$ 154 billion in capital has gone to 300 forest risk companies since the Paris Agreement
- A database of global capital flows to forest risk enterprises has been published by Forest and Finance, a joint project of six environmental research and advocacy groups.
- Over 50,000 financial transactions have been analyzed, showing that at least $ 153.9 billion in loans and investments have been made to 300 companies in Southeast Asia, Brazil and West Africa and of the Center since 2016.
- Of the 15 banks with the largest loan portfolios in forest-risk industries, eight are signatories to the United Nations Principles for a Responsible Bank, which call for an end to deforestation.
Since the signing of the Paris climate agreement in 2016, 300 companies at risk of contributing to deforestation have received at least $ 153.9 billion in funding, according to a new analysis of Forests and Finance. By browsing publicly available bank records, corporate disclosure sheets, records, and media records, the group’s researchers were able to track more than 50,000 financial transactions around the world, posting the results of their investigation in a searchable database this week.
The 300 companies analyzed received capital in the form of loans or investments and were involved in the production of pulp and paper, beef, palm oil, soybeans, rubber or timber.
“We are not directly blaming any of these companies for deforestation,” said Merel van der Mark, coordinator of the Forests and Finance Coalition, a join the project between six research and environmental groups. “We’re just saying these are companies at risk of deforestation because historically companies operating in these sectors have been linked to deforestation. “
The Forests and Finance database has been around since 2016, but this is the first year that it has been expanded to include companies operating in Brazil or Central and West Africa. Previously, it only collected data on people working in Southeast Asia.
According to new data, since 2016, banks and other investors have injected $ 95.2 billion into forest-risk businesses in Brazil, $ 54.2 billion into those in Southeast Asia and $ 4.5 billion. dollars in those of Central and West Africa. In the years following the signing of the Paris Agreement, these companies benefited from an overall credit increase of 40%.
The main creditor was Banco do Brasil, a state-owned bank that lent $ 30 billion to forest-risk companies in Brazil, largely through the Agricultural financing program, which provides loans to national agro-industries. Bradesco, a private bank in Brazil, was the second largest creditor, followed by Rabobank from the Netherlands, JPMorgan Chase from the United States and Mizuho Financial from Japan.
The Brazilian cattle sector, which continues to be linked to deforestation in the Amazon, received about 43% of the credit destined for the country’s forest-risk industries, making it the largest recipient of bank loans.
On the investment side, the Brazilian Economic Development Bank was the largest source of capital for companies working in Brazil, primarily through stakes in the beef and paper industries. BlackRock and Vanguard, two US-based asset management companies, were also among the top three sources of investment for forest risk industries in Brazil.
The two biggest investors in the data set were Malaysian government investment funds Permodalan Nasional Berhad and Employees Provident Fund, which together invested $ 13 billion in businesses threatened with deforestation, almost entirely in the palm sector. oil. Sime Darby Plantations, a Malaysian oil palm mega-producer, received the largest investment of any company in Southeast Asia with $ 7.1 billion.
In West and Central Africa, Chinese banks have dominated the credit landscape, occupying eight places in the top 10 of the largest lenders to forest risk companies. The rubber industry was the largest recipient of loans in the region, receiving a total of $ 2.8 billion. Almost all of this funding went to Sinochem, a Chinese state-owned conglomerate that owns Halcyon Agri, which was accused of deforestation and mistreatment of rural communities in Cameroon.
Researchers from Forest and Finance say the purpose of the database is to help the public understand how much money is being directed to industries known to be responsible for deforestation, and which financial institutions are providing that funds. . Of the 15 banks with the largest portfolios of loans to forest-risk industries, eight signed the UN Principles for a Responsible Bank, which includes a commitment to “stop deforestation”.
“We believe it is important for banks and investors to develop policies and due diligence processes that ensure their customers are not involved in deforestation,” said van der Mark. “And we want to show to what extent these banks are potentially exposed to this risk.”
The database is the product of a painstaking process of digging through the information documents of companies and banks around the world, and researchers say their numbers are almost certainly underestimated. In many jurisdictions, companies are not required to disclose the sources of their funding, and although pooled loans provided by multiple banks are generally made public, information on bilateral loans made by a single bank to a customer is extensive. more difficult to discover.
“There is definitely a significant amount missing, especially in jurisdictions where regulations do not have sufficient transparency requirements,” said Ward Wamerdam, senior researcher at Profundo and one of the lead investigators for forests and finances.
While the available data offers a crucial picture of capital flows in forest-risk industries, van der Mark says that the challenges that Forests and Finance researchers have faced point to a greater need for disclosure requirements to be met. worldwide.
“One of our criticisms is precisely the fact that there is a huge lack of transparency,” she said. “The financial industry is known to put in place these structures that make it almost impossible to track the beneficial owner of any fund.”