According to a recent study released on Tuesday, the major financial institutions in the world will expand their support of businesses in the agriculture, forestry, and land use sectors that are most responsible for deforestation in 2021.
The Forests & Finance Coalition of NGOs published a report that revealed financing for those companies increased by over 60% to $47 billion between 2020 and 2021. The coalition works to improve transparency, policies, processes, and laws in the financial industry.
The analysis comes ahead of the upcoming round of international climate negotiations in November, where protecting rainforests and another biodiversity that is vital to the climate is expected to be a major topic.
The Report is Blindsiding
According to the analysis, banks have invested $267 billion in commodity companies that face forest risk since the Paris Climate Agreement was signed in 2015, while investors held $40 billion in bonds and shares as of September of this year.
Tom Picken, director of Rainforest Action Network’s Forest and Finance Campaign, stated in a statement that “dangerously inadequate” policies were the reason why “the world’s financial institutions are actually boosting their loans to the very industries bringing mankind to the brink.”
200 financial institutions exposed to businesses operating in regions at risk of deforestation in Latin America, Southeast Asia, and West and Central Africa were evaluated under the Forests & Finance policy, and 59% of them received ratings below one out of 10, indicating “an abject failure” to reduce environmental, social, and governance (ESG) risks.
The remaining forests in Indonesia, for instance, are under threat as Southeast Asian pulp and paper makers continue to increase their output; meanwhile, in Brazil, the meat industry is credited for 80% of Amazon’s (NASDAQ:AMZN) deforestation since 1985.
The study also found that finance firms’ policies on giving credit or investing to both sectors were “very weak” and had not done much to protect the environment, support the rights of indigenous peoples and local communities, or guarantee that businesses weren’t using forced labor to exploit workers.
The most recent analysis, according to Picken, “shows how huge banks and institutional investors are ignorant to the urgency of the situation.”