Global finance industry sinks $119bn into companies linked to deforestation

In the five years since the Paris Agreement came into force, global banks and asset managers have spent a total of $ 119 billion on 20 major deforestation-related agribusiness businesses, according to a Global Witness Campaign Group survey. Funded.

According to the survey, the world’s leading lenders, JP Morgan, HSBC and Bank of America, are the largest funders of companies, including Brazilian meat producer JBS, each between 2016 and 2020. Has signed dozens of financing contracts.

According to the data, the transaction included raising approximately $ 730 million worth of funding from Olam International, one of the world’s largest food ingredients suppliers, and a subsidiary through a revolving credit facility from JP Morgan. I did.Olam International Under investigation According to the Forest Stewardship Council, which allegedly destroyed the rainforests of Gabon.

Deforestation is a major source of carbon emissions, and addressing this issue is expected to be one of the topics discussed by global negotiators at the COP26 UN Climate Change Summit in the United Kingdom.

Despite growing corporate interest in planting carbon-absorbing trees, supply chain deforestation efforts have more investors than other environmental issues, such as measuring corporate direct emissions. It’s not a mainstream issue for us.

Data on more than 5,000 transactions shared with FT show that the top five banks by total transaction volume, including BNP Paribas and the Industrial and Commercial Bank of China (ICBC), have made approximately 570 bonds, credits and underwriting transactions. .. Twenty agribusinesses worth a total of $ 32 billion during the period.

All five institutions, with the exception of ICBC, have a “no deforestation” policy. All 20 agribusinesses are publicly related to deforestation and are listed in the database of companies operating in the forest risk sector, such as soy palm and beef. Forest and finance Umbrella Group.

Colin Robertson, Senior Forest Researcher at Global Witness, said:

“The most important issue is [legal] Obligations to banks to change practices, “he added.

According to the data, ICBC, the largest in China, has arranged loans to 8 out of 20 companies. This includes a loan worth approximately $ 1.1 billion and the provision of a revolving credit line to Cofco International, a commodity trader at the heart of the advocacy group’s allegations. Mighty Earth Kofco-related suppliers cleared more than 20,000 hectares of forest in Brazil between 2019 and 2021.

Cofco said there was no illegal deforestation on the farms it procured at the time.

JP Morgan, the second largest lender, has underwritten three bonds between 2018 and 2019 for commodity trader Cargill, who has been accused of procuring soybeans grown in deforestation areas. rice field.

Last year, salmon producer Grieg Seafood Identified Cargill About the “risk of soybean-related deforestation in Brazil”. JP Morgan declined to comment.

Cargill said it had stopped supplying soybeans from farmers who had cleared land in illegal or protected areas and was found to be logging in protected areas.

Meanwhile, Barclays and Santander each responded to JBS, a meat producer facing activist and investor scrutiny of its link to the destruction of the Amazon rainforest, between 2018 and 2019. I took on two bonds.

JBS said the company has a “zero tolerance” policy for deforestation and has ceased working with suppliers who broke it.

Banks are “working to protect the Amazon,” said Santander, hoping that beef processing customers in the region will have a “fully traceable supply chain without deforestation” by 2025. He said he was.

Many banks and investment groups have a “no deforestation” policy, but you can limit its scope. For example, deforestation may be defined as the destruction of certain tropical or rare forests rather than forests. The ban may also extend to legal logging.

Policy enforcement and monitoring can also be difficult. Banks may ask customers to make sure their suppliers are not involved in deforestation, but many large food companies are unable to explain the behavior of all suppliers. Is called.

“The problematic track record should have signaled a major danger to the banking compliance team,” said Global Witness.

Legislators in the EU, UK and US have proposed regulations designed to eliminate deforestation from corporate supply chains, but none extend additional due diligence requirements to financial institutions.

The Global Witness study included an analysis of bond and equity issuance underwriting agreements and an analysis of bond holdings and credit lines from lenders headquartered in the United Kingdom, EU, US and China. Bond issuance was the largest source of funding, followed by revolving credit lines and corporate loans. 2016, when the Paris Agreement came into effect, was the busiest year in terms of money, followed by 2019.

A $ 1 billion bar chart showing bond underwriting and credit lines was the main source of funding

In addition to direct finance, the data show that 1,500 banks and asset managers tracked in the database held approximately $ 37.5 billion worth of stock in 20 agribusinesses as of the fourth quarter of 2020. I did.

HSBC said the bank “has terminated, is in the process of termination, or has no relationship with the majority of entities listed in the report, related to forestry, palm oil, or cattle.” ..

The BNP’s list, compiled by Forests & Finance, “ranks all companies that may be considered” at risk “in the forest, rather than identifying actual logging practices.” Said. Stopping funding companies in the high-risk sector “will not have a positive impact on their practices, as they can continue to rely on many other lenders,” he added.

Barclays, Bank of America and Olam declined to comment. ICBC did not respond to requests for comment.

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Global finance industry sinks $119bn into companies linked to deforestation Source link Global finance industry sinks $119bn into companies linked to deforestation

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