Leading global banks and lenders have extended a total of $119bn of financing to 20 major agricultural businesses and companies linked to deforestation, a new investigation revealed.
Some of the world’s leading banks and lending institutions provided funds amounting up to USD$119bn to 20 major agriculture businesses that have been linked to deforestation in the last five years, according to an investigation conducted by the Global Witness campaign group.
The Financial Times reported that based on data on more than 5,000 deals, the top five banks – ranked by deal value – have contributed a total of $32bn to 20 agricultural businesses over the five year period.
JPMorgan, HSBC and Bank of America were among the biggest investors of the companies, which included Brazilian meat producer JBS – a major corporation responsible for deforestation and known for its use of soy in animal feed in cattle feedlots, poultry, and swine farms. Each of the banks have reportedly struck dozens of funding deals between 2016 and 2020.
One notable finding showed $730m worth of financial backing from JP Morgan to Olam International, one of the world’s largest food ingredient suppliers, and is currently under investigation by the Forest Stewardship Council for its destructive activity in Gabon’s rainforests.
Deforestation is one the biggest environmental problems that we face today. Without forests, our most important carbon sinks, global carbon emissions will soar, warming the planet to catastrophic levels. Forests also help prevent soil erosion, where tree roots bind the soil and prevent it from washing away, preventing landslides.
The investigation findings were released ahead of the UN climate summit COP26, which will take place in Glasgow between October 31 and November 12. It is expected that world leaders and negotiators will discuss the issue of deforestation in order to reduce global greenhouse gas emissions and limit global warming to at least under 2C as set in the Paris Agreement.
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Tackling deforestation in supply chains has not been a priority for many investors despite most top banking and financial institutions – with the exception of ICBC – have adopted “no-deforestation” policies.
The 20 agricultural businesses that have been linked to deforestation were listed in a database of companies active in forest-risk sectors, such as soy palm and beef, produced by the global coalition of campaign and research organisations under the Forests & Finance umbrella group. This information can be easily researched, yet banks continue to maintain relationships with these agribusinesses.
“Despite the fact that many of these banks have voluntary commitments on deforestation and on climate change, they’re continuing to have relationships with companies that are linked to deforestation,” said Colin Robertson, senior forests investigator at Global Witness. “The overarching problem is there is a lack of [legal] obligation on banks” to change practices, he added.
Instead, banks and investment groups look for loopholes in their “no-deforestation” policies, such as limiting the definition of deforestation to only tropical forests. The lack of monitoring and enforcing mechanisms in the financial sector also makes it difficult to ensure clients and suppliers’ sustainable practices.
The 20 agribusiness’s “problematic track records should have raised major red flags for bank compliance teams”, and it’s clear that there’s an urgent need for stricter regulations tackling deforestation in companies’ supply chains, as well as due diligence requirements for financial institutions.