Banking on the Amazon: how the finance sector can do more to avoid tropical deforestation
Chainsaws are not the only tools contributing to deforestation. A report published today by WWF shows how global banks can contribute to the fight against deforestation in the Amazon. By putting in place strong social, environmental and governance standards, banks can ensure they avoid lending to companies whose practices are driving deforestation and instead promote sustainable business practices.
The research found that sectors including agriculture, cattle ranching, and extractive industries including oil and gas exploration, mining and logging, are known to be driving deforestation in many cases. The investment community can therefore play a role in promoting good practice.
As part of this research, WWF analysed the environmental and social policies of ten leading financial institutions. It found that although many of these global banks are making strides in improving their policies, they have opportunities to put in place stronger safeguards to avoid lending to companies that drive the loss of forest habitat in fragile regions, such as the Amazon.
WWF-Brazil’s Sustainable Finance Specialist, Fabio Guido said:
“Deforestation in the Amazon continues at a pace of 1.4 million hectares per year, threatening biodiversity, and reducing the world’s capacity to efficiently regulate climate and rainfall patterns. It’s therefore in everyone’s interest that the world’s leading financial institutions support the fight against deforestation. By doing so, they will incentivise hundreds of local banks, which lag far behind the standards set by the big players, to up their game too.
With many of the world’s smartest companies focusing on mitigating negative socio and environmental impacts, there are plenty of opportunities to support the responsible business approaches our planet needs."
WWF recommends that financial institutions:
- Join and participate in relevant global initiatives such as the UN Principles for Responsible Investment, UN Environment Programme Finance Initiative, Equator Principles, Natural Capital Declaration and the ‘Soft Commodities’ Compact.
- Require clients to adhere to international standards, principles and initiatives such as the Global Reporting Initiative and the OECD Guidelines for Multinational Enterprises and practice good disclosure. For agro-commodities, where independent certification, such as Forest Stewardship Council and Roundtable for Sustainable Palm Oil exist, this should be a requirement for clients.
- Develop policies which commit banks not to finance activities in natural protected areas, such as World Heritage Sites.
With support from the Gordon and Betty Moore Foundation, WWF is working with its partners including Ceres, National Wildlife Federation, The Nature Conservancy, and the World Business Council for Sustainable Development on multiple initiatives to eliminate deforestation and illegality from the Amazon and Cerrado of Brazil as well as the Chaco of Argentina and Paraguay. These partnerships work with financial institutions to implement lending and investment practices that eliminate deforestation, illegality and other unsustainable practices from major food production systems, in addition to also engaging major beef and soy producers, processors, traders, brands, and retailers.
While the Banking on the Amazon report is not funded by the Gordon and Betty Moore Foundation, we foresee its findings to be relevant to inform this scope of this additional work.
There has also been progress in one Amazon country, Colombia, where WWF has been working with a number of financial institutions to strengthen their safeguards against deforestation. BanColombia, one of the banks analysed in this report, has made most progress on the policies that establish safeguards against deforestation.
WWF Colombia has also been working with smaller, more local financial institutions, not covered in this report, which are also important players, since they lend to rural producers, who often lag behind global financial institutions in terms of safeguards. This work includes a partnership with the main state Agricultural Bank (Banco Agrario) whose main objective is to finance activities related to rural, agricultural, livestock, fisheries, forestry and agro-industrial sector. As part of this partnership together WWF and Banco Agrario are designing a roadmap to include Environmental, Social and Governance Risks (ESG) assessments into the bank’s policies. This work will support and strengthen the bank´s commercial activities and processes and designing training modules and materials.
WWF’s global work across its network offices will continue to engage with the financial sector to ensure that companies have strong environmental, social and governance policies, to safeguard the world’s most precious forests and reduce deforestation.