Opinion: Taking the next step in engaging the financial sector on harmful investment practices

By Julia Bakker of World Animal Protection

In 2020 The Fair Finance Guide Netherlands, together with Hivos, Both Ends and Greenpeace  released a damning report highlighting the scale of destruction caused by European financial sector investment in harmful business activities in the Amazon and Cerrado region.  

The massive increase in deforestation in the Amazon and the Cerrado in recent years, is principally due to agricultural activities. Land is cleared of forest in order to raise beef cattle, and soy, cotton, sugarcane and maize crops. A significant proportion of what is produced is exported to European markets for food products and animal feed.

The report - Funding destruction of the Amazon and Cerrado - analyzed financial institutions’ investments in companies with a high risk of involvement in deforestation in the region, and it identified nearly $ 3.2 billion in investments in stocks and bonds from 59 companies. Almost half of this amount went to leading Brazilian agribusiness companies, an amount of US $ 1.4 billion.

Accounting for investments, subscriptions and loans, 19 financial institutions operating in the Netherlands have allocated almost US $ 10.4 billion to the 26 companies that lead agribusiness and the distribution of their by-products in Brazil – and linked to the destruction of this climate-critical environment.

Following the launch of the report there was a highly successful public campaign in The Netherlands to raise awareness and mobilise consumers to demand action from their banks. But once the news cycle had inevitably moved on to something else, Fair Finance Netherlands and partners wanted to take a further step to address this issue, and in early 2021 invited representatives from banks, insurers and pension funds to come together and learn more about how they can address this issue.

Julia Bakker of World Animal Protection, a member of Fair Finance Netherlands, explains more:

“We arranged a confidential meeting with over 40 participants including representatives of banks, insurers, pension funds and the Ministry of Foreign Affairs, where they could hear directly from affected communities living in the region, and from experts on deforestation. We decided on this format to foster constructive engagement, by creating open space for questions and dialogue.

During this session, we had powerful input from local communities, who gave a face to the environmental and human rights issues that come with the soy and beef sector. We also had some experts joining us including a forest criminologist, a professor from the University of Minas Gerais in Brazil, the director of World Animal Protection, and a representative of Fair Finance Guide Brazil.

The audience heard concrete examples of how the operations of companies like Cargill, Bunge and JBS  contribute to deforestation, loss of biodiversity, and human and land rights violations. Speakers also highlighted the dangers of, and deficiencies in soy certification, legal deforestation and land right claims, which do not address deforestation risks and can sometimes exacerbate them.

We held this session to emphasise the importance of stepping up bank and investor engagement in favor of more effective corporate approaches to these problems, and to focus attention on the importance of fundamental systemic change to tackle this issue. For example this means a food system change, where plants should be used by people for food first and not to feed livestock.

The expert session was chaired by an independent presenter so there was an open space for questions from the financial representatives.

The Fair Finance Guide will actively continue their efforts for greater commitment of banks, insurers and pension funds to biodiversity conservation and human rights restoration, particularly in Amazon and Cerrado, and raise awareness of the importance of systemic change that benefits people, animals and the environment."