Global Canopy: New Tools Provide Significant Opportunity for Latin American Banks to “Underwrite Regional Food Security”, Through Better Management of Soft Commodity Risks

  • Global Canopy adds new tools and guidance to the Soft Commodity Risk Platform (SCRIPT), produced in partnership with WWF, to help regional banks better manage sustainability risks for commodities such as palm oil, soy, cattle and seafood.
  • Progress on cattle and soy: A quarter of 24 Latin American banks assessed now have a specific policy to govern lending to companies in the cattle sector, and two have specific lending policies applicable to companies in the soy sector.
  • SDG opportunity: The production of soft commodities such as palm oil, soy, cattle, and timber contribute up to 20% of carbon emissions linked to the loss of forests globally. Latin American banks are urged to adopt policies to ensure the sustainable production of soft commodities and capture the opportunity to align their portfolios with the Sustainable Development Goals.
  • Policy sea change required: The policies of regional banks associated with soy and cattle companies are currently focused on meeting legal requirements, such as compliance with the Brazilian Forest Code. However only one bank encourages companies to ensure Free, Prior and Informed Consent.

LONDON–(BUSINESS WIRE)–New research from Global Canopy, developed in partnership with WWF, has found that banks operating in Brazil and Paraguay stand to benefit from improving policies to manage the negative environmental and social impacts of soft commodities such as beef, soy, palm oil and timber production.

New tools on SCRIPT platform provide significant opportunity for local banks to ‘underwrite regional food security’ through better management of soft commodity risks

Soft commodity production is a major driver of tropical deforestation and contributes a significant portion of the 15-20% of carbon emissions linked to the loss of forests globally. If banks put in place safeguards to ensure the sustainable production of soft commodities they can capture the opportunity to align their portfolios with the Sustainable Development Goals and transition to a low carbon economy.

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Research released today finds that 9 of 14 Brazilian banks (64%) explicitly state that their clients need to operate legally. However, there is room for improvement too, as only one bank encourages companies to ensure Free, Prior and Informed Consent, and none require companies to meet key labour standards.

Today’s package of tools added to Global Canopy’s SCRIPT (the Soft Commodity Risk Platform), to help banks and investors analyse their exposure to risk in soft commodity supply chains include:

  • An updated Policy Benchmarking Tool to help banks assess the strength of their deforestation and seafood policies against 60 peers globally and regionally.
  • Materiality guidance to demonstrate the business risks facing companies operating unsustainably in seafood supply chains.
  • Corporate guidance and a briefing paper to set expectations for the boards of companies operating in seafood supply chains. The expectations are intended to foster more effective financial institution-to-company engagement around environmental and social impacts associated with aquaculture and fisheries.

Financial support for the project has come from the Gordon and Betty Moore Foundation.

Tom Bregman, Senior Sustainable Finance Associate, Global Canopy said:

“The banking sector in Latin America has a historic opportunity to underwrite regional food security and reap the multi-trillion dollar benefits across its lending and investment portfolios. But first there is a real need to put in place policies that properly assess the environmental and social risks of those they finance. Every year, over nine million hectares of tropical forests are cleared to make way for the production of soft commodities such as palm oil, soy, cattle, and timber. And more than 30% of the world’s fisheries have been pushed beyond their biological limits.“

Raj Kundra, Vice President, International Finance, World Wildlife Fund:

“While there are encouraging signs that regional banks are starting to act in areas such as labour rights or palm oil, there is 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. That’s why today’s tool and guidance is so important. They help provide a platform to bridge the capacity gap, enabling banks to develop meaningful policies that help manage supply chain risks and opportunities.”

For more information see www.script.finance

Contacts

Global Canopy
Mike Weber, ESG Communications
+44-(0)7932-577-755
mike@esgcomms.com