How much money are EU banks and investors making from deforestation and related human rights abuses?

What can the EU do?

The
European Union has a unique opportunity to put its own house in order and end
its complicity in global deforestation with legislation under development that
will regulate forest-risk commodities coming into the EU market.

But in order for the law to be effective and
ambitious – and meet the demands of the EU’s Paris Climate commitments and the
European Green Deal – it is crucial that the financial sector is not let off
the hook. This means that the legislation should also require EU financial
institutions to check whether they are backing companies involved in global
deforestation, and to mitigate their exposure to such risk.  

Existing
initiatives on finance
and sustainability are not designed to stop
deforestation finance. The EU
Action Plan on financing sustainable growth (Taxonomy)[4]
only covers green finance products – so doesn’t cover the mainstream financing
most often linked to deforestation. Similarly, the EU Corporate
Sustainability Reporting Directive (CSRD)
does not
require financial institutions to undertake adequate checks in their financing
decisions and does not include provisions that would prevent financial
institutions from funding harmful activities.

Relying only on disclosure of companies’
activities – which often overlook their role in deforestation – does not
necessarily lead to banks stopping profiting from deforestation and human
rights violations. Whilst banks and
investors can keep the profits made from dealing with companies implicated in
deforestation with few or no consequences, they will continue bankrolling
destructive agribusinesses.

Only by ensuring financiers are held accountable
through legislation will we end their complicity in the destruction of the
world’s forests and related human rights violations.
The EU can do this by including
the financial sector in its upcoming regulation on deforestation and should seize
the opportunity to safeguard the future of the world’s forests.


[1]
Exchange rate used: 0.881741383069989 for USD to
EUR conversions.

[2] Brookfield Asset
Management; Cargill; COFCO; Felda Group; Genting Group; Itochu; Jardine
Matheson Group; JBS; Marfrig; Minerva; Noble Group; IOI Group; Oji Group; Royal
Golden Eagle Group; Salim Group; Sinar Mas Group; Sinochem; SLC Agricola; Olam
International; Wilmar

[3]
Exchange rate used: 0.881741383069989 for USD to
EUR conversions.

[4]
European Commission, EU taxonomy for sustainable activities. Available at: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en

Methodology note : Estimates of revenues from deals
have all been adjusted downwards to account for the proportion of each
agribusiness thought to directly participate in a forest-risk commodity. It
should be noted that banks and asset managers often hold bonds and shares on
behalf of third-party investors, as well as on their own behalf. The bank or
asset manager will normally gain from the transaction taking place,
earning a percentage of the invested value or a fee. But not all of the income
will be retained by the bank.

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