28th September 2022, London - Three of the world’s largest central banks stand accused of investing in the destruction of climate-critical forests in Brazil, according to a new investigation published today.
In recent years, the US Federal Reserve, the European Central Bank, and the Bank of England have sought to inject additional liquidity into financial markets by purchasing corporate bonds, a tool used extensively to support economies during the pandemic.
But analysis of these ‘asset purchase programmes’ shows that each institution has bought bonds in recent years from corporations heavily linked to illegal deforestation of climate critical forests and land grabs in Brazil. The new investigation from Global Witness, entitled Bankrolling Destruction reveals that:
- The US Federal Reserve has bought a combined total of $16 million of bonds issued by the Archer-Daniels-Midland Company (ADM), Bunge Ltd Financial Corp, and Cargill, Inc. since 2020, all companies accused of involvement in environmentally destructive activity in Brazil; and
- Since 2016, the Bank of England has also purchased an undisclosed share in a £150 million corporate bond issued by Cargill, Inc., and the European Central Bank has bought an undisclosed amount of debt issued by Bunge Finance Europe B.V.
All this comes despite the repeated public statements from all three central banks stressing the risks that climate change poses to financial stability and long-term economic growth.
Global Witness is calling for central banks to adopt zero-deforestation policies and avoid such purchases in future.
ADM, Bunge, and Cargill have denied some of the allegations of their links to deforestation. None of the central banks disputed the allegations and did not comment on Global Witness’s concerns regarding deforestation.
Veronica Oakeshott, Forest Team Leader at Global Witness, said:
“At a time when the climate crisis is ravaging countries across the world, it is unacceptable that the biggest central banks are investing in companies linked to the destruction of forests and its associated human rights abuses. If we are to have any hope of limiting climate change we need those forests standing. Whatever their corporate bond purchase schemes were set up for, it surely wasn’t this.”
“It also sets the worst possible example for other banks and investors in the US, Europe and Britain, and it betrays the mission that all three central banks have to act in the wider public good, especially when they are spending the central reserves that they control on our behalf.”
“Whilst the UK and US have either sold these bonds or are in the process of doing so they should now commit to avoiding such purchases in future and the European Central Bank needs to act to clean up its portfolio. These central banks have started to talk in recent years about the risks that climate change poses to stability and growth in the biggest economies, but all that talk will remain pure hypocrisy as long as their investments are directly contributing to those risks.”