger deforestation reduction strategy, potentially by proposing a Sustainability-Linked Bond coupled to deforestation reduction targets.

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