Two-thirds of finance giants ‘continuing to fund deforestation’, report warns

An analysis of 150 of the world’s largest financial firms found that 93 do not have policies to prevent deforestation caused by the companies in which they invest and lend.

Even among funders with commitments, most had limited scope and progress was not reported publicly in 2021

Published today (January 13) by Global Canopy, the analysis shows that these 93 financial firms have collectively provided more than $2.6 trillion in investment and lending in the 350 companies in the world most at risk from deforestation.

The banks and investors named and shamed in the nonprofit “Forest 500” report include the world’s three largest asset managers, BlackRock, Vanguard and State Street, as well as banking giants including Santander, ScotiaBank and Wells Fargo. UK-based companies on Global Canopy’s deforestation list include Legal & General, Janus Henderson, Bailey Gifford, Schroders and Prudential UK.

The report also argues that simply having a commitment to combat deforestation or a set of principles is not good enough. Of the 57 financial firms with commitments in this area, less than half (23) have reported progress in the past 12 months, according to Global Canopy. Furthermore, the report reveals a general trend towards companies making environmental commitments on forests but not human rights commitments to protect and empower forest communities.

Overall, there is only a very slight improvement in the data recorded by Global Canopy in last year’s edition of the Forest 500 report.

Banks and asset managers are facing increasing pressure to tackle deforestation in their value chains. The landmark ‘Bankrolling Extinction’ report, published in late 2020, revealed how many of the world’s largest banks have been linked to industries causing widespread deforestation and biodiversity loss, with some in the finance sector making loans and underwriting worth more than $2.6 trillion. climate destruction initiatives.

Since then, several initiatives have been launched in an attempt to break this trend. The Cambridge Institute for Sustainability Leadership (CISL) has launched a new action plan to help these companies halt their contribution to global deforestation; Dozens of finance companies signaled their support for the upcoming Nature Related Financial Disclosure Framework (TNFD) task force, and at COP26, asset managers representing $8.7 trillion pledged to stop funding deforestation-related agri-food companies by 2025.

But today’s new analysis reveals slow progress. Global Canopy warns that, unless things change, the actions of companies funded by the private financial sector will risk undermining a new international commitment to end – and, if possible, reverse – global deforestation by 2030.

Nikki Mardas, CEO of Global Canopy, said: “The past year has seen unprecedented policy action as more than 140 governments have recognized the urgent need to protect forests, yet most of the companies and financial institutions with the greatest capacity to halt deforestation are doing little or no do something”.

Poor progress all around

Also detailed in this year’s Forest 500 report is an updated analysis of how large companies that produce and use goods at risk from forests are approaching the transition to deforestation-free value chains. Commodities covered include palm oil, soybeans, beef, leather, timber, pulp and paper.

The analysis reveals that while two-thirds of companies have a deforestation policy of some sort – a proportion that is steadily increasing – only 28% have policies that cover all the forest-risk goods they use. Furthermore, less than one-tenth of companies report that deforestation is a direct financial risk.

As with financial firms, many firms with deforestation policies have not reported sufficient progress. Of the 233 companies with some type of commitment, 40 have not provided any progress data at all over the past 12 months. Another 50 reported progress on some, but not all, of the goods covered by their commitment. No company has publicly disclosed how many hectares of deforestation they have identified across their entire supply chain network.

Among the companies with the lowest rankings in Global Canopy this year are fashion brands Steve Madden, Jimmy Choo and Versace. retailers SPAR International and Deichmann; Domino’s restaurant companies and Inspiration Brands; food manufacturers Land O’Lakes and Kikkoman; Bag giant Samsonite and major health and beauty company Natura & Co, which owns The Body Shop.

“With major consumer governments beginning to translate these commitments into tough and fast legislation, companies that haven’t taken deforestation seriously are completely unprepared and face real risks,” added Mardas of Global Canopy. The UK government has notably implemented a “compliance or explanation” requirement for companies with multinational supply chains purchasing goods exposed to forest risks. It is under constant pressure to extend this mandate to financial firms.

Global Canopy, in the report, notes that companies based in Asia and North America generally lag behind their European counterparts in terms of addressing deforestation. Companies with public deforestation commitments and reports covering all goods include GlaxoSmithKline, Sainsbury’s, Marks & Spencer Group, Tesco, Unilever, Morrisons and Kingfisher, which owns retail brands including Screwfix.

Sarah George

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