Banks based in the European Union are major funders of companies at high risk of involvement in land-grabbing and deforestation, according to new research by Fern.
The study examines the sources of finance of 23 large companies involved in agriculture and commodity trading in tropical regions, including big names such as Wilmar, Olam International and Sime Darby. All the companies surveyed had been subject to claims of land-grabbing or human rights abuses linked to land acquisition. Many operate in sectors plagued by deforestation.
The research found that EU banks were responsible for more than USD 18 billion of loans – nearly forty per cent of all loan finance provided to these companies – over the period 2010-15.
In contrast, EU investment institutions – such as pension funds, insurance funds and asset managers – were not major investors in companies challenged by allegations of land-grabbing and deforestation. EU investment funds held less than five per cent of the value of all shares in the businesses surveyed.
The aim of the research was to provide information that could be used to harness the power of EU financiers to improve environmental practices at businesses they fund. The evidence indicates that policymakers and campaigners should focus their efforts on banks rather than investment funds: judging by the sums of money involved, EU banks are likely to have more influence.
Inevitably, Brexit will change the picture, but even without the contribution of British financiers, the research suggests that EU banks still account for about a quarter of lending to these high-risk companies.
As this issue of ForestWatch was going to press http://forestsandfinance.org/ was launched. This website highlights the role that finance plays in enabling tropical deforestation. It is the result of research by organisations including Rainforest Action Network, TuK INDONESIA, and Profundo.