Many of the world’s biggest banks, financial institutions and companies are not doing enough to stop deforestation, and in many cases are continuing to bankroll forest destruction, undermining efforts to stop a major driver of global carbon emissions, a new report has found.
The report, released Thursday by the U.K.-based non-profit, Global Canopy, tracked commitments by 500 of the key companies and financial institutions that use or finance “forest risk” commodities—those most closely linked to the destruction of the world’s forests, including beef, soy, palm oil and timber.
The report revealed that the majority of these companies have not committed to stopping deforestation in relation to the full range of commodities they rely upon or trade. Those that have have done so are doing very little to achieve their goals. BlackRock and Vanguard, two of the largest U.S.-based investment firms, have failed to make similar commitments or to purge their portfolios from companies that are linked to deforestation.
“It’s really disappointing that there are still so many companies and financial institutions that haven’t set any deforestation policies at all,” said Emma Thomson, a co-author of the report. “But even those that are making these policies aren’t implementing them effectively. Deforestation is responsible for 15 percent of carbon emission. There is no solution to the climate crisis without a solution to deforestation.”
Yet, deforestation rates are rising, especially in forests that are vital for storing large amounts of carbon. This includes the Amazonian forest in Brazil, which is currently at its highest level of destruction since 1995.
Global Canopy researchers examined the 350 companies that rely on deforestation-related commodities and the 150 financial institutions that support them, such as pension funds and asset managers.
They found that roughly one-third of these 350 companies have no policies in place to stop deforestation and nearly three-quarters of them have only made commitments to stop deforestation connected to one or two commodities, often those they don’t rely on heavily.
Only 25% of food manufacturers, retailers, and restaurant chains have pledged that they would eliminate deforestation from their supply chains. However, only half of agribusiness commodities firms have done so. Half of the companies in the Global Canopy analysis are from the food and agribusiness sectors.
“Soy and beef are the biggest drivers of deforestation and they’re being ignored,” Thomson said, noting the report’s findings that companies that use or trade palm oil have been more progressive in making pledges to eliminate deforestation.
The report also emphasizes what many analysts say is the financial industry’s slow pace in responding, not just to their role in the climate crisis, but deforestation in particular.
“We are starting to see some action, definitely not enough, but some action from the big financiers on fossil fuels,” said Moira Birss, director of climate and finance for the advocacy group, Amazon Watch, which was not involved in the report.
Birss noted that BlackRock and Vanguard have made recent public commitments to remove coal companies out of their portfolios. Last October, Banque Postale in France announced that it would cease financing the oil-and-gas industries by 2030.
Global Canopy states that 93 out of the 150 financial institutions it examined have no deforestation policy for their investments and lending to companies that have forest-risk commodities within their supply chains. The researchers found that these companies provide $2.6 trillion in financing to companies that rely on deforestation-related commodities.
Many banks, including American giants J.P. Morgan, Bank of America, and Citigroup, were also given low marks for not addressing deforestation in their lending or investments.
“Rightly, there’s a focus on fossil fuels,” Birss said, “But that focus is coming at the expense of a focus on deforestation. Fossil fuels are the biggest drivers of carbon emissions, but deforestation and land-use is the second.”
The report comes two months after more than 130 countries vowed to stop deforestation by signing on to the “Glasgow Leaders Declaration on Forests and Land Use” at the United Nations climate negotiations, known as COP26, in Scotland.
During COP26, 30 financial institutions signed a pledge stating that they would shift their portfolios away form agricultural commodity-driven forest destruction by 2025.
“In the last decade, roughly 40 times more finance flowed into destructive land-use practices rather than forest protection, conservation and sustainable agriculture,” a U.N. press release said at the time. “The commitment signed by more than 30 financial institutions covering over $8.7 trillion of global assets under management seeks to change that.”
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Advocates say it’s a step in the right direction and a sign that deforestation is getting the attention of investment and financial leaders, but they note that it represents only a small fraction of the world’s banks and investors.
At the COP26, yet another consortium of financial institutions and companies—with $130 trillion in assets—committed to aligning their lending and investment with net-zero emissions targets.
Global Witness, an advocacy group, released a report in October last year that showed that global banks, investment managers, and other financial institutions made $1.74 trillion in agribusiness deals tied to deforestation. This despite the fact that they had made voluntary commitments not to do so.
Global Witness and many other advocacy groups insist that these voluntary commitments don’t work.
Last fall, the U.K. passed legislation which required financial institutions and companies in the country to disclose the climate-related risks to their portfolios. Similar proposals have been made in the U.S.A. as well as the European Union. A proposed rule by the Securities and Exchange Commission would require companies to disclose information about their greenhouse gas emissions.
Yet, the U.K. legislation does not require companies to disclose deforestation tied to their portfolios, Thomson said, and it’s not known yet whether these other proposals will, either.
“It’s pretty clear that the financial industry only does the right thing on the climate when forced to by intense public pressure and government regulation,” Birss said. “And on the deforestation issue, they haven’t been as strong as on fossil fuels.”
Source: Inside Climate News