Environment Bill — House of Lords, 2021-07-12
Topic: Environment
Kathryn Jane Parminter (Liberal Democrats, Centre to centre-left): My Lords, I rise to introduce Amendment 265A in my name, for the support of which I am grateful to the noble Lord, Lord Randall of Uxbridge, the noble Earl, Lord Sandwich, and the noble Baroness, Lady Jones of Whitchurch Like other Peers, I welcome the inclusion of Schedule 16 and its introduction into law of an essential means of combating the deforestation associated with the consumption of forest risk commodities in the UK. Yet the trade in these commodities is only the final stage of the supply chain; their production must also be financed and, because the UK is such an important global source of capital, British banks and financial institutions currently supply a considerable proportion of this investment As Global Witness reported, in 2020, UK banks channelled over £900 million into over 300 major companies involved in forest risk commodities such as palm oil, soya and beef. Between 2013 and 2019, UK-based financial institutions were the single biggest source of international finance for six major agribusiness companies involved in deforestation in the climate-critical forests of Brazil, the Congo basin and Papua New Guinea, providing £5 billion over this period. I am not claiming that all this investment financed illegal activities, but, almost certainly, some of it did. As Forest Trends reported earlier this year, over the period of 2000-2012, 49% of tropical deforestation for agricultural commodities was thought to be illegal; between 2013 and 2019, the proportion rose to at least 69%. Illegal conversion of forests for agriculture is destroying an area of forest the size of Norway each year The point is that these banks do not have adequate systems in place to ensure they are not funding illegal deforestation. Extending the same requirements for the exercise of due diligence to banks as this Bill would impose on importers is a sensible move. This is not merely my view. That was the conclusion of the Global Resource Initiative Taskforce of sustainability leaders from finance, business and civil society, which was established by this Government in 2019. It was chaired by Sir Ian Cheshire, who was at that time chairman of Barclays UK. In its report last year, it concluded: "Financial institutions provide enabling financial services across the commodity supply chain and so should be obligated to exercise due diligence with regard to their lending and investments." No other mechanism currently requires banks to carry out due diligence for illegal deforestation. The Government have argued, in their response to the Global Resource Initiative report, that the requirements for reporting on climate-related financial information that they intend to introduce will tackle the problem—but in reality they cannot. These reports will focus only on annual carbon emissions and are not suited to identifying the links between the provision of finance for agricultural crops growing on land cleared of forest several years before; they will also not require any assessment of the legality of the forest clearance The reports the importers of these commodities will be required to issue on the actions they have taken to establish their due diligence systems will provide helpful information but, again, they will relate to the final stages in the supply chain—the trade of the commodities. Far better, surely, to require banks to conduct due diligence on their lending and interventions at the start of the process when the initial finance is provided The financial sector is one of the British economy’s greatest strengths, but it will fail to remain so if it continues to fund activities which contribute to the climate and nature emergencies. I recognise and applaud the many steps that individual banks and financial institutions are already taking to green their activities. Requiring all of them to conduct due diligence to avoid their lending contributing to illegal deforestation is hardly a radical move. Indeed, it is the minimum we should expect.