Stop EU companies from bankrolling nature destruction

Sandra Hieke is a project co-lead with Greenpeace International and is based in Hamburg, Germany.

The European Commission frequently highlights its determination to help save the planet from climate change and environmental destruction. And in February, it announced its new goals for curbing greenhouse gas emissions.

However, according to a new report from a coalition of NGOs — including Greenpeace International — beyond the Continent’s borders, EU banks and financial institutions continue to fund deforestation and the destruction of other critical habitats. And only the Commission has the power to turn off this destructive cash flow.

In short, banks provide corporations with funding, extend credit, buy their stocks and bonds, and provide them with other financial services. This new report focuses on the money going to major corporations most active in sectors that are linked to the destruction of ecosystems — sectors producing agricultural commodities like palm oil and soybeans, industries consuming these commodities to make animal feed or other products, as well as timber and wood pulp.

Its findings show that financial institutions headquartered in the EU currently hold €60 billion in investments in such companies — that’s 9.4 percent of the global total.

Moreover, since 2016, these same financial institutions have provided €256 billion in credit to corporations in sectors linked to ecosystem destruction. That amounts to more than a fifth of the total credit these companies have received globally, making EU-based banks and financial institutions their second-largest lender, trailing closely behind those in the U.S. and well ahead of China.

Food factory Cargill’s conveyor belt. | Guillaume Souvant/AFP via Getty Images

Among these financial institutions, those in just four countries — France, the Netherlands, Germany and Spain — extended nearly 90 percent of Europe’s total credit to major companies in ecosystem risk sectors. The biggest lenders were BNP Paribas, Deutsche Bank and Rabobank, while the biggest investors were Crédit Agricole, Deutsche Bank and Allianz.

And though the biggest recipients of the funds might not be household names, they’ve collectively received €24.4 billion in credit and €1.6 billion in investments from EU-based banks. The companies Cargill and Bunge are two of the world’s largest traders of commodities that pose a risk to ecosystems — like soy, maize, cocoa and sugar. JBS and Marfrig are leading meat industry conglomerates. The major Indonesian companies Royal Golden Eagle and Sinar Mas are both globally significant producers and processors of palm oil and pulpwood.

All of these recipients of European cash have operations in sectors linked to deforestation, ecosystem destruction and disputes with local communities. It is hard to overstate just how destructive an impact they have had on our natural world.

The fact that they’re so enmeshed in the European economy also makes it hard for shoppers to source products that have been produced responsibly. For example, palm oil is ubiquitous in consumer goods as varied as pizza dough and laundry detergent — and while its cultivation isn’t necessarily harmful, palm oil is all too often produced by leveling biodiverse tropical forests to replace them with vast monocultures of oil palms. 

When farmers began protesting EU policies by blocking border crossings in February, they rightly pointed out that the bloc is awash with products from countries with lax environmental regulations. And it’s exactly the size of this market — and the bloc’s involvement as a financier — that means the EU has a vital role to play in cleaning up these industries.

It’s all too clear we can’t rely on corporate promises to do better. According to a report from environmental watchdog Global Canopy, out of 500 companies linked to tropical deforestation risk,  40 percent haven’t established policies to reduce their impact. Meanwhile, many of those that do have policies still continue to be linked to the problem.

The only solution is to stop our financial institutions from funding this cycle of global degradation. Along these lines, last year, Brussels adopted the EU Deforestation Regulation as the bloc’s first step toward meeting global climate and biodiversity commitments. This regulation bans the sale of products derived from commodities such as soy, palm oil and beef when they’re associated with deforestation. However, at present, it doesn’t regulate their financial enablers.

Fortunately, the Commission is mandated to complete a review of the regulation by June 2025, with particular focus on the role of finance in deforestation. And this gives lawmakers an opportunity to do something.

The EU need to address its complicity in forest destruction, regulate cash flows, and start protecting and restoring nature — the true wealth that benefits us all. And to do so, Europe’s political leaders need to seize this opportunity.