EU banks under attack over funds to ecosystem wreckers

Several major European banks could potentially be contributing to ecosystem destruction and extinction, according to a study published by Milieudefensie (Friends of the Earth Netherlands), Greenpeace International and Harvest. 

The study, named “EU bankrolling ecosystem destruction”, uses data from Profundo, an independent research organisation.

The report is co-signed by several other non-governmental organisations (NGOs), including Oro Verde, Rainforest Action Network and the Association of Ethical Shareholders.

It highlights how European banks have lent some €256 billion to entities putting savannahs, forests and various other critically endangered ecosystems at risk, since the 2015 Paris Climate Agreement.

Industrial agriculture blamed for damage to ecosystems

These companies have mainly done this through industrial agriculture, especially the production of commodities such as rubber, soy, palm oil, cattle and timber. Currently, the EU comes second only to the US for funding these sectors which have been proven to greatly damage ecosystems.

Some of the companies named in the report are Cargill, JBS and Sinar Mas, amongst others. The report also looks at which European financial institutions are extending funding support to these companies and sectors.

The publishers of the report are calling for more stringent EU regulation, to hopefully restrict the flow of funds to corporations that harm nature, as well as force the financial sector to take worldwide biodiversity and climate targets into account in its decision-making process.

Sigrid Deters, biodiversity campaigner at Greenpeace Netherlands said in a press release: “Europe thinks highly of itself for climate and nature protection, but looks the other way as its banks pour money into companies linked to massive nature destruction and related human rights abuses.

“There is a clear pattern, the EU financial sector’s links to ecosystem destruction are widespread. We can’t fight the climate crisis and ecological collapse while at the same time bankrolling extinction.”

Which European banks are funding nature destruction?

The report names ABN Amro Bank, Santander, BNP Paribas, ING Group, Deutsche Bank, Allianz Group, Credit Agricole, Group BPCE, Societe Generale, DZ Bank Group, Rabobank and Nordea Bank as the banks that have been funding sectors and companies putting nature at risk.

These banks accounted for about 22% of the entire worldwide credit given to large companies in the above sectors between 2016 and early 2023.

Approximately 86% of this credit came from banks in Germany, Spain, France and the Netherlands. Italy is also a major player. Currently, EU pension funds, banks and asset managers also account for about 9.4% of worldwide investments in sectors which allegedly harm nature.

Coming to investments by EU-based financial institutions in companies risking ecosystems, Germany, France, Netherlands, Sweden and Finland are the top countries.

The banks and financial institutions are funding the likes of Cargill and Bunge, named by the report, which are two of the biggest traders of several industrial agriculture products such as maize, soya, sugar, and cocoa, as well as derivatives like animal feed.

Conglomerates such as Nestlé, Unilever and Danone have also been named.

Two of the world’s largest meat producers, Marfrig and JBS are also being funded, as are Sinar Mas and Royal Golden Eagle (RGE), important manufacturers of pulpwood and palm oil.

Also in the Greenpeace press release, Jonas Hulsens, senior policy officer for forests and climate justice at Milieudefensie said: “Our research shows that banks and investors are not changing voluntarily, they are still pumping billions of euros into companies that destroy nature.

“Biodiversity hotspots vital to climate stability, such as the rainforests of the Amazon, Southeast Asia and the Congo Basin, or the northern boreal forests, are disappearing at an alarming rate. The EU urgently needs to show leadership by regulating its financial sector and stopping the flow of money into climate disruption and nature destruction.”

Is Europe’s anti-deforestation law doing enough?

Recently, the EU has been doing more to lessen its share in global deforestation and hold itself more accountable when it comes to ecosystem destruction, by implementing the EU Deforestation Regulation (EUDR), which obliges corporations to sell only legally produced and deforestation-free products in the EU.

The European Commission said: “On 29 June 2023, the Regulation on deforestation-free products entered into force. The main driver of these processes is the expansion of agriculture land that is linked to the production of commodities like cattle, wood, cocoa, soy, palm oil, coffee, rubber, and some of their derived products, such as leather, chocolate, tyres or furniture.

“As a major economy and consumer of these commodities linked to deforestation and forest degradation, the EU is partly responsible for this problem and it wants to lead the way to solving it.

“Under the regulation, any operator or trader who places these commodities on the EU market, or exports from it, must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation.”

When it was first introduced as a draft law, the EUDR faced significant backlash from companies and industries who objected to being considered as contributing to natural damage. Several sectors such as pulp and paper, soy feed and meat claimed that their sectors did not contribute so much to ecosystem destruction and that whatever little damage was being done, was being handled independently by companies, or sectors as a whole.

Many companies from the timber and food sectors increasingly lobbied EU decision-makers, seeking to make sure the regulatory standards impacting their sectors were as lenient and permissive as possible.

However, most importantly, the EU has come under considerable fire for failing to hold the financial sector to account when it comes to funding these companies and sectors.

Giulia Bondi, senior forest campaigner at Global Witness also said in the press release: “The evidence is loud and clear: European banks are continuing to finance the destruction of forests around the world to the tune of billions of euros.

“Yet the financial sector is excluded from the EU’s anti-deforestation law, undermining efforts to meet global climate and biodiversity goals. It is time for the EU to put the brakes on the financial institutions that are destroying the planet.”

Currently, the European Commission is expected to look over the impact of funding in forest degradation and deforestation and if needed, make a legislative proposal by next June.

Regarding the review, the report said: “The planned EUDR review relating to finance provides a critical opportunity to advance long-needed legislative action to prevent direct and indirect financial flows to ecosystem destruction.

“The EU should introduce specific obligations to financial institutions to ensure that their financial flows do not contribute directly or indirectly, to ecosystem conversion or degradation and related human rights abuses. These obligations should also cover other financial services such as insurance.

“In particular, these obligations should prevent financial institutions from providing financial services to any groups whose activities pose a non-negligible risk of contributing to ecosystem destruction, so that these groups cannot benefit from the EU financial system.”

What else can the EU do to protect ecosystems?

The EU’s anti-deforestation laws have also been criticised for not prioritising non-forest ecosystems enough. This includes savannahs, wetlands and peatlands, across the world, which are also under significant risk due to companies producing goods to be sold in the EU.

The erosion of these ecosystems could also lead to the widespread livelihood destruction and displacement of indigenous communities, as well as push several rare flora and fauna closer to the brink of extinction. The ecosystems are also key towards slowing down climate change, and harming them could also be detrimental to global climate goals.

Environmental activists have also called for the European Commission to extend greater protection to more products, such as a more diverse range of meats and poultry, as well as other agricultural products.

The European Commission has also been pressed to only allow companies whose products comply with international human rights laws to sell in the EU, instead of those who comply with individual countries’ domestic human rights laws.

This is because some countries – for example, the Democratic Republic of Congo – have less stringent domestic human rights laws than international ones, possibly allowing companies operating within its borders to bypass international rules.