UK banks’ support for deforestation firms topped £900m last year | Deforestation

British banks provided at least £900m in finance last year to companies involved in deforestation overseas, research has shown, putting pressure on the government to include financial institutions in plans to force companies to root out illegal deforestation from their supply chains.

The environment bill will be debated in parliament on Wednesday and will include requirements for consumer goods companies to carry out due diligence on their suppliers, to ensure they are not selling goods linked to deforestation overseas.

The requirement is one of the main provisions of the wide-ranging bill, which will also include restrictions on exporting plastic waste, action on tree-planting, a new legally binding target on species abundance for 2030, and measures to restore peatland and other habitats.

The environment bill has been delayed several times since it was brought forward by then environment secretary Michael Gove in 2018, owing to a lack of parliamentary time because of Brexit, the 2019 general election and the Covid-19 pandemic.

Ministers are confident it will pass this time, before the UK’s presidency of the Cop26 UN climate talks in Glasgow in November.

Rebecca Pow, the environment minister, said: “As we build back greener from the pandemic, it is vital that we address the twin challenges of climate change and biodiversity loss, and protect and improve the environment for future generations.

“The environment bill will ensure we deliver the most ambitious environmental programme of any country on Earth, which is why it is essential that we complete its passage into law as soon as possible.”

There are likely to be several amendments that ministers are not likely to support. One of these covers due diligence requirements and would include banks in rules that penalise companies for allowing goods that result from illegal deforestation overseas to enter their supply chains.

The NGO Global Witness analysed 2020 data on 300 companies involved in deforestation for soy, palm oil and other commodities. It found that more than £900m in financing came from UK-based financial institutions.

Under the environment bill, as it stands, these banks would face no restrictions on providing similar finance in future, as only the companies involved in supplying commodities, such as food and cosmetics producers, are covered.

This is a significant failing, according to Jo Blackman, the head of forests policy and advocacy at Global Witness. “Supply chains are only one way in which the UK contributes to deforestation – finance is also a huge part,” she said. “Finance is a crucial lifeline to keep these [deforesting] companies going.”

The UK is one of the biggest sources of finance to companies linked to deforestation, Global Witness research suggests.

Neil Parish, the Conservative MP who chairs the environment, food and rural affairs select committee, has tabled an amendment that would close the loophole and force banks to conduct the same due diligence when supplying finance as companies dealing with “forest-risk commodities”.

The pension fund for MPs is also invested in companies linked to deforestation. According to research by the NGO Feedback, published on Wednesday, the parliamentary contributory pension fund holds shares in JBS, a meat producer that has been linked to deforestation in the Amazon.

Parish said: “It is unacceptable that while MPs vote on this bill, our pension pots are being invested in companies fuelling deforestation. All pension funds should check where their money is being invested, and parliament should be leading by example. This new evidence shows exactly why the bill must be toughened to include financial institutions in the due diligence obligation.”

Blackman called on the government to accept the amendment, to show leadership on deforestation before Cop26 and the UK’s presidency of the G7 group of rich countries next month. She pointed out that the EU was also considering similar legislation, which could cover banks.

“Banks will continue to invest until there is a cost to doing so – they will respond to regulation,” she said.

A spokesperson for JBS said: “JBS upholds high environmental, social and governance standards and implements concrete environmental actions throughout our value chain in line with global standards. This includes our dedication to the elimination of illegal deforestation and tackling the complex issues relating to traceability of the full supply chain in Brazil.”

The Labour party also plans to table a separate amendment to the bill, on tree-planting, arguing that the government’s proposals are inadequate. The amendment would require a further 30,000 hectares of woodland.

Luke Pollard, the shadow environment secretary, said: “The environment bill goes nowhere near far enough to match the scale of the crisis facing us. We need more trees and better protections to restore our most vulnerable habitats.”

Labour has estimated that at current rates of tree-planting, by 2050 the UK will have less than 15% tree cover, compared with the 17% minimum called for by the Committee on Climate Change.