Chinese banks are the second largest financial backers of raw materials involved in deforestation of tropical rainforests, according to a study that casts doubt on Beijing’s ambitions to be a world leader in the fight against climate change.
Data analyzed by Forests & Finance, a global coalition of non-governmental organizations, showed that from January 2016 to April 2020, Chinese institutions provided $ 15 billion in loans and underwriting services to companies that traded commodities. firsts linked to deforestation in Southeast Asia, Brazil and Africa.
Chinese companies involved in the pulp and paper, palm oil, soybean, rubber, and timber trade operate largely overseas and are often funded by Chinese banks, underscoring the footprint. international financial sector of the country. Brazil accounted for the largest amount of finance related to deforestation, but most of the loans were made in the country.
The results, which estimated a company’s share of borrowing going to activities that put forests at risk, coincided with an increased focus in Beijing on limiting greenhouse gas emissions. President Xi Jinping promised last year, China would achieve “carbon neutrality” by 2060.
Climate advocates have pointed out, however, that China’s overseas investments and loans for environmentally risky infrastructure and trade run counter to Xi’s bold goal.
The National Industrial and Commercial Bank of China was the largest provider of loans and underwriting services in the database, with a total value of $ 2.2 billion. Sinochem, a Chinese state-owned chemicals group, was the biggest recipient, raising $ 4.6 billion, mostly for its rubber business.
Trade in products included in the Forests & Finance database has accounted for about two-fifths of the world’s deforestation. Research suggests that it contributes about 5 percent of annual greenhouse gas emissions through its effect on deforestation alone.
“The world’s major economies talk big about climate action but continue to turn a blind eye to their own banks funding tropical deforestation,” said Tom Picken, Campaign Manager Forests & Finance.
Picken explained that the purpose of the database was to demonstrate the huge flow of funding from Chinese banks which fell below standards of “green financing” and to pressure Chinese banks to adopt stricter guarantees to avoid financing deforestation.
“There is currently little implication for banks even knowingly financing illegal deforestation abroad,” he said.
In 2017, the Chinese banking system overtook the euro zone become the largest in the world in terms of assets. There are also signs of its growing influence in other developing economies.
A Bank for International Settlements research paper last year found that Chinese banks have become the largest cross-border creditors for around half of emerging and developing economies globally. The document added that their lending activity “is strongly correlated with trade”.
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