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Info Service on Biodiversity and Traditional Knowledge (Dec23/03) Commercial financial flows drive tropical deforestation A new report by Forests & Finance maps commercial flows to the forest-risk commodity sectors driving the majority of deforestation in the worlds three major tropical forest biomes: Southeast Asia, South America, and Central and West Africa. The analysis of 300 of the largest companies operating in the production of beef, palm oil, pulp and paper, rubber, soy, and timber in these biomes found that they received at least US$ 307 billion in credits from banks since January 2016 to September 2023. Additionally, they were supported by institutional investors, which as of September 2023 held US$ 38 billion in bonds and shares. The analysis suggests that much of the finance is being provided without the necessary safeguards to prevent deforestation and other social and environmental harms. In the time period examined, around a quarter of all credit went to beef and pulp and paper each, and a fifth went to palm oil and soy each. The largest companies receiving forest-risk financing include large agro-commodity traders, Brazilian meatpacking giants, Southeast Asian palm oil conglomerates, and pulp and paper producers. Almost all these companies are exposed to allegations of environmental, social, and governmental (ESG) violations. The report provides a detailed regional analysis of the credit flows: almost 65% of identified credit flowed to South America (largely to the beef sector), almost 35% to Southeast Asia (largely to palm oil) and the remaining credit was provided to companies in Central and West Africa (largely to rubber). A league table shows the largest 30 banks providing loans and underwriting, with the leaders from Brazil, the Netherlands, and Spain. With regard to investment trends, more than half of the US$38 billion bonds and shares were attributable to palm oil and a quarter to pulp and paper. A league table with the largest 30 institutional shareholders shows investors in the United States and Malaysia taking the lead. Forests & Finance also assess the policies of over 100 of the most significant financial institutions related to forest-risk commodity sectors in tropical biomes, using 38 ESG criteria. This assessment concludes that financial institutions policies are extremely inadequate, with key financial actors not even making the most basic commitments to protect the environment and respect human rights. Banks and investors are therefore enabling forestry and agribusiness companies to expand operations into remaining tropical forest ecosystems, destroying forests and peatlands, and violating human rights. The key recommendation is for governments to mandate the very much-needed regulation for the financial sector to safeguard ecosystems and human rights. This should be translated into robust standards and systems with meaningful sanctions for non-compliance, in line with international commitments. Forests & Finance also calls on the financial sector to adopt five key principles:
With
best wishes, - Banking
on Biodiversity Collapse
Tropical rainforests are globally important biomes which host an outsized proportion of the worlds terrestrial biodiversity and are critical to climate stability. However, these ecosystems and the people who depend on them are under severe threat from the continued expansion of agribusiness and logging. At a time when catastrophic climate impacts are being felt around the world, critical ecosystems that enable a liveable planet are on the brink of failure. Meanwhile, the people defending their lands and rights are being threatened, criminalized, and killed. Workers and impacted communities face exploitation and injustice across the food and agricultural system. Business as usual is no longer an option. At the end of 2022, a landmark agreement on biodiversity the UN Global Biodiversity Framework was signed by 196 countries. It sets out targets to halt and reverse global biodiversity loss, including a specific requirement on states to take policy and legal measures to ensure financial institutions align with the agreement. This is a significant step in recognizing the long-term failure of the financial sector to address its role in the biodiversity crisis. While the devastating social and environmental harms related to the expansion of forest-risk commodities are already widely known, finance continues to flow with impunity to agribusiness and logging companies driving these harms. This report maps commercial financial flows attributable to the forest-risk commodity sectors driving the majority of tropical deforestation. Forests & Finance analyzes 300 of the largest companies operating in the production of beef, palm oil, pulp and paper, rubber, soy, and timber in the worlds three major tropical forest biomes: Southeast Asia, South America, and Central and West Africa. From January 2016 to September 2023, banks provided at least US$ 307 billion in credit to these operations. In addition, they were supported by institutional investors, which held US$ 38 billion in shares and bonds as of September 2023. Forest-risk commodity sector financing is dominated by banks from Brazil (US$ 127 billion), Indonesia (US$ 31 billion), China (US$ 25 billion), the United States (US$ 22 billion) and Japan (US$ 20 billion), collectively representing 73% of all recorded credit since 2016. Investment is more concentrated, with 66% coming from just two countries as of September 2023: the United States (US$ 14 billion) and Malaysia (US$ 11 billion). While there were some fluctuations in annual credit and investment totals from 2016 to 2023, there appears to be no downward trend in capital facilitating the continued expansion of forest-risk commodity production. Forests & Finance also assesses what policies financial institutions claim to have in place in order to mitigate the specific types of risks and impacts routinely observed in bank and investor financing impacting tropical forests. Our 2023 analysis of the forest-risk commodity sector policies of over 100 financial institutions shows that they are dangerously inadequate. The average policy score was just 17% and the majority of financial institutions assessed scored below 30%, with almost half scoring under 10%. This analysis suggests much of the finance is being provided without the necessary safeguards to prevent deforestation and other social and environmental harms. The financial sector appears to be failing to address its role in the climate and nature crises due to systemic negligence. This report presents four cases that illustrate the type of client behaviors tolerated and facilitated by banks and investors. JBS, Cargill, Royal Golden Eagle, and Sinar Mas Group have each been repeatedly linked to extensive social and environmental harms which exemplify the risks common in tropical forest-risk sectors. Yet these groups continue to rake in billions of dollars in commercial finance, serving to embed and extend destructive corporate control over land and communities. The biggest backers of these groups include global financial powerhouses such as Bank of America, Blackrock (United States), Mizuho (Japan), Santander (Spain), Bradesco (Brazil), Bank of China, and Bank Panin (Indonesia). Given the prolific harms documented in their clients forestry and agribusiness operations often spanning several decades banks and investors appear to be systematically ignoring egregious harms in order to maintain highly profitable business relationships. Meanwhile, a litany of corporate-devised initiatives offers financial institutions platforms to make lofty pledges on sustainability without any real transparency or accountability, enabling business-as-usual greenwashing. This report advocates for governments to step in and mandate financial sector regulation necessary to safeguard society and the ecosystems on which we all depend, consistent with international public policy goals. This is a systemic problem which ultimately demands stronger, more systemic interventions. These could include, for example, prohibiting the allocation of capital to certain sectors or corporations driving ecosystem destruction and legislating for meaningful sanctions against financial institutions that fail to align their lending and investment accordingly.
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