Five of the world’s largest banks are greenwashing their role in the destruction of the Amazon, according to a report indicating that their environmental and social guidelines are failing to cover more than 70% of the rainforest.
The institutions are said to have provided billions of dollars in financing to oil and gas companies involved in projects that impact the Amazon, destabilize the climate or damage the land and livelihoods of indigenous peoples.
The banks say they follow ethical policies that help protect intact forests, biodiversity hotspots, indigenous areas and nature reserves. However, the research says it found geographic and technical limitations on their ability to monitor and achieve these set goals.
The report was prepared by the watchdog organization Stand.earth and the Coordinating Organization of Indigenous Organizations of the Amazon Basin (COICA). The organizations mapped the extent of environmental and social governance (ESG) obligations of five leading financiers 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 to companies in this sector.
The analysis found that on average 71% of the Amazon is not effectively protected by the five banks’ risk management policies on climate change, biodiversity, forest cover and the rights of indigenous peoples and local communities.
The differences varied considerably from company to company. At one end of the spectrum is JPMorgan Chase, whose biodiversity protections, according to the report’s authors, only apply to UNESCO World Heritage sites that cover just 2% of the Amazon and are in any case unlikely to qualify for oil and gas exploration. .
On the plus side, the study praised British bank HSBC, which was once a major financier of destructive projects in the region but has not provided any financing since adopting a 100% Amazon exclusion policy in December 2022.
“So far, HSBC has been true to their word,” said Angeline Robertson, the report’s lead author. “This shows that it can and has been done, even by a company that used to have a major interest”
Some banks claim that they are playing a positive role in encouraging extractive industries to adopt more responsible policies. However, while the report’s authors say there are long-term relationships and potential influence involved with the banks, the majority of funding from the big five comes in the form of syndicated bonds for general corporate purposes. These bonds, which are standard practice, are intended for broadly defined purposes and require little or no follow-up once an agreement is signed. This may make it difficult to apply due diligence guidelines to specific environmental or social issues.
Spanish bank Santander – Europe’s largest financier of oil and gas in the Amazon and the fourth largest in the world with almost $1.4 billion (£1.1 billion) in direct financing between 2009 and 2023 – has one of the most comprehensive exclusion policies for oil and gas, which covers: 16% of the Amazon, but the report indicates that 85% of transactions are in the form of syndicated bonds, which are not transparent and reduce the bank’s liability as a contributor to negative consequences.
The authors examined 560 oil and gas transactions from 280 banks over the past two decades in the Amazon using Stand’s Amazon Banks Database to determine whether deal structures that circumvent ESG exclusions and screening are common.
They found that two North American banks, Citibank and JPMorgan Chase, have provided the most capital – $2.43 billion and $2.42 billion respectively – to companies exploiting oil and gas projects in the Amazon. JPMorgan Chase recently withdrew from the Equator Principles Association, which serves as a common foundation for institutions to manage environmental and social risks when financing projects.
The third largest financier over the past two decades is Brazil’s Itaú Unibanco, which, the report notes, does not have any exclusion or screening applicable to oil and gas activities in the region. The database shows that it has financed projects from 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 largest financier of oil and gas in the Amazon, handling 99% of transactions in the form of syndicated bonds, the report said. This means that these deals would not necessarily have been subject to stricter ESG screening.
The report urges banks to introduce a geographic exclusion covering all transactions involving the oil and gas sector in the Amazon. The authors say this is essential because the rainforest is the world’s most important carbon store on Earth and home to biodiversity, yet it is declining towards a point of no return.
“We literally live in a rainforest that is on fire, our rivers are polluted or drying up,” said Fany Kuiru, COICA’s general coordinator. “Our destiny is your destiny: the Amazon is crucial for the future of our planet. The banks are trying to wash away the debt through vague policies, but must be held responsible for the damage their money is doing to the indigenous peoples of the Amazon and to the biodiversity of the rainforest. Not a single drop of oil from the Amazon has been extracted with the consent of the indigenous peoples. We demand that Citibank, JPMorgan Chase, Itaú Unibanco, Santander and Bank of America end oil and gas financing.”
Since Stand.earth launched its Exit Amazon Oil and Gas campaign, several banks, including BNP Paribas, Natixis, ING and Credit Suisse, have pledged to stop financing the trade of oil from ports in Ecuador and Peru, which has covers a large part of the oil and gas trade. trade in fossil fuels from the Amazon region. HSBC and Barclays have also implemented comprehensive geographic exclusion policies.
The authors say they want to work with the remaining oil and gas financiers in the Amazon to tighten their ESG policies and exclude rainforest oil projects from their portfolios.
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Robertson said the five banks are pursuing policies that “seem very symbolic; it appears that it is more about the risk to reputation than the risks of impact on the ground”. But she emphasized that this could change. “There are many opportunities for banks to respond appropriately and embody environmental risks in their portfolios because that is what the future holds. With climate change and biodiversity loss looming over us, we need banks to make better decisions in the interests of their customers and their own business interests. This is a reckoning and a call to responsibility.
“We have tried to give an idea of the adverse consequences on site. This is not only an effort to expose banks’ greenwashing, but also to center the voices of those most affected in the Amazon.”
Some in the financial industry dispute the report’s methodology, saying it was inappropriate to add up multi-year financings, lines of credit, refinancings and indirect financings and then suggest this amount was funneled to a particular group. They said that loans for general corporate purposes have long made up the vast majority of credit markets and that it would be necessary to ask specific companies whether and how this capital is used.
Several banks said they are applying ESG guidelines to general corporate bonds.
Citibank said it has a “comprehensive corporate security risk management policy, which outlines our expectations for clients and directs us to conduct greater due diligence around activities with heightened risks related to human rights, biodiversity, indigenous peoples, critical habitats, community conflict and /or environmental justice. We work directly with clients to evaluate their commitment, capacity, policies, management systems and workforce to manage these specific environmental and social risks.” The company updated its agricultural risk policy in 2022.
JPMorgan Chase said: “We support fundamental principles of human rights, including the rights of indigenous peoples, in all our industries and in every region of the world in which we operate. Our 2023 ESG report reflects our policies and practices related to environmental and social risks and human rights, including restricted operations and sensitive business activities. Screening customers and transactions for our limited activities and sensitive business activities that are subject to more stringent review includes GCP (general corporate purpose) financing activities. It is not limited to project financing.”
Regarding JPMorgan Chase’s decision to leave the Equator Principles Association, a spokesperson added that EPA membership was “not necessary for us to independently maintain 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 notes that there is “enhanced due diligence for transactions where the majority of proceeds are attributed to identified activities that could have a negative impact on an area that is used or traditionally claimed by an indigenous community. ”.
A Santander spokesperson said: “We fully understand the importance of protecting the Amazon and supporting sustainable development in the region. All financing decisions are guided by a strict policy framework approved by our board of directors, and our operations are in line with all environmental regulations in the region. We are also actively involved in various sector initiatives to protect the region and proactively work with customers, as well as other banks, governments, regulators and other institutions to help improve practices, recognizing that this is a very complex challenge that requires a multifaceted, multilateral response. .”
Itaú Unibanco had not responded to the Guardian’s request for comment at the time of publication.