Tuesday

6th Dec 2022

EU banks play 'major role' in deforestation, report finds

  • Most banks have specific sustainability policies aimed at preventing deforestation, but companies easily evade scrutiny (Photo: CIFOR)
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European banks and asset managers play a major role in deforestation, a new report by Global Witness shows.

Lenders based in the EU have earned a reported €401m from deforestation, out of more than €30bn worth of deals with companies linked to logging.

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Researchers analysed over 70,000 financial deals struck between financial institutions and agribusiness companies between 2016 and 2020.

Deal-making was dominated by big banks from the Netherlands, France, Spain, Germany, and Italy.

The report shows that Rabobank, HSBC, BNP Paribas and Deutsche Bank have invested billions in companies with proven links to deforestation.

Among these are soy giant SLC Agricola, which the report accuses of clearing 30,000 hectares of forest in the Amazon and Olam International, charged with razing 40,000 hectares of rainforest in Gabon between 2012 and 2017 to create rubber and palm-oil plantations.

"These companies' problematic track records should have raised major red flags for bank compliance teams," researchers write, but the data shows companies often use subsidiaries to evade scrutiny.

"Banks have benefited from the destruction of precious habitats and human rights violations," Global Witness wrote, detailing investments in livestock farming and plantations for soy, palm oil or rubber linked to deforestation.

In total, over the past five years, €135bn has been invested in activities leading to logging in tropical regions in Brazil, Southeast Asia and Africa. This generated €1.5bn for the international financial sector.

Strikingly, most banks under examination have specific sustainability policies aimed at preventing deforestation.

"We have a strict policy and strict controls. If we receive signals about deforestation, we take immediate action," a spokesperson for Rabobank said.

But the report details the close relationship the bank maintains with Anthoni Salim, Indonesia's fourth-richest man.

Salim owns a sprawling group of companies notorious for rainforest destruction. According to the study, just two of its palm plantations in Kalimantan cleared 7,000 hectares of pristine rainforest between 2015 and 2018.

The firm has also been accused of facilitating child labour through its subsidiaries.

Rabobank has said it will not comment on individual customers. The Salim Group did not respond to questions about actions committed by its subsidiaries.

The worst offender mentioned is JPMorgan, with a reported €8bn in deals resulting in tens of thousands of hectares of rainforest lost.

The Bank of China is connected to investments that resulted in the clearing of 140,000 hectares of forest in Sumatra, exposing the culpability of financial institutions around the globe.

The report builds on earlier records of displacement of indigenous people.

"Life was better before [the company cleared the forest]," Maliau, an elderly inhabitant of Sumatra, told Human Rights Watch in 2018.

"We made lamps from gum resin. Now we cannot find materials to make these."

EU law

The findings come just weeks before the EU Commission will announce a new law to tackle deforestation, currently scheduled for November 17.

EU imports result in the loss of 200,000 hectares of forest annually, a figure that is predicted to increase in the next decade.

And while this new law could help curb the bloc's role in driving deforestation, the current proposal does not cover financial institutions.

"This would be a huge missed opportunity,' Global Witness told EUobserver. "Financial organisations should also be required to carry out due diligence."

The European Parliament has previously called on the commission to include financial institutions in the new law.

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