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Report

New BankTrack research shows need for banks to move beyond certification requirements to slow finance for deforestation

"Six years of the Soft Commodities Compact failed to slow bank finance for deforestation", 1 Dec 2020

The Soft Commodities Compact (SCC), an initiative signed by 12 banks which concludes at the end of 2020, has been unable to show any progress towards its target of supporting ‘zero net deforestation’ in the palm oil, soy, cattle, and pulp & paper and timber sectors. This failure shows the urgent need for the banking sector to develop a fresh approach to the urgent crisis facing the world’s forests, concludes a BankTrack report titled “Soft commitments, Hard lessons”...

The 12 banks committed under the SCC to support their clients in soft commodity supply chains to reduce deforestation through an approach largely focused on requiring clients to sign up to certification schemes. However, a month from the end of the Compact, none of the banks succeeded in ensuring all their clients were certified by 2020.

Six banks have not even reported on the proportion of their clients that have achieved certification, one month before the Compact ends. These banks are BNP Paribas, Lloyds Banking Group, Rabobank, Société Générale, UBS and Westpac.

Figures extracted from the Forests and Finance website (forestsandfinance.org) show that banks that adopted the Compact have considerably increased their financial exposure to forest-risk companies since 2014...

Banks that signed the Soft Commodities Compact remain exposed to deforestation risks from providing financial support to giant commodities companies engaged in destructive practices...

Based on its analysis, BankTrack recommends in the report that banks move beyond an approach focused on certification, and instead require clients to adopt “No Deforestation, No Peat, No Exploitation” (NDPE) frameworks backed with robust due diligence, traceability and transparency, within an ambitious timeframe which reflects the urgency of the linked crises of deforestation and climate change.

[Note on methodology]: We contacted all banks covered in this report and held conversations with representatives of six banks regarding their policies and reporting, as well as possible next steps regarding the initiative.