The biggest financiers of oil and gas in the Amazon are failing to identify and manage the true scale of the social and environmental risks their investments pose in the world’s largest rainforest, according to a new report.
Greenwashing the Amazon, published by non-profits Stand.earth and the Coordinating Body of Indigenous Organisations of the Amazon Basin, found that, on average, 71 per cent of the Amazon is not effectively protected by the environmental and social risk management policies of the top financiers of Amazon oil and gas — Citigroup, JPMorgan Chase, Itaú Unibanco, Santander and Bank of America.
“The Amazon must remain at least 80 per cent protected to avoid a dieback, stop biodiversity loss, mitigate climate change, and uphold indigenous peoples’ and local communities’ rights,” the report stated.
The Amazon plays a vital role in slowing down climate change by absorbing carbon emissions. But scientists warn that large parts of the tropical rainforest are projected to experience “mass mortality events” due to climate change and “land use-related disturbances” in the coming decades, which could in turn potentially accelerate climate change.
Only one bank, HSBC, which is also a “major bankroller of Amazon oil and gas”, presented “a positive example” of environmental and social risk management policies, according to the report. HSBC had exclusion policies — parts of the Amazon where banks have agreed not to finance oil and gas operations — that apply to the whole of the Amazon.
HSBC’s decision in December 2022 to stop financing new oil and gas fields had shown “good results”, said the report, with no new transactions for the bank recorded in Stand.earth’s Amazon Banks Database in 2023. The database sources loan and bond underwriting information from Bloomberg for companies with oil and gas activities in the Amazon regions of Peru, Ecuador, Brazil and Colombia.
However, the policies of Citi, JPMorgan, Itaú, Santander and Bank of America fully exclude only 4 per cent of the Amazon on average, with a further 25 per cent of the area regarded as “screened”, which means that enhanced due diligence by banks may occur, but financing of oil and gas exploration is still possible, according to the report.
The degree of exclusion policy coverage varies significantly among financial institutions, with Citi’s exclusion rules for oil and gas financing only applying to parts of the Amazon rainforest that are listed as Unesco world heritage sites, according to the report.
This leaves large swathes of the rainforest unprotected and vulnerable to risks ranging from the loss of biodiversity and forest cover, to the exploitation of local and indigenous communities, said the report.
In the last 20 years, Citi, JPMorgan, Itaú, Santander, Bank of America and HSBC accounted for almost half (46 per cent) of all direct financing for oil and gas operations in the Amazon, the report claims.
Closer analysis of more than 560 oil and gas financing transactions from the Amazon Banks Database in that 20-year period revealed that more than 70 per cent of deals were designed in a way that minimises the “identification, categorisation and prioritisation” of environmental and social policy values in their risk management, according to the report.
The most common financing tool used by banks in the region, which accounted for 50 per cent of transactions analysed, is general corporate purpose syndicated bonds, which the report described as the “most limiting type of financing for bank due diligence”.
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These bonds, according to the report, fail to “trigger the project-related exclusion and screens” that are commonly found in banks’ environmental and social risk management policies. Additionally, they do not require “rigorous bank due diligence”, unless previously agreed among syndicate members, the report claims.
These shortcomings mean that once the financing is approved, and the bank decides to invest, its ability to monitor and have input on how the other party uses the proceeds “diminishes significantly”, the report’s authors wrote.
This lack of transparency can result in due diligence processes that fail to “accurately identify risks to people and nature, substantially limiting the application of mechanisms like exclusions and screens, which are designed to help banks make financing decisions on transactions and clients based on the possibility of adverse impacts”, they stated.
José Esach, president of the Confederation of Indigenous Nationalities of the Ecuadorian Amazon, which represents 1,500 communities, said in a statement that indigenous peoples are victims of a “corrupt system that perpetuates violence against us, takes away our territory, natural resources, brothers and sisters, and our quality of life”. In Ecuador, oil and gas blocks are said to “overlap” with 65 per cent (or 45mn hectares) of indigenous territories.
In the Peruvian Amazon, where almost 20 per cent of an estimated area of 7.4mn hectares of reserves — assigned for indigenous peoples living in isolation — overlaps oil and gas blocks, indigenous leaders have called on banks to take responsibility for the “contamination and destruction” of indigenous lands.
The report urges financial institutions to update their environmental and social policies to include “stringent” exclusions covering all transactions involving the oil and gas sector in the Amazon, similar to exclusions adopted by banks in the Arctic in 2020. “This is the only viable solution to avert a tipping point in the Amazon,” the report said.
It also called on banks to act fast to reverse current trends of deforestation in the Amazon and help preserve 80 per cent of the region’s rainforest by 2025. “Averting the tipping point is an urgent task for humanity, and it will take policy at all levels to stop the current trend,” it stated.
Bank of America declined to comment but noted that its environmental and social risk policy framework prescribes “enhanced due diligence for transactions in which the majority use of proceeds is attributed to identified activities that may negatively impact an area used by or traditionally claimed by an indigenous community”.
Citi also pointed to its environemtal and social risk policy and said: “We engage directly with clients to evaluate their commitment, capacity, policies, management systems and staffing to manage these specific environmental and social risks.”
JPMorgan said the bank “support[s] fundamental principles of human rights, including Indigenous People’s rights, across all our lines of business and in each region of the world in which we operate”.
Itaú said it complies with commitments made under the Net Zero Banking Alliance and that it “has been working to tackle [the Amazon] deforestation in the region by monitoring environmental, social and climate risks, guided by the best practices in the international market”. It noted that it has teamed up with other banks “to support sustainable development projects and initiatives in the region.
Santander said that it “fully understand[s]” the importance of protecting the Amazon and that its operations “align with all environmental regulations in the region.” It also pointed to its involvement in industry initiatives to protect the area, and its work with clients and other institutions to “help improve practices”.
HSBC has been contacted for comment.
This article has been amended since publication to include comments from Citi, Itaú and Santander
