Investments in deforestation-linked companies increased by $8 billion compared to the previous year

The world’s 50 largest financial institutions increased investments in commodity companies that are linked to deforestation by more than $8 billion, reported Mongabay based on analysis of financial data by Forests & Finance .

The report compared sustainability commitments of the world’s top 50 financial institutions with investments, lending, and guarantees to more than 200 companies that operate in industries linked to deforestation. These industries include beef and palm oil. Forests & Finance found that the gross value of investments in deforestation-linked commodity companies increased by more than 21 per cent, or $8.1 billion, when compared to the previous year.

“This indicates that the majority of financing to the different commodities driving deforestation (beef, palm oil, pulp and paper, rubber, soy and timber) is not subject to even basic desk-based social, environmental or governance checks, much less actual verification of client standards,” the report said.

The financial data comes from the Forests & Finance database that was made publicly available last year and includes information dating back to 2013. Forests & Finance is a coalition of NGOs that assesses the financials of companies involved in the beef, soy, palm oil, pulp and paper, rubber and timber supply chains.

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To compile this report, the group analyzed the financial records of some 200 companies with interests in Southeast Asia, Latin America, West Africa, and Central Africa.

Investment data used in the assessment spanned 2016 to 2020 and included $128 billion in underwriting of commodity projects with ties to deforestation. Also included was $28 billion of investments that were made up to April 2021.

The largest recipient of investment was the South Asian palm oil industry, where five Malaysian companies received one-fifth of all investment in the region. U.S. firms, including BlackRock and Vanguard, were among those with significant investments in the industry.

The report from Forests & Finance also ranked more than 50 financial institutions based on environmental, social and governance policies (ESG), and investments they have with deforestation-linked companies.

Various major banks and investors in the industry received low scores from Forests & Finance. Among them were Bank of America, Sumitomo Mitsui Banking Corporation, Industrial and Commercial Bank of China, BlackRock, Vanguard, and State Street.

Based on the data, the group concluded that ESG policies of the top 50 financial institutions were inadequate. Forests & Finance gave the institutions an average 2.4 of 10 ranking.

“Protecting the world’s tropical forests has quite literally never been more important to all life on Earth,” said Merel van der Mark, a coordinator for Forests & Finance. “And yet, these financial institutions are all but writing a blank check to the companies driving forest destruction and human rights abuses.”

Forests & Finance also highlights how the figures used in this assessment are likely underestimated because of differing disclosure regulations across the regions involved in the report.

The report is paradoxically released at a time of increased global interest in ESG initiatives. Last year ESG fund assets hit a record high of approximately $1.4 trillion USD, reported Bloomberg News , where more than half of all money going into European funds went into sustainable products.

PwC, one of the four major accounting firms, is also taking a leading role in ESG according to Financial Times . The firm announced the launch of “trust leadership institutes” in both the U.S. and Asia, which will train clients in relation to ESG business ethics.

Despite the growth of ESG, deforestation-linked industries are still profitable. The palm oil industry alone quadrupled between 1995 and 2015 and is expected to so again by 2050, according to the Guardian . The continued growth of the palm oil industry could be partially attributed to its vast application, where Palm Oil Investigations said the product is listed as an ingredient in at least 200 common food, home, and personal care products.

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