The UK banking sector has invested more than £1 billion ($1.4bn) in companies linked to deforestation since COP26, potentially undermining the climate commitments the country made at the 2021 Glasgow summit, according to new analysis by Global Witness in collaboration with the Forests & Finance coalition.
The analysis is based on data compiled by independent research group Profundo and highlights that in 2024, UK financial institutions were the third-largest investors in shares and bonds of “forest-risk” companies, trailing only the US and Japan, excluding financial institutions located in tropical forest countries. These companies, operating in regions like Southeast Asia, Central and West Africa, and South America, are involved in industries such as beef, palm oil, and soy, which drive the majority of tropical deforestation.
The report also ranks UK financiers as the 10th largest global creditors of these “forest-risk” companies, moving up to 7th place when excluding banks from tropical forest regions.
This level of investment casts doubt on the UK’s commitment, as stated in the Glasgow Leaders’ Declaration, to halt and reverse global deforestation by 2030 and align financial flows with forest protection efforts. Of the 50 largest UK firms analysed, which account for 99% of the investments in these companies, only eight have made public commitments to eliminating deforestation from their portfolios. The majority still lack clear public policies on the issue.
The findings come at a critical time, just before a UK Treasury review mandated by the Financial Services and Markets Act in June 2023 to assess whether current financial regulations are sufficient to prevent funds from flowing into businesses that contribute to deforestation. However, this review has yet to begin.
Anna Gelderd MP, Labour MP for South East Cornwall said, “There will be lots of conversations about green, sustainable finance for the UN Biodiversity Conference (COP16) starting next week. But we must not lose sight of the role dirty finance plays in driving nature destruction. It makes no sense to work towards repairing biodiversity vandalism while allowing British funding to flow to those responsible for the damage. An urgent assessment of the impact of UK finance on forests globally is needed.”
As of July 2024, British investors still held £1.4 billion ($1.8bn) in bonds and shares in companies considered “forest-risk.”
Although credit provided by UK banks to these companies declined from £662m ($819m) in 2022 to £380m ($472m) in 2023, major banks continued to finance some of the most controversial agribusinesses, including Brazilian meatpacker JBS, soy giant Cargill, and beef and leather producer Minerva Foods. All three have faced allegations of deforestation or human rights violations.
A broader analysis of UK bank activity since the signing of the Paris Agreement at COP21 in 2015 shows that three UK banks—HSBC, Standard Chartered, and Barclays—have accounted for 97% of the country’s credit provision to forest-risk companies. HSBC alone provided £2.9 billion in credit, followed by Standard Chartered with £0.86 billion and Barclays with £0.75 billion, totaling £4.45 billion from January 2016 to June 2024.
Alexandria Reid, Forests campaign lead at Global Witness said, “It’s time to put an end to this hypocrisy – the UK cannot claim to be leaders in the fight against nature loss while bankrolling its destruction. This reckless financing is helping fuel deforestation and tearing apart our planet’s vital ecosystems – all while undermining the UK’s promises to tackle the climate crisis. Labour fought for and won a new Treasury review of deforestation finance under the last government and now they must seize this opportunity to deliver it and stop deforestation before it’s too late.”
While overall financing has decreased in recent years, some major banks have ramped up funding for controversial projects. HSBC, for instance, increased its financing for Cargill’s soy operations in Brazil by 112% between 2022 and 2023.
HSBC, Standard Chartered, and Barclays have all publicised policies against deforestation and have been recognised by initiatives like Forest500 for their commitments. However, the report indicates that voluntary measures are not enough to prevent environmental destruction. Global Witness argues that only legally enforced regulations can effectively protect the world’s vital forests from destructive finance.
