Five of the world’s biggest banks are “greening” their role in destroying the Amazon, according to a report that says their environmental and social guidelines do not cover more than 70% of the rainforest.
The institutions have reportedly provided billions of dollars in funding to oil and gas companies involved in projects that impact the Amazon, destabilize the climate, or interfere with the land and livelihoods of indigenous peoples.
Banks say they adhere to ethical principles that help protect pristine forests, biodiversity hotspots, indigenous lands and nature reserves. But the investigation says it found geographic and technical limitations to their ability to monitor and achieve those stated goals.
The report was produced by the watchdog Stand.earth and the Coordinating Body of Indigenous Organizations in the Amazon Basin (COICA). The organizations mapped the extent of environmental and social governance (ESG) commitments of five leading funders of fossil fuel operators in the South American biome. These banks – Citibank, JPMorgan Chase, Itaú Unibanco, Santander and Bank of America – together account for more than half of the loans extended to companies in the sector.
The analysis found that, on average, 71% of the Amazon is not effectively protected by the five banks’ risk management policies for climate change, biodiversity, forest cover, and the rights of indigenous peoples and local communities.
The gaps varied significantly from company to company. At one end of the spectrum is JPMorgan Chase, whose biodiversity protections only apply to UNESCO World Heritage sites that cover just 2% of the Amazon and are unlikely to be considered for oil and gas exploration, according to the report’s authors. .
On a positive note, the study praised British bank HSBC, which was once a major funder of destructive projects in the region, but has not provided any funding since adopting a 100% Amazon exclusion policy in December 2022.
“So far HSBC has kept its word,” said Angeline Robertson, lead author of the report. “This shows that it can be done and has been done, even by a company that previously had a large stake.”
Some banks say they are playing a positive role by encouraging the mining industry to adopt more responsible policies. However, according to the report’s authors, while bank loan arrangements involve long-term relationships and potential leverage, most Big Five funding comes in the form of syndicated universal corporate bonds. These bonds, which are standard practice, are for broadly defined purposes and require little or no follow-up once the contract is signed. This potentially makes it difficult to apply due diligence guidelines to specific environmental or social issues.
Spain’s Santander bank – Europe’s largest oil and gas financier in the Amazon and the fourth largest globally with almost $1.4bn (£1.1bn) in direct financing between 2009 and 2023 – has one of the most extensive oil and gas exclusion policies , which includes 16% of Amazon, but the report said 85% of its transactions are in the form of syndicated bonds, which lack transparency and reduce the bank’s liability as a contributor to adverse impacts.
The authors examined 560 transactions involving the oil and gas activities of 280 banks over the past 20 years in the Amazon using Stand’s Amazon Banks database to see if deal structures that bypass exemptions and ESG screens are common.
They found that two North American banks, Citibank and JPMorgan Chase, provided the most capital — $2.43 billion and $2.42 billion respectively — to companies that operate oil and gas projects in the Amazon. JPMorgan Chase recently withdrew from the Equator Principles Association, which serves as a common basis for institutions to manage environmental and social risks in project financing.
The third largest financier over the past two decades is Itaú Unibanco of Brazil, which the report said has no exemptions or screens that apply to oil and gas operations in the region. The database shows that it financed projects by Eneva, Frontera, Geopark, Petrobras, Petroquimica Comodoro Rivadavia and Transportadora de Gas del Perú.
Fifth on the list was Bank of America. Last year, it was the financial leader in oil and gas in the Amazon, expanding 99% of transactions in the form of syndicated bonds, the report said, meaning those deals would not necessarily be subject to increased ESG screening.
The report calls on banks to adopt geographic exclusions covering all transactions involving the oil and gas sector in the Amazon. The authors say this is necessary because the rainforest is the world’s most important terrestrial carbon store and home to biodiversity, yet it is being degraded towards the point of no return.
“We are literally living in a burning rainforest, our rivers are either polluted or drying up,” said Fany Kuiru, COICA’s general coordinator. “Our destiny is your destiny: the Amazon is critical to the future of our planet. Banks are trying to wash their hands of the blame through vague policies, but they must be held accountable for the damage their money is causing to the Amazon’s indigenous people and the biodiversity of the rainforest. Not a single drop of Amazonian oil has been extracted with the consent of the indigenous people. We demand that Citibank, JPMorgan Chase, Itaú Unibanco, Santander and Bank of America stop financing oil and gas.
Since Stand.earth launched its Exit Amazon Oil and Gas campaign, several banks, including BNP Paribas, Natixis, ING and Credit Suisse, have said they will end financing for oil trade from ports in Ecuador and Peru, which cover most of the trade fossil fuels from the Amazon. HSBC and Barclays also operate comprehensive geo-exclusion policies.
The authors say they want to work with the remaining Amazon oil and gas backers to tighten their ESG policies and exclude rainforest oil projects from their portfolios.
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Robertson said the five banks have policies that “seem very symbolic; they seem to be more about reputational risk than ground impact risks”. But she stressed that could change. “There are many opportunities for banks to respond adequately and incorporate environmental risk into their portfolios because that is the future. With climate change and biodiversity loss looming large, we need banks to make better decisions in the interests of their clients and their own business interests. This is about reckoning and accountability.
“We tried to outline the adverse effects on the ground. It is an effort not only to expose the greenwashing bank, but also to bring to the fore the voices of those most affected in the Amazon.”
Some in the finance industry have questioned the report’s methodology, saying it was inappropriate to add up multi-year financing, lines of credit, refinancing and indirect financing and then suggest that amount be transferred to a specific group. They said that conventional corporate loans have long constituted the vast majority of credit markets and that it would be necessary to ask specific companies whether and how this capital is being used.
Several banks reported applying ESG guidelines to general corporate bonds.
Citibank said it has a “comprehensive corporate security risk management policy that outlines our expectations of clients and guides us to conduct increased due diligence on activities with increased risks related to human rights, biodiversity, indigenous peoples, critical habitats, community conflicts and/or environmental justice. We work directly with clients to assess their commitment, capacity, policies, management systems and staffing to manage these specific environmental and social risks.” The company updated its agricultural risk policy in 2022.
JPMorgan Chase said: “We support the fundamental principles of human rights, including the rights of indigenous peoples, in all areas of our business and in every region of the world in which we operate. Our 2023 ESG report reflects our policies and practices regarding environmental and social risks as well as human rights, including restricted activities and sensitive business activities. Screening of clients and transactions against our restricted activities and sensitive business activities subject to heightened scrutiny includes GCP (General Corporate Purposes) funding activities. It is not limited to project financing.”
Regarding JPMorgan Chase’s decision to leave the Equator Principles Association, the spokesperson added that EPA membership “was not necessary for us to independently promote best-in-class environmental and social risk management standards” and that the company would remain aligned with the organization’s principles. .
Bank of America referred the Guardian to its environmental and social risk policy framework, which states “enhanced due diligence for transactions in which the majority use of proceeds is attributable to identified activities that may adversely affect an area used or traditionally claimed by an indigenous community.” “.
A spokesman for Santander said: “We fully understand the importance of protecting the Amazon and promoting sustainable development in the region. All funding decisions are governed by a strict policy framework approved by our Board of Directors and our activities comply with all environmental regulations in the region. We are also actively involved in several industry initiatives to protect the region and proactively work with clients as well as other banks, governments, regulators and other institutions to help improve practices as we recognize that this is a highly complex challenge that requires a multifaceted, multifaceted response. .”
Itaú Unibanco did not respond to the Guardian’s request for comment by the time of publication.