Criticism of banks’ financing of environmentally-destructive industries continues to grow, but a new report argues they could play a critical role in protecting forests and driving climate action
Banks have faced increasing criticism in recent years over their ongoing financial support for environmentally-destructive industries, but by tweaking their practices they could become part a critical part of the solution to escalating deforestation and habitat destruction worldwide.
That is the core message from research by the University of Cambridge Institute for Sustainability Leadership (CISL) this week, which outlines a set of five key actions banks and other financial firms can take to help respond to the biodiversity and climate crises, de-risking their investments in the process.
Released yesterday, the report from CISL’s Centre for Sustainable Finance focuses on soft commodities, such as palm oil, soy, beef and timber products, which are responsible for the majority of deforestation worldwide caused by commercial agriculture.
Banks often provide finance and financial services to companies along these supply chains, indirectly contributing to deforestation and land-use change, which make up the second largest source of greenhouse gas emissions after the burning of fossil fuels. In 2019, deforestation was responsible for around 11 per cent of global emissions, and growing demand for land for palm oil, cattle, and soy production continues to drive destruction of critical forests and habitats worldwide. Banks often support commercial agricultural firms responsible for these activities through loans, trade finance, bond and fund structuring, capital raising, and project finance.
But CISL’s report