At least 6.44 billion NOK went from seven Norwegian banks to 17 such companies in the last five years. Our study found links to soy and meat companies in Brazil, supermarket chains selling beef and producers of feed, pork, poultry and dairy products with soy in China, Europe and Brazil.
An international case study
The report is part of an international case study conducted by Fair Finance International, which Etisk Bankguide is a part of. Etisk Bankguide is run by Framtiden i våre hender and the Norwegian Consumer Council (Forbrukerrådet). The international case study from Brazil, Germany, the Netherlands and Norway examines financial ties to 59 companies with a high deforestation risk in Brazil. The companies produce, trade or sell soy or meat from Brazil, or have supply chains that use the raw materials in Europe and China. The studies show that financial institutions in the Netherlands, Germany and Norway have funded the companies in question with at least 20 billion USD since 2015.
High deforestation risk
Our review shows that several Norwegian banks are at the forefront of the work against deforestation in their portfolios, often ahead of their European counterparts. But although several of the banks are taking important steps, they are not protected from deforestation risk. We have identified 7 Norwegian and Nordic fund providers with financial ties to at least one of the 59 companies in the study. Four Norwegian banks have issued bonds totalling 57.9 million USD to the companies in the period 2015-2020. The Government Pension Fund of Norway has ties to 18 companies in the study with more than 2.2 billion USD and has thus invested more than three times as much as the banks in the study in the companies in question.
Several different parts of the supply chain can drive deforestation. It is particularly problematic to have ties to companies that do not take deforestation seriously, evidenced by malpractice or a deficient or lacking approach to the issue. It is crucial that investors have a comprehensive analysis with adapted instruments to prevent them from contributing to deforestation. It is unacceptable to risk financing the destruction of ecosystems in Brazil through ties to companies that take deforestation lightly.
Need for action
The situation in Brazil is dramatic and urgent. Norwegian financial institutions with ties to the companies in this study must take their responsibility and the increasingly aggravated situation in Brazil seriously. Banks must base themselves on thorough analyses and continuously evaluate the measures they use. They should also continue making demands to influence deforestation-risk sectors and their management. Such efforts could build on previous initiatives that communicate clear expectations to companies and Brazilian authorities.
Financial actors can play an important role in pressuring companies to become more sustainable, but this requires clear expectations for the entire supply chain and time-bound plans if the pressure does not materialize into actions. Further measures are needed against deforestation in portfolios, such as specific requirements, timelines and consequences for lack of action.
Recommendations to financial institutions:
Framtiden i våre hender recommends that the banks take note of the findings in this report. We also recommend the following measures:
- Commit to zero tolerance for deforestation in all financial relationships
- Demand transparency and disclose information
- Communicate expectations and formalize requirements
- Screen companies with deforestation risk
- Exclude companies with non-compliance
- Exercise active ownership
- Monitor and act
- Vote on shareholder proposals for deforestation
- Participate in joint initiatives
- Ensure effective grievance mechanisms
- Ensure sufficient capacity in the sustainability work
Recommendations to the Norwegian authorities:
- Develop and implement a comprehensive policy for the transition to circular agriculture and sustainable food systems.
- Develop policies to phase out imports of raw materials with high deforestation risk.
- Adopt a law imposing due diligence and transparency on companies, including financial institutions, to ensure business practices in accordance with OECD guidelines and UN Guiding Principles.
- Say no to the trade agreement between EFTA and Mercosur. In line with previous input from a broad group of civil society organizations, we ask the authorities to say no to the trade agreement until the critical deforestation and environmental situation in Brazil is under control through a credible framework that also ensures indigenous rights and sustainable food production, and until sustainability and human rights prevail. The sustainability chapter of the agreement must be binding, and other parts of the agreement cannot undermine provisions that are intended to ensure sustainability and human rights.
- Ensure coherence in policies that affect food systems, so that, for example, business policy measures do not promote a development that opposes political objectives on climate and forest conservation.