Over the last few days, thousands upon thousands around the world joined the Global Climate Strike, calling for urgent action to prevent catastrophic climate breakdown. Collectively we have just 11 years left to act in order to avoid the worst effects of climate breakdown – and to have any chance of doing so, we need to keep our forests standing.
Deforestation in the tropics alone is responsible for about 8% of the world’s annual greenhouse gas emissions – more than the entire European Union, and just behind the United States. According to the IPCC’s landmark report, drastically reducing annual emissions is vital if we are to limit global warming to 1.5°C. Yet worldwide, an area almost the size of India has trees that have been deforested since 2001.
An important factor driving this destruction is the growth of the agricultural commodities sector, including cattle farming, palm oil, soy and timber. These companies produce the raw materials needed to make many of the everyday products we consume – from food to fuel to furniture. Growing food doesn’t have to mean destroying forests. But despite commitments made by many companies operating in this sector to reduce or eliminate deforestation in their supply chains, progress has to date been completely inadequate.
If banks and investors adopted appropriate due diligence measures, it might no longer be possible for the banking majors to fund new and destructive projects on commercially attractive rates. That’s why we at Global Witness are refocusing our work on forests – to campaign for those who are financing forest destruction to think again and take responsibility as our climate crisis worsens.
As our first step in this campaign, today we expose how some of the world’s biggest banks and investment firms including Bank of America, Deutsche Bank and Standard Chartered are sinking serious money into companies which are bulldozing our largest rainforests.
For our first investigation in a new series, we commissioned research into the financial backers of six companies involved in deforesting the world’s three largest rainforest regions: the Amazon, the Congo Basin, and the forests Papua New Guinea.
It showed that between 2013 and 2019, over 300 financiers, headquartered from Canada to Japan, gave financial support to these companies totalling over $44 billion - sometimes in violation of their own policies and public commitments to ending deforestation. Here are some of the key findings…
In the Amazon – the world’s largest rainforest
In Brazil, BNDES (the largest development bank in the Americas), Capital Group, BlackRock, Deutsche Bank, Santander (the largest bank in the Eurozone), Brandes Investment Partners, Bank of America and the World Bank have all provided substantial financial support to JBS S.A., Marfrig Global, and Minerva Foods, the largest cattle buyers in the Brazilian Amazon.
All three of these companies, despite commitments, have failed to prove they’re keeping their supply chains deforestation free.
In the Congo Basin – the world’s second largest rainforest
In Cameroon, the controlling company behind the company controlling a group of rubber plantations – which involved clearing over 11,600 hectares of forest between March 2014-December 2018, emitting over 11 million tonnes CO2 (more than the UK’s entire industrial process emissions in 2017) – received financial support from DBS Bank, ABN Amro (the third largest bank in the Netherlands) and the China Development Bank.
In Gabon, a major palm oil trader secured a $2.2 billion revolving loan facility at a time when it was actively deforesting the world’s second largest rainforest. This generous arrangement was made possible by, among others, HSBC and Standard Chartered Bank.
In Papua New Guinea – part of the world’s third largest standing rainforest
In Papua New Guinea, a company operating palm oil plantations whose creation has destroyed more than 20,000 hectares of forest was funded by Sarawak’s State Financial Secretary and Affin Bank.
So how can we stop the financing of forest destruction?
As our investigation shows, finance plays a critical role in propping up companies which are directly or indirectly involved in deforesting the three largest rainforest regions of the world. From buying stocks and arranging bond issuances to extending loans or underwriting, financial support is instrumental in allowing these companies to continue their operations.
Evidently, the current system is not working. Despite commitments to curbing their impacts on forests from many of the financiers mentioned in our investigation, enormous quantities of money continue to flow to companies who are complicit in flattening the world’s forests.
Here’s what financiers, investors and others in the financial sector need to:
Firstly, they should commit to a Deforestation and Land Grab free policy for their financing and investment. This should include a commitment to zero deforestation and zero exploitation, including respecting the principle of Free, Prior and Informed Consent of local communities. If companies seeking financing are unable to show that they meet financiers’ policies on deforestation, then those financiers should withhold financing until they do.
Investors must also disclose their exposure to deforestation and forest-risk in palm oil, soy, beef, timber and other soft commodities. At minimum, this should include investors publishing their holdings, lenders making public the name of corporate agribusiness clients as is already accessible to the financial sector via corporate databases, publishing social and environmental impact assessments and ensuring local communities are provided information on financial sector actors and their policies.
And they should advocate for regulation to stop the financing of, and investment in, deforestation, including mandatory due diligence regulation to ensure a level playing field, and develop standards for due diligence and disclosure. They should also ensure justice for affected communities through accountability processes.
Governments too have a role to play: they need to regulate the financial sector to stop the financing of, and investment in, deforestation. Regulatory approaches also need to enable forest communities to uphold and defend their rights, and ensure that financial institutions are not profiting from, or handling any proceeds of, forest-related crime and related human rights abuses. Regulation to stop deforestation should include mandatory due diligence and reporting requirements, and other mechanisms. Governments must also thoroughly enforce such regulations and provide sufficient penalties for any violations.
