Banks urged to set time-bound targets to tackle deforestation

Some of the world's largest banks have been linked to industries that are causing mass deforestation and biodiversity loss

The new report details an action plan set out by the University of Cambridge Institute for Sustainability Leadership (CISL) as to how banks can play a role in halting global deforestation.

It focuses on the role of financing soft commodities such as palm oil, soy, beef and timber products that are responsible for the majority of deforestation caused by commercial agriculture. With more than 50% linked to services provided by nature, including freshwater, healthy soil and clean air, banks have a key role to play in shaping markets that combat the ecological crisis.

CISL’s director for the centre of sustainable finance Nick Villiers said: “More collaboration is needed between local and global banks and their clients if we are to halt and reverse deforestation. Our Action Plan maps out the unique part banks can play in tackling deforestation and aims to catalyse further action by the banking industry and beyond.

“By acting together, banks can help rewire the economy, mobilising and structuring finance so that it supports deforestation-free and forest restorative soft commodity production.”

The action plan calls on banks to align anti-deforestation policies to best practice standards and support improvement to supply traceability, while setting time-bound targets to ensure progress is achieved. Personnel within banks should be identified to lead on the delivery of these targets, with links to C-suite accountability. Banks should also advocate for government action on deforestation.

The Banking beyond deforestation report marks the close of the Soft Commodities Compact project –  a company-led alliance between CISL’s Banking Environment Initiative (BEI) and the Consumer Goods Forum (CGF), the goal of which was to lead the banking industry in aligning with the CGF’s resolution to help achieve zero net deforestation by 2020.

Loose change

Some of the world’s largest banks have been linked to industries that are causing mass deforestation and biodiversity loss, with some in the finance sector providing loans and underwriting worth more than $2.6trn to climate-wrecking initiatives.

The Bankrolling Extinction report has claimed that 50 global banks, including Bank of America, Citigroup, JP Morgan Chase, Mizuho Financial, Wells Fargo, BNP Paribas, Mitsubishi UFJ Financial, HSBC, SMBC Group and Barclay, together provided loans and underwriting worth more than $2.6trn to the food, forestry, mining, fossil fuels, infrastructure, tourism and transport and logistics sectors in 2019. According to the report, these industries are primary drivers of biodiversity loss and overfishing.

On average, each of the 50 banks was linked $52bn in finance that is causing biodiversity loss risk.

Some banks have started taking action. Last year, HSBC partnered with Pollination to launch what it described as the first large-scale investment fund focused solely on nature conservation and restoration. The fund, due to launch this year, will aim to raise $1bn to finance “a diverse range of activities that preserve, protect and enhance nature over the long-term, and address climate change”.

Elsewhere, AXA and BNP Paribas are among a group of 10 major banks backing a new initiative intended to help corporates measure, disclose and minimise their nature-related financial risks through a dedicated taskforce.

So far, 73 members have signed up to support the Task Force for Nature-Related Financial Disclosures (TNFD). They include: AXA; BNP Paribas; DBS Bank Ltd; Coöperatieve Rabobank U.A.; FirstRand Group Ltd; International Finance Corporation, Standard Chartered; Storebrand Asset Management; Yes Bank and the World Bank. Each of these organisations will contribute to the development of the framework, and be among the first adopters.

Matt Mace