Wednesday 16 October 2024, London – The UK banking sector has poured over £1 billion ($1.4bn) into “forest-risk” companies globally since COP26, undermining the country’s commitments made at the 2021 Glasgow climate conference - according to new analysis by Global Witness in collaboration with the Forests & Finance coalition.
This Global Witness analysis, published today, is based on new Forest & Finance coalition data prepared by independent research organisation Profundo. The study found that in 2024, UK financiers ranked as the third-largest investors in shares and bonds issued by "forest-risk" companies, behind only the US and Japan, when excluding financial institutions based in the tropical forest countries themselves.
These "forest-risk" companies are those operating in Southeast Asia, Central and West Africa and South America which are directly involved in industries such as beef, palm oil, soy, and other agricultural supply chains that drive the majority of tropical deforestation.
The study also revealed UK financiers as the 10th largest creditors
of “forest-risk” companies globally, moving up to 7th place when
excluding banks from tropical forest countries.
The findings imperil the commitments made by the
UK at COP26 to halt and reverse global deforestation by 2030, as stated in the
Glasgow Leaders’ Declaration, and to align financial flows with efforts to
protect forests.
Of the top 50
largest UK firms analysed by Global Witness, accounting for 99% of investments
in “forest-risk” companies in 2024, the majority still lack public commitments
to remove deforestation from their portfolios. So far, only eight out of 50
shareholders analysed have made clear public commitments to removing
deforestation from their portfolios.
The new findings come ahead of a critical review by the UK Treasury to assess the extent to which regulation of the UK financial system is adequate to stop funding flowing to business engaged in deforestation. Mandated in June 2023, as part of the Financial Services and Markets Act, the review has still not begun.
Anna Gelderd MP, Labour MP for South East Cornwall, said:
“There will be lots of conversations about green, sustainable finance for the UN Biodiversity Conference (COP16) starting next week. But we must not lose sight of the role dirty finance plays in driving nature destruction.
"It makes no sense to work towards repairing biodiversity vandalism while allowing British funding to flow to those responsible for the damage. An urgent assessment of the impact of UK finance on forests globally is needed.”
As of July 2024, British investors still held £1.4 billion ($1.8bn) in bonds and shares in these so-called “forest risk” companies.
Credit provision from UK banks to “forest-risk” companies has recently declined, falling from £662m ($819m) in 2022 to £380m ($472m) in 2023, the latest year for which full data is available. However, British banks have continued to fund some of the most controversial agribusinesses, including meatpacker JBS, soy-processing giant Cargill, as well as Brazil-headquartered beef and leather producer Minerva Foods. All three businesses have been mired in numerous controversies relating to deforestation or alleged human rights violations in recent years.
An analysis of a broader timeframe reveals that three UK banks accounted for a staggering 97% of the country’s credit provision to “forest-risk” companies since the signing of the Paris Agreement at COP21 in 2015: HSBC, which provided £2.9 billion; Standard Chartered with £0.86 billion; and Barclays with £0.75 billion.
In total, these banks extended £4.45 billion in
credit to “forest-risk” companies between January 2016 and June 2024. Among all
the banks analysed, HSBC emerged as the largest UK financier of forest-risk
commodities, representing over 62% of the UK’s credit flows to
deforestation-risk during this period.
Alexandria Reid, Forests campaign lead at Global Witness, said:
“It’s time to put an end to this hypocrisy – the UK cannot claim to be leaders in the fight against nature loss while bankrolling its destruction.
“This reckless financing is helping fuel deforestation and tearing apart our planet’s vital ecosystems - all while undermining the UK’s promises to tackle the climate crisis. Labour fought for and won a new Treasury review of deforestation finance under the last government and now they must seize this opportunity to deliver it and stop deforestation before it’s too late.”
Although total financing figures have declined in the past year, some major banks have increased funding to some of the most controversial agribusinesses. For example, HSBC increased its financing for Cargill’s soy operations in Brazil, an agricultural powerhouse, by 112% between 2022 and 2023.
While HSBC,
Standard Chartered, and Barclays have all publicised anti-deforestation
policies and received recognition from initiatives like Forest500 for these
commitments, the analysis provides powerful evidence of the limitations of
voluntary policies in safeguarding against environmental destruction. Global
Witness argues that only legal safeguards will truly protect the world’s
climate critical forests from destructive finance.
All of the
companies involved in this investigation were approached for comment. HSBC
declined to comment, directing Global Witness to their Net Zero Transition
Plan. Barclays stated that it was unable to comment on specific clients, but
drew Global Witness’ attention to its Forestry and Agricultural Commodities
Statement and noted its recognition in the Forest500 rankings. Standard
Chartered also declined to comment on specific clients, but referred Global
Witness to its Nature Position Statement and its past statements on agribusiness
and soy. The responses of all those entities approached for comment by Global
Witness are detailed further in the full report.