Some of the world’s biggest central banks are “unknowingly” helping to finance agribusiness giants involved in the destruction of the Brazilian Amazon, according to a report released Wednesday.
The Bank of England, the US Federal Reserve and the European Central Bank are among the institutions that bought millions of dollars in bonds issued by companies linked to deforestation and land grabbing, according to the report. Bank destruction report , published by rights group Global. Witness.
“As these programs are guaranteed by the respective governments of the UK, US and EU Member States, this means that taxpayers in all these territories are inadvertently signing up with companies involved in the destruction of the Amazon and other rainforests,” according to the report. report. report.
The role of central banks
Banks buy corporate bonds issued by big companies in an attempt to inject liquidity into financial markets when the private sector is reluctant to lend. Known as “asset purchase programs”, these measures aim to lower the cost of borrowing for companies and were widely used during the pandemic as a way to boost economies.
Some of the companies that sold bonds are linked to environmental destruction, the report says, naming Cargill, Inc., Archer-Daniels-Midland Company (ADM) and Bunge Ltd Financial Corp, three of the largest agribusiness conglomerates operating in Brazil. .
Brazil is one of the world’s largest producers or exporters of grains, coffee, soy, fruit and other raw materials, and the three companies have faced previous allegations of wrongdoing. The Guardian reported on links between Cargill and Bunge and a Brazilian farm that has been linked to abuses of indigenous and land rights.
Addressing the allegations in the Global Witness report, Cargill said it was “committed to ending deforestation and conversion in our agricultural supply chains” and Bunge said it was “committed to complying with all regulations in local markets”. our own strict socio-environmental policies”. ADM did not respond to requests for comment.
Financing the destruction of forests
But it was central banks that bore the brunt of the criticism. Since 2016, the Bank of England has also purchased an undisclosed stake in a £150m corporate bond issued by Cargill, Inc., and the European Central Bank has purchased an undisclosed amount of debt issued by Bunge Finance Europe BV. .
And in the last two years alone, “the US Federal Reserve has purchased $16 million in bonds issued by Archer-Daniels-Midland Company (ADM) Bunge Ltd Financial Corp and Cargill, Inc.
“All of this comes despite repeated public statements by the three central banks emphasizing the risks that climate change poses to long-term financial stability and economic growth.”
Global Witness said the Federal Reserve has “ended” its bond-buying scheme and the Bank of England will begin the same process this month.
The Fed said it adopted the policy as a one-time measure in 2020 to save jobs during the global pandemic and has no plans to do so again.
The EU also finances the destruction
The Bank of England said it had taken steps to reduce borrowing costs for all companies and noted that the support given to Cargill was “an extremely limited approach”.
Meanwhile, the European Central Bank said it “intends to gradually decarbonize its holdings in corporate bonds, in a path in line with the objectives of the Paris Agreement. To this end, the Eurosystem will skew these holdings towards issuers with better climate behavior, reinvesting the significant repayments planned for the coming years”.
However, Global Witness said the UK and EU banks’ refusal to publish the values of their holdings in the companies created a “lack of transparency”.
“As overseers of the private financial sector, central banks must lead by example and adopt an explicit zero deforestation policy as part of their approach to climate change, including divestment of all deforestation-linked bonds and increased scrutiny of deforestation. stability. by deforestation and loss of biodiversity,” says the report.
The report comes amid ongoing destruction in the Amazon region, a vast area that spans parts of nine different South American countries and a vital carbon sink to absorb the emissions driving the climate crisis.
Bolsonaro breaks deforestation records
Deforestation under the far-right president Jair Bolsonaro hit a record in the first seven months of the year, the latest shocking statistic under a president who turned a blind eye to illegal loggers, ranchers and prospectors active in the region.
26% of the Amazon has already been deforested and parts of it have passed the tipping point where lush forest turned into dry savannah, according to a report published in early September by scientists and indigenous organizations.
“I think this report is a very useful analysis that highlights the need for central banks to analyze their exposure to deforestation in their portfolios,” said Nick Robins, professor of sustainable finance at LSE.
“2022 is really the year that central banks recognized the risk of nature as a threat to institutions. The focus so far has been on the energy sector, but this is yet another sign that deforestation and land use need to be placed at the center of climate scenarios.”
By Andrew Downie. Article in English