Today’s COP26 announcement that global firms that control $130tr of financial assets have committed to align themselves to the Paris Climate Agreement 1.5C warming limit are doomed to fail unless governments bring in strong laws to hold them to their word.

“Banks and financiers are the lifeblood of the fossil fuel companies and destructive agribusinesses fuelling the climate crisis - so it’s right that focus should be on them at COP26. However, today’s announcement by banks risks amounting to more greenwashing if it’s not legally binding,” said Veronica Oakeshott, Head of Forests Policy and Advocacy at Global Witness. 

The trailed announcements also appear to suggest that the new plans may not address the financial sector’s links to deforestation.

“To achieve a liveable planet and stay within 1.5 degrees, we need no new fossil fuels and an end to all deforestation. Any net zero approach by finance or governments that ignores the crucial role of forests is not fit for purpose,” continued Oakeshott.

Our recent investigation showed that global banks and investors have made an estimated $1.74 billion in income since the Paris Climate Agreement from deals with agribusinesses linked to the destruction of climate-critical forests and human rights abuses, despite many signing up to voluntary commitments to align with Paris and to be deforestation free. The plans announced today must address this.

“We cannot stop climate breakdown while banks continue to bankroll and profit from the destruction of the rainforests we all rely on,” said Oakeshott.

“Time and time again we have seen that voluntary banking commitments are clearly not worth the paper they are written on and we don’t yet have reason to believe today’s will be any different,” she added. “Global leaders can no longer trust financial institutions to regulate themselves. Banks will not stop funding deforestation unless there is strong and binding legislation that makes it illegal for them to do so.”

UK Chancellor Rishi Sunak has also announced plans to make the UK the world’s first net zero financial centre.

“While we welcome the spirit of the Chancellor’s announcement, he has a big task ahead and if he’s to achieve it, his words must be followed up with regulatory action,” said Oakeshott.

The UK is home to some of the biggest financiers funding the destruction of climate-critical forests. Our latest report found that British banks and investors made deals worth $16.6 billion (£12.7 billion) since the Paris Climate Agreement with agribusinesses linked to tropical deforestation, raking in $192 million (£147 million) in revenues along the way.

“If the UK government are serious about making the UK’s financial sector a help rather than a hindrance to fighting climate change, they must bring forward legislation that addresses the role of UK banks in fuelling the destruction of the world’s forests,” concluded Oakeshott.