Tuesday

16th Apr 2024

Opinion

How EU firms and banks help fund Amazon fires

  • While Emmanuel Macron and Angela Merkel rallied the G7 support to the very small tune of €20m, financiers in these countries fund cattle and soy companies at a scale of billions of dollars every year (Photo: Dirk Henker)

Led by France and Germany, the G7 pledged to help protect the Amazon forest after fires continued to ravage one of the most important ecological landscapes in the world.

But the G7 cannot successfully fund the protection of the Amazon while the banks and investors of these countries continue to fund their destruction.

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While Emmanuel Macron and Angela Merkel rallied the G7 support to the very small tune of $22m [€20m] , which Brazil has since rejected, financiers in these countries fund cattle and soy companies at a scale of billions of dollars every year.

Deutsche Bank, BNP Paribas, Blackrock, and Vanguard collectively own more than $1.1bn in debt in the three largest soy, and the three largest cattle companies, and own $6bn worth of shares in these companies.

Hundreds of other major financial institutions in G7 countries are major shareholders and debt owners. Through these shareholdings and debt ownership, financiers in France, Germany, the US, and elsewhere fund these companies who rely on deforestation of the Amazon and neighbouring landscapes at a scale of 2,000 times more than offered from the G7.

The forest areas in Brazil have been burned intentionally to provide land for agricultural production.

However, this production would not be possible without the lending and investment of global financial institutions.

Financiers like BlackRock, BNP Paribas, and Deutsche Bank continue to fund the companies benefiting from deforestation of the Amazon, despite evidence of the companies' ties to the deforestation and future plans to expand production in forest areas.

Here's an example: JBS, the largest meat-packer in Brazil, with known ties to deforestation and corruption, and allegations of slave labour - receives over $20bn in debt financing from financial institutions. Deutsche Bank alone holds over $38m worth of shares in JBS.

The funding of JBS' cattle activities continues even as JBS plans new meatpacking facilities in, encouraging cattle ranching to expand in the Amazon and highly-important Cerrado biome.

Enough land left

Although cattle and soy production play an important part of Brazil's economy, research shows an ample amount of suitable, yet degraded, land for agricultural production to allow for expanded production without sacrificing forests or savannahs.

The continued funding of these companies comes despite commitments by these banks to address deforestation from the production of commodities like soy and cattle.

Deutsche Bank, for example, have an environmental and social policy framework that sets a "preference" that soy and cattle companies operate sustainably.

But a mere preference is not enough. As long as finance continues to flow to companies deforesting the Amazon, and other environmentally valuable areas, companies will continue to deforest.

The question then becomes not how to fund Amazon preservation and fire-fighting, but how to defund the destruction of the forest.

Banks and all financiers must adopt stronger policies to require companies operate sustainably.

With the incentive of access to loans and fundamental business capital, companies will face positive pressures to adopt sustainable sourcing and production practices.

Consumers also play an indirect role in financing these companies through pension funds. The Canadian Pension Fund, for example, owns a 40 percent stake in Glencore Agriculture, a major commodity company knowingly deforesting for soy production in the Amazon (according to Bloomberg.)

While it is crucial to recognise that the Amazon fires are likely intentionally set, focusing blame on the farmers who set the fires overlooks the broader economic system that ignores, and even rewards, forest clearing.

If financiers, and in turn the companies they finance, required assurance systems to preclude deforestation-linked products, the implications would be felt throughout the entire supply chain all the way to the farmers on the ground.

These financiers hold the ability not only to defund deforestation, but to provide the financial incentive for sustainable production.

While international action is necessary, especially from the G7, the leadership of countries like France and Germany must be matched by action of the financial community in those countries as well. Otherwise, history will repeat itself.

Author bio

Sarah Lake is managing director of supply chains at Climate Advisers, where she specialises in solutions to commodity-driven deforestation.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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