Deforestation is a critical systemic risk. Voluntary initiatives have not secured the progress we need to manage deforestation and conversion and that means strengthening due diligence processes. We need enhanced mandatory due diligence to apply to all companies at risk of exposure to deforestation and conversion, including financiers.
More than a quarter (27%) of deforestation results from agricultural commodities. One of the key drivers of deforestation and conversion is the clearance of forests for agricultural “forest-risk” commodities like soy, beef, palm oil, cocoa, timber and rubber. The financial sector plays a major role in facilitating the trade of these commodities, both for products bound for the UK and for foreign markets.
Our Findings
While the finance sector is increasingly aware of the impacts and risks of investment in fossil fuels, this study finds that the UK financial sector is still highly exposed to deforestation and land use conversion risks through its investment and lending - to the tune of £40 billion to companies operating in biodiverse landscapes in Brazil and Indonesia for soy, palm and beef alone. Despite the evidence that 2020 deforestation targets were going to be missed, direct lending to traders in all “forest-risk commodities” has remained largely consistent since the Paris Agreement was signed in 2015. Current commitments on forests are largely voluntary and will not drive the changes we need to see to ensure that the UK’s value chains are sustainably produced.
Our Call to Action
The UK Government should strengthen their proposed Environment Bill by including all deforestation and conversion of natural ecosystems, extending mandatory due diligence to all companies in the value chain- including financiers. It must also enforce dissuasive penalties, and including free, prior and informed consent (FPIC) provisions for Indigenous communities. This report lays the groundwork for what inclusion of the financial sector could look like, following a law for companies.
We do not have the luxury of time. Parts of the Amazon are already emitting more carbon than they absorb, mainly due to increased deforestation and deliberate forest fires. In the wake of an emerging climate crisis, we need coordinated and clear legislative action across all tiers of “forest-risk” supply and value chains.