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Is corporate finance associated with deforestation unforgivable?

Is corporate finance associated with deforestation unforgivable?

According to Campaign Group Global Tennis, global banks and asset managers have provided $ 119 billion in funding to 20 major deforestation-related agricultural companies in the five years since the Paris Agreement went into effect.
Research has found that large global lenders such as JPMorgan, HSBC and Bank of America are one of the largest corporate financiers, including JBS, a Brazilian meat producer with dozens of financial agreements between 2016 and 2020.
Data shows that Olam International, one of the world’s largest food suppliers, and its subsidiary JPMorgan received nearly $ 730 million in revolving credit facilities. The Olam International Forest Council is investigating allegations that it destroyed rainforests in Gabon.
Deforestation is a major source of carbon emissions, and addressing this issue is expected to be one of the topics discussed by global negotiators at the forthcoming UN COP26 Climate Summit in the UK.
Despite the growing interest among companies in planting carbon-absorbing trees, tackling deforestation in supply chains is less important to many investors than other environmental concerns, such as measuring companies’ direct emissions.
Data on more than 5,000 deals shared with the Financial Times show that the top five banks – BNP Paribas and ICPC – have concluded nearly 570 bonds and loan deals based on total deal value. The total value is $ 32 billion.
Except for China’s Industrial and Commercial Bank, all five companies do not have “deforestation” policies. All 20 agribusinesses are publicly linked to deforestation, and are included in the database of organizations operating in forest risk sectors such as soybean and beef compiled by the Global Alliance of Campaigns and Research Organizations under the umbrella of the Forest and Finance Committee.
“Although many of these banks have voluntary commitments on deforestation and climate change, they continue to have relationships with deforestation-related organizations,” said Colin Robertson, Senior Forest Analyst at Global Witness. “The main problem is the lack of legal obligation on banks to change practices,” he added.
Data shows that the Industrial and Commercial Bank of China has provided financial assistance to eight out of 20 companies. This includes $ 1.1 billion in loans and revolving loans to commodity trader COFCO International, which has been at the center of the Mighty Earth Group’s allegations that COFCO-linked suppliers destroyed more than 20,000 hectares of forest in Brazil between 2019 and 2021.
Kofko said there was no illegal deforestation on the farms he bought at the time.
JPMorgan, the second-largest financier, obtained three bonds between 2018 and 2019 from commodity trader Kargil, which is accused of supplying soybeans grown in deforested areas.
Last year, salmon producer Greg Seafood named its “Brazil soybean deforestation hazard” Kargil. JPMorgan declined to comment.
Kargil said it had not provided soybeans from farmers who had cleared land illegally or in protected areas and had stopped suppliers who were found to have deforestation in protected areas.
Meanwhile, Barclays and Santander received three bonds between 2018 and 2019, a meat producer GPS facing challenges from enthusiasts and investors for links to destruction in the Amazon rainforest.
GPS has a “no-no” policy with deforestation and has stopped working with suppliers who violate it.
“The bank is committed to protecting the Amazon,” he said, adding that by 2025, beef processing customers in the region will have a “fully detectable, deforestation supply chain.”
Although many banks and investment groups have “no deforestation” policies, they may be limited. For example, they can define deforestation as the destruction of some tropical or rare forest, not the destruction of any forest. The ban on legal deforestation will not be extended.
Policies can be difficult to implement and monitor. Banks need to ensure that their customers are not involved in deforestation, but many large food companies claim that they cannot be held responsible for the behavior of each supplier.
According to Global Witness, the problematic records of 20 agricultural companies should have raised important warning signs for bank compliance committees.
Although lawmakers in the European Union, the United Kingdom and the United States have proposed regulations designed to eliminate deforestation from corporate supply chains, none of them will extend the extra diligence requirements of financial institutions.
Global Witness’s research includes securities and equity securities agreements, as well as analysis of bond reserves and lenders led by the UK, EU, US and China. Bond issues were the largest source of funding, followed by revolving credit facilities and corporate loans. The year that the Paris Agreement on Global Warming came into force, 2016, was the busiest year to sign a deal based on value, followed by 2019.
In addition to direct funding, the data shows that the 1,500 banks and asset managers monitored in the database had approximately $ 37.5 billion in reserves in 20 agricultural companies in the fourth quarter of 2020.
HSBC said the bank had “left, is in the process of exiting or has no forest, palm oil or livestock banking relationship with most of the companies mentioned in the report”.
The list, compiled by Forest and Finance, “does not identify actual deforestation practices, but categorizes all companies that may be considered endangered by deforestation,” BNP said. It has a positive impact on its practice because it continues to rely on many other lenders.
Barclays, Bank of America and Olam declined to comment. The ICPC did not respond to a request for comment.

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