The world’s largest investment banks provided more than $2.6tn (£1.9tn) of financing linked to the destruction of ecosystems and wildlife last year, according to a new report.
Led by Wall Street giants Bank of America, Citigroup and JP Morgan Chase, 50 top investment banks provided financial services to sectors driving mass extinctions and biodiversity loss worth more than the GDP of Canada in 2019, the analysis found.
It argues that financial institutions are unable to monitor and measure the impact of their activities on the natural world because of limited policies on protecting ecosystems that are critical to human life and livelihoods when providing loans or underwriting services.
The findings in the Bankrolling Extinction report were produced by portfolio.earth, a new initiative led by finance, economics and environmental experts to better understand the role of the finance industry in the destruction of the natural world.
By matching financial services provided by investment banks to sectors identified by the UN as the primary drivers of biodiversity loss in 2019, experts identified $2.6tn of loans and underwriting services as being linked to mass extinctions and the collapse of life-sustaining ecosystems.
The sectors include food, forestry, mining, fossil fuels, infrastructure, tourism and transport and logistics sectors, all of which were identified as drivers of biodiversity loss by Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), the UN’s scientific body on nature.
According to the UN’s Convention on Biological Diversity there are five main threats to biodiversity. In descending order these are; changes in land and sea use; direct exploitation of organisms; climate change; pollution and invasive species.
Converting wild spaces into agricultural land and the intensification of farming practices is causing the greatest destruction. Between 2010 and 2015, 3.3m hectares (8.1m acres) of forest disappeared, with no sign of rates slowing down. Predictions suggest agricultural land could increase by 18% by 2050, further removing the land available to nature. As agriculture intensifies, things like wetlands, scrubland and woodlands – which wildlife relies on – are ironed out from the landscape.
In marine environments, overfishing is considered to be the most serious driver of biodiversity loss. One quarter of the world’s commercial fisheries are overexploited, according to a 2005 Millennium Ecosystem Assessment. Harvesting of wood, keeping livestock in high densities and water abstraction are also all negatively affecting ecosystems through overexploitation of natural resources.
Climate change is dismantling ecosystems at every level. Extreme weather events such as tropical storms and flooding are destroying habitats. Warmer temperatures are also changing the timing of natural events – such as the availability of insects and when birds hatch their eggs in spring. The distribution of species and their range is also changing – mountain species are particularly vulnerable because they have little opportunities to move as temperatures warm.
In marine environments, pollution from agricultural runoff (mainly nitrogen and phosphorus) is a huge problem. When these chemicals leak into the wider environment they change ecosystems by increasing the nutrient-value – this means fast-growing species that like high-nutrient environments outcompete slower growing species that favour nutrient-poor environments. Agricultural runoff causes toxic algal blooms and even "dead zones" in the worst-affected areas.
Since the 17th century, invasive species have contributed to 40% of all known animal extinctions. Invasive species change the composition of ecosystems by outcompeting native species. With increased travel and tourism, there is a higher risk of species hitchhiking to new areas. For example, invasive earthworms carried in the treads of hiking boots are believed to be changing Arctic ecosystems.
Sir Robert Watson, former chair of IPBES, said the task of rescuing nature must fall to the world’s finance industry, yet the vast majority of banks still remain unaware of their impacts on the natural world.
“Bank by bank, the report authors found a cavalier ignorance of – or indifference to – the implications, with the vast majority unaware of their biodiversity impacts, or associated balance sheet risks,” he said. “In short, this report is a frightening statement of the status quo.”
Changing this mentality is a first priority to drive change, he added.
The top 10 banks with the biggest exposure to the risks associated with the destruction of the natural world include Bank of America, Citigroup, JP Morgan Chase, Mizuho Financial, Wells Fargo, BNP Paribas, Mitsubishi UFJ Financial, HSBC, SMBC Group and Barclays.
While not all of the $2.6tn identified will be driving biodiversity loss, the report says that banks do not have systems in place to monitor environmental harm.
Mizuho Financial and SMBC Group did not respond to the Guardian’s request for comment. Bank of America, Citigroup, JP Morgan Chase, HSBC and Barclays declined to comment. BNP Paribas also declined to comment, saying it was unable to check the accuracy of the report’s findings.
Wells Fargo declined to comment on the report but a spokesperson said its environmental and social risk management policy includes biodiversity considerations for customers working in critical habitats. A spokesperson from Mitsubishi UFJ Financial Group said the company refers to internal criteria to assess the environmental impacts of sectors which could potentially affect biodiversity, such as forestry or mining.
The portfolio.earth initiative has called on banks to improve disclosures and reform how they assess possible environmental damage the financial services might support. Governments have been encouraged to hold banks liable for any damage their activities might cause, following the example of a Brazilian resolution that made rural credit financed by public banks dependent on lenders proving that they complied with environmental and other laws.
Since the 2016 Paris climate agreement, an increasing number of investment banks have implemented restrictions on coal, Arctic oil and gas, and tar sands extraction following pressure from environmental campaigners and investors. But analysis by Rainforest Action Network led by in March found 35 leading banks had funnelled more than £2.2tn ($2.66tn) into fossil fuels since the international agreement to limit greenhouse gas emissions and have not aligned themselves with goals of the accord.
Prof Kai Chan of the Institute of Resources, Environment and Sustainability at the University of British Columbia and leading author of the IPBES report, said: “A global sustainable economy sits at the centre of humanity’s much-needed transformation to meet the climate and ecological crises. And at the centre of that sit the banks and the finance institutions whose investments power development around the globe.
“Imagine a world in which projects can only raise capital when they have demonstrated that they will contribute meaningfully and positively to restoring the planet’s bounty and a safe climate for all? That’s the future this report envisions and builds toward.”