Chinese banks and investors funneled billions of dollars into global agribusinesses driving deforestation in the past seven years, according to new analysis published by eco-watchdog Global Witness.

The report, released June 7, revealed that between January 2013 and April 2020, Chinese financiers poured more than $22.5 billion into major companies producing and trading commodities linked to deforestation, such as palm oil, soy and beef. This makes China the sixth-largest funder of global deforestation in the period, behind major commodity producers Brazil, Malaysia, the U.S. and Indonesia, and non-producer Japan.

The researchers’ analysis, based on public data from the international coalition Forests & Finance, also showed that five of the biggest Chinese commercial banks, including the Industrial and Commercial Bank of China and the Bank of China, were responsible for 45% of all funds provided by Chinese financiers to these sectors during this period.

With the Chinese law regulating commercial banks set to undergo revisions this year, Global Witness and other campaigners are calling for policymakers to explicitly require commercial banks to ensure they are not financing businesses linked to environmental and social damage, whether locally or elsewhere.

Last year, Chinese President Xi Jinping pledged to bring the nation’s greenhouse gas emissions to a peak before 2030, and to achieve carbon neutrality by 2060. While the country’s green finance sector has since boomed, with China overtaking the U.S. to sell $15.7 billion of green bonds in the first quarter of this year, its commercial banks remain major funders of deforestation-linked companies overseas.

From 2016 to 2020, 29% of Chinese funds to forest-risk companies went to those producing and trading palm oil, soy and beef, a Forests & Finance report found. These three agricultural commodities were the leading drivers of deforestation from 2001 to 2015 in countries including Indonesia, Malaysia, Brazil and Argentina, according to the World Resources Institute.

Global Witness’s report highlighted that five of the companies that received the most financing from Chinese banks for their soy and beef operations in Brazil — ADM, COFCO International, Cargill, Bunge and Louis Dreyfus Company — were all exposed to deforestation. Combined, the five companies have been linked to 161,018 hectares (398,000 acres) of forest clearance from March 2019 to March 2021 — an area more than twice the size of Singapore — based on data from Mighty Earth. The latter four have disputed their involvement in many of the incidents linked to them by the campaign organization.

Chinese banks also funneled $3.2 billion into 28 palm oil groups during the period, including COFCO, ADM and Bunge, the report said. Nine of the firms were closely linked to the 2019 Indonesian forest fires and the cross-border haze that ensued, with some of the fires started to clear land for plantations, it alleged.

Among the 28 companies, COFCO received the lion’s share of the funding, with $2.1 billion channeled into its palm oil operations, the report highlighted. While the company operates mainly as a trader and refiner and does not produce its own palm oil, more than 70 of its suppliers have been linked to possible environmental or social risks and breaches despite a supplier code of conduct that prohibits deforestation, the researchers found. COFCO has challenged the link between the $2.1 billion figure and palm oil financing from Chinese banks. “We can’t connect such an amount with Chinese banks or our palm oil operations,” the company wrote in an email.

“The companies that major Chinese banks chose to finance suggest that the banks have done little or no due diligence to safeguard against their exposure to environmental and social harms,” Beibei Yin, a senior forests campaigner at Global Witness, said in a press statement.

Since major Chinese commercial banks rank among the world’s largest banks by total assets, their investment decisions have significant ramifications on both individual country and international climate change commitments, where deforestation is a key issue.

“If China were to stop its banks from financing forest destruction, it would demonstrate global environmental leadership and help future-proof Chinese investments,” Yin said. “The proposed revision of the Chinese banking law this year provides a crucial opportunity to ensure that the Chinese banking sector is aligned with the country’s green ambitions.”

Banner image of deforestation for oil palm plantations in Borneo, by Rhett Butler/Mongabay.