How your bank could be funding global deforestation and climate disaster

There are more and more headlines and studies about how our individual eating habits are fuelling deforestation and the climate crisis.

But this focus on consumer behaviour often lets the more fundamental and systemic drivers of this environmental destruction off the hook - the big banks that are financing and profiting from the companies tearing up rainforests and destroying our planet to produce products like palm oil, soya, rubber, beef and leather.

Demand for land for these commodities drove an estimated 23 million hectares of tropical forest loss between 2016 and 2020 – an area nearly the size of the United Kingdom.

Some of the financial institutions bankrolling this deforestation may be the same ones that you bank or have your mortgage with.

What damaging activities are banks funding?

Our recent investigation showed that since the Paris Climate Agreement, financial institutions in the UK, EU, US, and China have ploughed $157 billion into agribusiness firms linked to tropical deforestation and associated human rights abuses in the climate-critical forests of South-East Asia, Central and West Africa, and Brazil.

The banks financing these destructive agribusinesses include household names like HSBC, JP Morgan, Deutsche Bank, and BNP Paribas. Many of the banks featured in the report have committed to align their investments with the goals of the Paris Climate Agreement and put in place voluntary environmental, no-deforestation and human rights policies.

Our findings reveal how financiers’ public pledges are consistently and repeatedly contradicted by their actual financing decisions as they continue to profit from deforestation and associated abuses, highlighting their hypocrisy and greenwashing.

What are banks and governments doing to stop deforestation?

Governments and financial institutions are telling us that they are taking measures to stop the destruction of the world’s forests.

The COP26 climate conference in November 2021 saw lots of headline-grabbing announcements on deforestation, including the Glasgow Declaration on Forests and Land Use, which pledged to halt and reverse forestation by 2030. However, this risks being more of the same weak voluntary commitments that have failed to deliver results, following in the footsteps of the similar 2014 New York Declaration of Forests.

The forest commitments at COP26 were also accompanied by almost £14 billion ($19.2 billion) in public and private funding and a welcome promise of increased support for Indigenous Peoples and local communities.

These communities are the guardians of more than one third of the world’s forests and 80% of all terrestrial biodiversity, yet they currently receive less than 1% of global climate finance.

Unfortunately, the funds announced at COP26 are dwarfed by the huge amounts of money we have shown are flowing from the financial sector to companies linked to deforestation and related abuses. 

In Glasgow, 30 asset managers also pledged to eliminate investment in activities linked to deforestation. However, no high-street banks signed up and almost all of the financiers featured in our recent report as significant sources of financing for deforestation financing were conspicuous by their absence.

Those that did make this commitment have given themselves until 2025 to tackle deforestation, allowing them three to four more years to fund destruction with no questions asked. Even after 2025, there will be no consequences if they fail to deliver on their promises. Many banks already made and failed to meet previous zero net deforestation targets by 2020, under the Soft Commodities Compact.

Ultimately, voluntary pledges by financiers are doomed to fail if they aren’t backed by regulation. The only thing that will stop banks and investors financing deforestation is if governments make it illegal for them to do so.