Banks in Southeast Asia and parts of Latin America stand to benefit from improving their policies to manage the negative environmental impacts of beef, soy, palm oil and, especially, seafood, according to Global Canopy. Southeast Asia is set to produce a quarter of the world’s seafood by 2030, but research by Global Canopy, developed in partnership with WWF, shows that none of the 24 banks in the region have a seafood-specific lending policy.
Agriculture and seafood production is dependent on the ongoing provision of ecosystem services, underpinned by nature. Goods and services from the “ocean environment” are valued at $2.5 trillion per year, and growth in seafood production is key to ensuring regional food security. Banks can capitalize on that opportunity if they put safeguards into place to ensure the sustainable development of the fisheries industry. While global banks such as Deutsche Bank and Standard Chartered have seafood-specific policies, none of the 24 regional banks assessed for the Soft Commodity Risk Platform (SCRIPT) have such policies.
On the other hand, almost 30% of the Southeast Asian banks assessed now have a specific policy to govern lending to companies in the palm oil sector, and two have introduced innovative financial incentives to palm oil companies to be more sustainable.
“The banking sector in Southeast Asia has a historic opportunity to underwrite regional food security and reap the multi-trillion-dollar benefits across its lending and investment portfolios,” says Tom Bergman, senior sustainable finance associate with Global Canopy. “But first there is a real need to put in place policies that properly assess the environmental and social risks of those they finance.” For example, he points out, more than 30% of the world's fisheries have been “pushed beyond their biological limits.“
The findings emerged from a new package of support added to Global Canopy’s SCRIPT, which was launched in April and aims to help banks and investors analyze their exposure to risk in soft commodity supply chains.
It has been estimated that land-use change alone cost the global economy between $4 trillion and $20 trillion per year between 1997 and 2011, Global Canopy says. Due to these impacts and dependencies, companies are facing increased reputational, operational, and regulatory risks, which can affect their ability to repay the capital.
The SCRIPT guidance and policy tool was developed to help banks in Southeast Asia and Latin America minimize the environmental and social risks of their loan books.
