Household banks and asset managers have invested tens of billions of pounds financing businesses involved with deforestation, according to a new report.
The research, undertaken by Global Witness and shared exclusively with Sky News, reveals the scale of investments being made in controversial and destructive agribusiness and, for the first time, calculates that financial institutions in the UK, Europe, The US and China that are likely to have made $1.84bn (£1.33bn) in income from such deals.
All the deals analysed were made since the Paris Climate Agreement in 2016, when many banks and investors pledged to bring their businesses in line with its stated aims.
It’s led to claims many of these firms are saying one thing and doing another when it comes to the climate.
The report analysed 70,000 shares, bond, credit and underwriting deals made between financial institutions based out of Europe, the US and China with 20 of the worst offending agribusinesses with well-documented links to deforestation.
It found that in total the deals done were worth $157bn (£120bn). The biggest overall investor in these companies was US-based bank JPMorgan, striking deals worth $9.38bn (£7.18bn).
British banks and asset managers, meanwhile, provided an estimated $16.6bn, making an estimated $192m (£147m) from deforestation-linked financing.
HSBC was the largest British-based financer of destructive agribusiness making deals worth $6.85bn (£5.25bn).
“The commodities, the things that drive the destruction of tropical rainforests are beef, soy, palm oil crops. And all of those are incredibly finance intensive,” explains Kenza Bryan, report author and investigator at Global Witness.
“Without the backing of the finance system, these commodities wouldn’t be produced and they wouldn’t be produced on deforested land so we show all the ways in which the financial sector and the city of London are driving tropical deforestation.”
Deforestation is not only deeply harmful to efforts to curb climate change as vast quantities of the world’s carbon dioxide is stored in the trees, but it also has disastrous implications for local and indigenous communities.
Many of the financial institutions named in the report have also made public commitments to help tackle the global climate crisis.
For instance, HSBC is estimated to have generated nearly £30m from these deals since 2016.
This is despite the fact that the company made a commitment to no longer finance firms linked with deforestation in 2017.
“The banks we focus on are multibillion-dollar companies,” says Mr Bryan. “They’re very good at telling us how green they are but what we’ve found is this gaping hole between what they say in public and what they actually do.
“So when you follow the money and look at their revenue streams, look at their actions you realise that they’re not actually as clean as they say they are.”
A spokesperson for HSBC said “HSBC has exited, is in the process of exiting or has no banking relationship related to forestry, palm oil or cattle with the majority of entities named in the report.
“We proactively engage with and help our customers to ensure they operate in accordance with good international practice but end relationships with customers who do not comply with our policies.
“We are committed to tackling deforestation and will further evolve our policies and practices, in line with emerging best practice guidance.
“In certain instances, HSBC’s name may appear on a company share register where we act as nominee or custodian for our customers. HSBC is not the beneficial owner of these shares, and has no influence either over the investment decision of its custodial clients or as a shareholder in the entities in which they invest.”
There is nothing illegal about these deals and due to the complexities of the global financial system, many may be tricky to unpick.
But it is for this reason that many are calling for a change to the law.
The government’s flagship environment bill is due next week and many campaigners say this is the perfect excuse to regulate.
Neil Parish MP is chair of the environment select committee and tabled an amendment to the bill which would have assisted in banning some of these deals, but it was rejected.
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“Legislation is always important because you can then go to these major banks, major companies and actually say you have acted illegally, you must stop and we can take direct action,” he said.
“I think the government has come a long way in the environment towards the direction we want. What they don’t particularly want is to do direct legislation but I think they should because then companies will have to take notice.”
JPMorgan declined to comment on the report.
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