Companies that are destroying the South American rainforest in order to farm there, or a paper industry that needs massive amounts of wood: There are a whole range of industries that non-governmental organizations (NGOs) believe are contributing to global forest destruction.
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In a study published today, the Norwegian NGO Harvest and the German Environmental Aid (DUH) show that the German financial sector could also be massively involved. It’s about loans and investments in the millions.
The study was exclusively available to the Tagesspiegel in advance. According to the 20-page document, German financial institutions such as Deutsche Bank, Commerzbank – but also the state development bank KfW – granted 899 million US dollars in loans to companies that manufacture products critical to deforestation from 2016 to June last year.
In addition, there are further investments up to May 2022 totaling 411 million dollars. In addition to banks, the investors denounced include Allianz, Munich Re and fund companies such as the Deka Group.
The two NGOs classify all loans and investments that flow into the beef industry, timber, palm oil, soybean, rubber and pulp and paper production as funds that potentially increase the risk of deforestation.
To determine the individual totals, they cite the Forest and Finance platform, which includes data on financial services to over 300 companies directly involved in the supply chains of related industries and their operations impacting the natural tropical forests of Southeast Asia , Central and West Africa and parts of South America.
According to conservationists, forests are the focus when it comes to climate change and the loss of biodiversity, i.e. biological diversity. According to the two NGOs, deforestation and forest degradation account for around 11 percent of global greenhouse gas emissions.
“Forests, especially old-growth forests, need to be preserved so that they can continue to act as carbon sinks and provide other ecosystem services, including, for example, filtering freshwater, positively influencing rainfall patterns and providing livelihoods for numerous indigenous and traditional communities,” they write .
“The problem of deforestation has not yet been sufficiently addressed in the German financial sector and also in companies,” says Tina Lutz, co-author of the study and an expert on deforestation-free supply chains at Deutsche Umwelthilfe.
“We need more public pressure here.” During the COP26 climate change conference in Glasgow last November, 30 financial institutions pledged to strive to eliminate agricultural deforestation from their portfolios by 2025. Large German financial companies were not among the signatories.
The study makes it clear that, according to the NGOs, none of the 21 financial institutions surveyed have implemented a zero deforestation target with a target date of 2025 and robust mechanisms to identify and mitigate their deforestation risk.
According to the NGOS, five institutes, Deutsche Bank, DZ Bank, Landesbank BW, Hamburg Commercial Bank and BayernLB, have adopted guidelines that include the goal of zero deforestation for (part) areas. However, there are no robust mechanisms to enforce this.
Harvest and the German Environmental Aid are now hoping for Brussels. They are demanding that the financial sector be included in an ordinance against imported deforestation. The EU Parliament votes on September 13th.
The regulation proposed by the EU Commission stipulates that some products, such as coffee, cocoa or palm oil, may no longer be imported into the EU if their production has led to deforestation.
“The vote on September 13 in the EU Parliament is the last chance to bring a ban on forest-damaging financial products into the planned regulation against imported deforestation,” says Lutz.
This proposal is supported, among others, by Delara Burkhardt, environmental policy spokeswoman for the SPD members of the European Parliament and social democratic negotiator for an EU regulation for deforestation-free supply chains.
“As a saver, I can’t be sure that my piggy bank is contributing to the destruction of rainforests,” she says. “Because German banks finance large-scale activities such as cattle breeding or soybean cultivation by companies all over the world, which pose a great threat to rainforests.” Relying on the voluntary nature of the economy, as the European Commission and conservatives in the EU are doing, is not enough .
However, the chances that the NGOs will get through with their demands are likely to be rather small. A majority of social democrats, liberals, greens and leftists would be needed in the EU Parliament.
And even if MEPs decide to include financial institutions in the regulation, they would still have to negotiate this with the EU Commission and the European Council, i.e. the EU member states that would rather keep the financial sector out of it.
“If the EU Parliament were to include a ban on financial products in its negotiating position with the European Council and the EU Commission and lose there, we would still have sent a signal,” says Tina Lutz.
The EU Commission will then see that there is a political will in Europe to also make the financial sector responsible in the fight against deforestation. “They could then take that into account in another regulation.”