Banks in South East Asia and Latin America urged to upgrade lending policies on seafood, palm oil, cattle and soy to safeguard against risk
Regional banks in South East Asia and Latin America have a "historic opportunity" to safeguard their investments by better managing food security risk associated with commodities such as palm oil, soy, cattle and seafood, according to new research led by Global Canopy and WWF.
Published today, the research argues banks operating in the two regions stand to benefit from improving their lending policies to minimise the negative environmental and social impacts of seafood and commodity production.
WWF has previously valued good and services from the global ocean economy at around $2.5tr each year, and SE Asia is projected to produce around a quarter of the world's seafood by 2030, which represents a core sector of that overall blue economy.
Yet more than 30 per cent of the world's fisheries have already been pushed beyond their biological limit, and over nine million hectares of tropical forests are cleared to make way for soft commodities such as palm oil, soy, cattle and timber, the green groups point out.
But despite the significance of SE Asia's blue economy, none of the 24 regional banks assessed have a seafood-specific lending policy, potentially opening up their lending to local sustainability risks, such as over-fishing and depleted stocks, the research found.
In contrast, the eight global banks which have operations in SE Asia, including Deutsche Bank and Standard Chartered, all have some form of sustainability policy on seafood.
On palm oil, regional SE Asia banks are making stronger moves to address sustainability risks, but the research suggests there is still some way to go. It shows 30 per cent of the SE Asian banks now have a specific policy to govern lending to firms in the palm oil sector, while two have introduced financial incentives to palm oil companies to encourage them to embrace more sustainable practices.
Tom Bregman, senior sustainable finance associate at Global Canopy, urged regional banks in SE Asia to up upgrade their policies to include seafood and other food commodities. "The banking sector in South East Asia has a historic opportunity to underwrite regional food security and reap the multi-trillion dollar benefits across its lending and investment portfolios," he said. "But first there is a real need to put in place policies that properly assess the environmental and social risks of those they finance."
Meanwhile, in Latin America, the research found that of 24 banks assessed in Brazil and Paraguay, only one currently has a commitment to reduce deforestation caused by companies in its portfolio. And, of 14 regional banks in Brazil, only four specifically require companies to demonstrate legal land tenure and compliance with the forest code.
The findings come from Global Canopy's Soft Commodity Risk Platform (SCRIPT) which launched last year with the aim of helping banks and investors analyse their exposure to environmental and security risks in food supply chains. The tool has now added an updated policy benchmarking tool, as well as new materiality and corporate guidance for setting seafood investment policies, Global Canopy said.
Raj Kundra, vice president for international finance at WWF, welcomed positive moves to address food security risks among some regional banks on areas such as labour rights and palm oil, but stressed the was "still a long way to go".
"The majority of banks assessed do not have adequate seafood and soft commodity policies to seize the opportunity of financing the food security of tomorrow," he said, and urged them to "develop meaningful policies that help manage supply chain risks and opportunities".
Banks, perhaps more than any other sector, should be aware of the truth in the old adage that you can't manage what you don't measure. And yet it appears that many leading financial institutions are continuing to turn a blind eye to the incrasingly obvious environmental risks afflicting both global food supply chains and the companies they invest in.
National Infrastructure Commission chief executive Phil Graham's speech at the Clean Energy Infrastructure Summit
Brewing giant has made SDG6 central to its water strategy, and is reaping the benefits as a result
Joint statement with institutional investors strengthens oil major's low carbon plans, but critics insist wider targets are needed
P&G set new target to reduce plastic use in European Fabric Care brands by 30 per cent by 2025