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Investment Key findings July 2022

The June 2022 investment analysis shows a total of USD 48.6 billion held by investors in bonds and shares in 239 forest-risk commodity companies in the world’s three largest tropical forest regions. This figure represents an increase of 17% (USD 7 billion) since September 2021. The change in numbers can be partly attributed to improved data availability, to changes in share prices and to exchange rate fluctuations. However, analyzing the data in more detail also shows trends of increased investments by certain actors, despite a flurry of financial sector commitments in November 2021 at the Glasgow COP26. These included the creation of the Glasgow Alliance for Net Zero (GFANZ) which brought together financial institutions to align their financing with the Paris Agreement target of limiting global warming 1.5 above pre-industrial levels and to accelerate the transition to a net-zero economy. 

As Figure 1 shows, the largest sector for bond and shareholding as of May 2022 was the palm oil sector with USD 22.1 billion. This was followed by: USD 13.1 billion for the pulp & paper sector; USD 5.2 billion for beef; USD 3.3 billion for Soy; USD 3 billion for rubber; and USD 1.9 for timber.

Figure 1. Investment by sector (May 2022)

Just six countries’ financial institutions were responsible for almost 85% of the total investment held in bonds and shares based on the latest filings in May 2022. These, shown in Figure 2, were the USA (USD 14.6 billion), Malaysia (USD 12.6 billion), Brazil (USD 5.8 billion), Japan (USD 3.6 billion), Chile (USD 3 billion) and the UK (USD 1.5 billion).

Figure 2. Largest ten countries with financial institutions’ investments by forest-risk region (May 2022)

The investors with the most financial exposure to forest-risk commodity sectors in Southeast Asia, Latin America and West & Central Africa include three of Malaysia’s major public-backed funds, US-based Blackrock and Vanguard – the world’s largest asset managers – and Chile’s Banco de Crédito e Inversiones (BCI). In the case of BCI, its rise to the list of top investors is most likely related to improved data coverage on its bond holding, in the financial databases that are the source of our data. 

Figure 3. Largest ten investors by sector (May 2022)

These figures demonstrate a substantial uptick in the scale of finance to the most significant commodity sectors for tropical deforestation, environmental degradation and social conflicts worldwide. Increasing support for these sectors without strengthening ESG policies and due diligence procedures undermines the world’s ability to meet climate goals or achieve the UN Sustainable Development Goals. 

Latin America

Much of the investment in Latin America is flowing to the pulp & paper and beef sectors. Within the largest ten investors, four major US investment managers represent a third of investment providing USD 2.9 billion to commodity producing companies primarily operating in Brazil. Despite growing concerns from civil society about the unprecedented assaults on Indigenous Peoples’ rights and rollbacks on environmental protections under Bolsonaro’s administration, these investors continue to provide substantial finance. Most recently, the brutal murders of Bruno Pereira and Dom Phillips, who were working to defend Indigenous Peoples’  rights and environmental protections, has been linked to the escalating violence under Bolsonaro. This demonstrates the systematic dismantling of human rights and environmental protections in Brazil, a reality that commodity companies and their investors cannot ignore.

Figure 4. Largest ten investors in Latin America by sector (May 2022)