{"id":71500,"date":"2021-05-04T15:43:01","date_gmt":"2021-05-04T15:43:01","guid":{"rendered":"https:\/\/chinadialogue.net\/?post_type=opinion&p=71500"},"modified":"2024-04-12T16:26:21","modified_gmt":"2024-04-12T16:26:21","slug":"reducing-the-forest-footprint-of-chinese-soft-commodity-financing","status":"publish","type":"opinion","link":"https:\/\/dialogue.earth\/en\/business\/reducing-the-forest-footprint-of-chinese-soft-commodity-financing\/","title":{"rendered":"Reducing the forest footprint of Chinese soft-commodity financing"},"content":{"rendered":"\n

China, through its vast imports of commodities like soy, palm oil, rubber and timber, has an unparalleled impact on many commodity markets linked to global deforestation and related greenhouse gas emissions. This has prompted calls<\/a> for new regulations requiring Chinese importers to undertake due diligence in order to eliminate significant harms from their supply chain. <\/p>\n\n\n\n

There is another important point of leverage that China should be using more to meet its commitments on deforestation, climate change mitigation and biodiversity loss: its financial sector.<\/p>\n\n\n\n

Financing production and trade in food and other essential resources while adhering to high environmental, social and governance (ESG) standards can help foster socio-economic development. It can support progress towards UN Sustainable Development Goals such as reducing inequality and providing decent work and economic growth. Yet, without stringent safeguards, commodities produced in tropical forest regions have tremendous potential to cause adverse ESG impacts, including land rights conflicts, labour rights issues, biodiversity destruction and the catalysation of climate change through conversion and degradation of natural forests.<\/p>\n\n\n\n

\"woman<\/div>
Harvesting benzoin resin in North Sumatra, Indonesia. The degradation of natural forests has affected livelihoods in many communities around the world. (Image: Agusriady Saputra \/ Rainforest Action Network)<\/div><\/div><\/div><\/div>\n\n\n\n

A new study<\/a> by Forests & Finance \u2013 a coalition of research groups and civil society organisations from the US, Indonesia, Netherlands, Brazil and Malaysia \u2013 demonstrates how highly exposed Chinese financial institutions (FIs) are to deforestation and related ESG risks linked to the operations of six commodities \u2013 beef, soy, pulp and paper, palm oil, rubber and timber. Based on data gathered from financial databases and company publications, we estimate that between January 2016 and April 2020, Chinese FIs provided at least US$15 billion in loans and underwriting services to companies involved in forest-risk commodities in the three tropical regions under the scope of the study \u2013 Southeast Asia, Brazil, and Central & West Africa.<\/p>\n\n\n\n

What is a \u2018forest-risk\u2019 commodity?<\/span>

\u201cForest-risk\u201d refers to the known or potential environmental and social impacts routinely associated with the production of commodities in forested areas. The risks of these harmful impacts are passed onto associated companies involved in the physical supply chain or through financing relationships.<\/p><\/div><\/div><\/div>\n\n\n\n

Our research is not exhaustive. But the 300+ companies we studied are a representative sample of the largest foreign and domestic companies in terms of their capacity to produce the six commodities, or the areas of their land that impact or cause potential harm to tropical forests, wetlands and communities. The research identified that 75 Chinese creditors \u2013 including the Big Four Chinese commercial banks \u2013 have financed the production of forest-risk commodities. Further, it identified over 100 Chinese institutional investors (primarily asset managers and insurance companies) that have financial relationships with those 300+ Chinese companies.<\/p>\n\n\n\n