Over 145 banks in 44 countries have committed to net zero emissions by 2050. The banks hold $74 trillion in assets. How well are banks progressing towards that goal?
Since adopting the Paris Agreement, the world’s major banks have given over $395 billion in credit to sectors that drive deforestation and human rights abuses in tropical forests. The findings come from two reports–Banking On Biodiversity Collapse and Regulating Finance for Biodiversity by the Forests & Finance campaign. From January 2023 to June 2024, major banks gave $77 billion in credit, contributing to forest destruction.
Forest Destruction Across Sectors
Banking On Biodiversity Collapse analyzes the financing provided by banks and investors to 300 companies in six forest-risk sectors: beef, palm oil, pulp and paper, rubber, soy, and timber. Those sectors are responsible for most of the tropical deforestation, biodiversity loss, and human rights abuses in Southeast Asia, Latin America, and Central and West Africa. Regulating Finance for Biodiversity analyzes banking regulations and their impact on forest destruction.
Investments in the six sectors increased since September 2023, and credit rose to $53 billion in 2023, up from $48 billion in 2022. As of July 2024, institutional investors held over $41 billion in forest-risk bonds and shares from companies in those sectors in South America, Southeast Asia, and Central and West Africa. That is $3 billion more than last year. The palm oil sector received the most significant investment share (46 percent). Pulp and paper received 36 percent.
“Governments are asleep at the wheel while the world’s banks continue to fund forest destruction and human rights abuses, without any restriction or consequence,“ said Tom Picken, Director of the Forests & Finance campaign with Rainforest Action Network (RAN). “ The real ‘finance gap’ for conservation is actually a gap in regulation to stop banks and investors knowingly fueling the biodiversity crisis.”
Investing in Tropical Deforestation
Voluntary frameworks, such as the Taskforce on Nature-related Financial Disclosures (TNFD), are inadequate to stop investment in deforestation. Brazil is a great example. Bunge is a leading soy trader in Brazil’s Cerrado, the most diverse biodiverse savanna. The company uses the Taskforce on Nature-related Financial Disclosures (TNFD) framework to hide environmental damage through selectively reporting on risks. Over half of the 30 latest forest-risk banks are members of voluntary frameworks to address their role in environmental and forest destruction.
JBS is the world’s largest meat processor. The company received over $1 billion in credit from 2018 to June 2024 and $719 million in investments as of July 2024. The cattle industry is the main impetus behind deforestation in Brazil’s Amazon. From 1985 to 2023, 90 percent of the area cleared became pasture. The beef sector received over 38 percent of forest-risk credit in Brazil, contributing to forest destruction.
In Southeast Asia, almost 50 percent of all forest-risk credit flowed to the palm oil sector. Indonesia is the top palm oil producer, and Indonesian banks are among the top financiers of forest-risk commodities. They extended $31.2 billion in credit to those sectors. Most forest-risk bonds and shares (88 percent) in Southeast Asia were in the palm oil sector, exacerbating the destruction of tropical forests.
Since 2016, around 75 percent of forest-risk credit to Central and West Africa went to the rubber sector. Most prominent financiers are Chinese banks, except the British bank HSBC. The Chinese company Sinochem has rubber operations in the region through its subsidiaries. Sinochem received 73 percent of the credit to the region from 2018 to June 2024. Forty-seven percent of the forest-risk bonds and shares in the region were in the palm oil sector, contributing significantly to forest destruction.
Governments and corporations must be held accountable for their role in forest destruction.
