Thursday, October 29, 2020
Unless Financial Institutions urgently address their role in funding deforestation through 5 key steps, the Amazon and the battle against climate breakdown will be lost, says Gustavo Machado de Melo of Fair Finance Guide Brazil.
It is dry season in Northern Brazil and the fires in the Amazon are burning again. More than 10,000 were recorded in the first ten days of August alone and the destruction they cause to this planet-critical eco-system is accelerating.
In 2019 as deforestation alerts in the Amazon increased 34,5% over 7000 sq km of the Amazon was deforested, whilst in the neighbouring Cerrado savannah – Brazil’s second largest biome - over 4000 sq km of vegetation was destroyed. This equates to a total loss of a habitat half the size of Turkey.
According to MapBiomas - the leading platform on land use in South America - agribusiness is responsible for 90% of all natural vegetation lost in Brazil since 1985. Soy, beef pasture, corn, cotton, and sugarcane crops have replaced 870,000 sq km of biodiverse forest and savannah.
These commodities are driving catastrophic changes in land use that impact on us all as they lead to a dramatic decline in bio-diversity, increased risk of zoonoses, critical changes in rainfall patterns, more frequent and severe droughts, and an annual average of 870 million tons of climate changing CO2 emissions.
All these effects occur because this ecosystem is complex and interdependent, and subject to key forces. When we think about the Amazon and Cerrado as an eco-system we cannot only think about the forest and savannah, we must also factor in the commodity supply chains it provisions and the Financial Institutions it enriches. This is the economic eco-system. Financial Institutions are the bedrock of this, providing a flow of funding supporting commodity producers and traders exploiting the region. The extent of this role in the destruction of the Amazon and Cerrado remains largely overlooked, although concern is growing.
Fair Finance International - a research and advocacy network of over 70 CSOs – recently screened Dutch, German and Norwegian Financial Institutions’ investments in 59 leading beef and soy companies with supply chains linked to deforestation in Brazil. These companies include soy giant Cargill, commodities company Louis Dreyfus, dairy manufacturer Danone, and Brazilian meat company JBS, amongst others.
It was found that 33 major Financial Institutions, including banks and insurers, invested a combined total of 20 billion US$ in these companies - through underwritings, loans, shares and bonds. Banks in the Netherlands such as ING and Rabobank lent more than 10.2 billion euros between 2015 and 2020; asset managers of Nordic Banks invested US$711 million in shares and bonds; and in Germany insurance companies and asset managers directed almost US$2.7 billion in shares and bond-holdings to these companies.
Financial Institutions are funding an exploitative economic eco-system that is destroying the Amazon and Cerrado regions, contributing to climate breakdown. Unless this financing is curbed it will be too late, as experts forecast that the Amazon is close to an irreversible tipping point.
Financial Institutions are crucial to the economic eco-system of the Amazon region and have an urgent responsibility to act. Environmental and social requirements must be central to the investment practices and divestments of Financial Institutions. This is the only way to achieve an economic eco-system that doesn’t destroy our planet for the sake of profit.
Gustavo Machado de Melo is a Global environmental governance and human rights analyst with Idec the Brazilian Institute of Consumer Defense and leading member of the Fair Finance Guide Brazil coalition.
This Op-Ed has been published in Impaktor.
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