9 June 2021

UK banks criticized for their support to deforestation

British banks are massively financing deforestation, The Guardian says. The issue has come to Parliament. And may not find a solution

by Matteo Cavallito

 

In 2020, UK banks provided over £900 million, or about €1 billion, in funding to companies contributing to deforestation on a global scale, Guardian reports. The figure, obtained from an investigation by the NGO Global Witness, further fuels the debate around the ambitious environmental protection law still under discussion in the British Parliament, which should introduce new tools to fight deforestation on the Planet. The goal of its promoters is to secure approval of the new legislation before November, when COP26 sessions are set to open in Glasgow, Scotland.

Deforestation comes to Parliament

The bill, the Guardian writes, includes a requirement for companies that sell consumer goods to conduct due diligence on their supply chain. This operation aims to identify and then exclude those suppliers who distribute products linked to deforestation. At present day, however, the draft of the law does not provide the same requirement for banks, which should be able to continue to fund all operators without restrictions, even after the rule is approved.

An amendment submitted by Conservative MP Neil Parish would extend the duty of investigation also to lenders. But this proposal, according to the Guardian, is not expected to find the support of the government.

Banks and environment: an open issue

The responsibility of the financial sector in environmental protection is an unresolved issue. In 2019, an investigation by the organization Portfolio.earth has revealed, the largest global banks of the Planet have funded more than $2.6 trillion projects related to the destruction of ecosystems and wildlife. Some of the largest US lenders such as Bank of America, Citigroup and JP Morgan Chase top the blacklist compiled by reaserchers which include 50 major global banks. The big three were ultimately responsible for 25% of the total loans.

The overall amount of financial support for deforestation monitored by Global Witness exceeds $286 billion. At the top of the list we may find the huge $4.5 billion investment made by Malaysian financial giant Permodalan Nasional Berhad to acquire a 45% stake in fellow palm oil company Sime Darby Plantations.

Forest cut is contributing to climate change

The growth of deforestation is a major problem especially for Latin America. The epicenter of the crisis is the Amazon, which has lost more than 20 million hectares of tropical forest between 2002 and 2018 according to estimates. An area, ironically, almost as large as the United Kingdom.

The trend is also contributing to climate change. In the last ten years, according to a study published in Nature Climate Change magazine, the Brazilian forest has released more CO2 than it was able to store, generating a 670 million tons deficit. The development of large crops, a survey by the University of Helsinki has found, also helps to reduce rainfalls, thus promoting an increase in temperatures.