Banks, Insurers Targeted as Climate Group Seeks EU Review of Deforestation Rule

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Climate activists are putting pressure on the European Union to reconsider its decision to exclude banks from a landmark deforestation rule, in a move designed to preempt an official review of the regulation next year.

UK-based nonprofit Global Canopy says it was a mistake to allow the finance industry to fall outside the scope of the EU’s deforestation regulation. Given what the group characterizes as poor progress by banks and asset managers in tackling the issue, Global Canopy is lobbying the EU to include finance in its rules for protecting forests. The US and UK should consider similar rules, Global Canopy said.

“Financial institutions have the power to transform global supply chains, but voluntary action has failed,” said Emma Thomson, who leads the Forest 500 and deforestation projects at Global Canopy. “We need to see regulation.”

The nonprofit tracks 500 companies and financial firms that it has identified as playing a key role in the destruction of the world’s woodlands. While the destruction of forest accounts for roughly 10% of global carbon-dioxide emissions, Global Canopy’s research shows that the financial institutions assessed had over $6 trillion in finance outstanding to companies most exposed to deforestation, as of October 2022. And of those financial firms, 55% have no policy to address such risks. (Editor’s Note: Global Canopy tracks all financial services institutions, including insurers).

The call for more comprehensive rules follows a landmark agreement at the COP26 climate summit in 2021, at which the finance industry pledged to play its part in reducing global greenhouse gas emissions. The following year, roughly 200 countries committed in the Kunming-Montreal Global Biodiversity Framework to halt and reverse nature loss by the end of the decade.

Last year, the EU passed the world’s first deforestation due diligence law, and a pact to end deforestation by 2030 made it into a United Nations Conference of the Parties accord for the first time, at the COP28 summit in Dubai.

Now, explicit rules are needed to force banks to ensure their financing isn’t linked to deforestation, Global Canopy said.

“After a decade of being in the spotlight and numerous engagement attempts, it is remarkable that this group of highly exposed companies has failed to produce a single publicly available deforestation commitment,” Niki Mardas, the nonprofit’s executive director, said on Tuesday in connection with the group’s publication of its annual Forest 500 report. “There is no solution to climate change without ending deforestation.”

The destruction of the world’s forests represents “a huge crisis that has implications on the climate, on biodiversity and on people,” said Thomson. “As these companies and financial institutions continue to refuse to act, all of those impacts grow.”

Photograph: A section of deforestation near La Paz, Guaviare department, Colombia, on Sunday, July 30, 2023. Ivan Mordisco is a Colombian warlord with a cocaine empire and a bounty on his head. He is also doing more to protect the Amazon rainforest than almost anyone else on Earth. Photo credit: Ivan Valencia/Bloomberg

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