The trade of commodities included in Forests & Finance’s database accounted for about two-fifths of deforestation globally. Research suggested that it contributed about 5 per cent of annual greenhouse gas emissions through its effect on deforestation alone. Recommended “The world’s big economies talk big on climate action yet continue to turn a blind eye to their own banks funding tropical deforestation,” said Tom Picken, head of the Forests & Finance campaign.
Climate advocates have pointed out, however, that China’s overseas investments and lending for environmentally risky infrastructure and trade run counter to Xi’s bold target. The findings, which estimated how much of a company’s borrowings went towards activities that put forests at risk, has coincided with an increased focus in Beijing on limiting greenhouse gas emissions. President Xi Jinping pledged last year that China would reach “carbon neutrality” by 2060.
The state-owned Industrial and Commercial Bank of China was the largest provider of loans and underwriting services in the database, at a total value of $2.2bn. Sinochem, a Chinese state-owned chemicals group, was the largest recipient, collecting $4.6bn, most of it for its rubber business. Chinese companies involved in trading pulp and paper, palm oil, soy, rubber and timber largely operate overseas and are often funded by Chinese banks, highlighting the international footprint of the country’s financial sector. Brazil accounted for the largest amount of funding linked to deforestation, but most of the loans were made within the country.
A research paper from the Bank for International Settlements last year found that Chinese banks have become the biggest cross-border creditors for about half of emerging and developing economies globally. The paper added that their lending activity “strongly correlates with trade”. Climate Capital In 2017, the Chinese banking system overtook the eurozone to become the world’s largest by assets. There are also signs of its growing influence in other developing economies.
“There are currently few implications for banks found to be even knowingly funding illegal deforestation overseas,” he said. Picken explained that the aim of the database was to demonstrate the huge flow of financing from Chinese banks that fell below the standards of “green financing” and to press Chinese banks to adopt stricter safeguards to avoid funding deforestation.
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