Financial institutions’ (FI) potential exposure to financial crime risks linked to environmental crime are dependent on the location, nature, and scale of their operations and business activities. Across the board, however, exposure appears to be high: of the FIs surveyed whilst creating this toolkit, 84% operated in at least one high-risk business area for illegal mining and 81% for the illegal wildlife trade.
All FIs should incorporate into their governance systems effective mechanisms to monitor progress and effectively manage risk and exposure to financial and environmental crime. A carefully considered and implemented framework helps firms to meet their regulatory requirements and avoid potential legal, financial, and reputational damage.
Whilst there is no one-size-fits all approach, and every organisation should consider their specific business activities, this panel highlights some of the best practices and possible approaches to build and strengthen a firm’s strategic framework and commitments in this space.
This panel provides a model framework based on best practices that can be implemented to establish effective risk management structures. The seven core components of an effective strategic framework are:
Outlining best practices for an environmental crime-linked financial crime risk assessment, which serves as a key step towards helping senior management understand the risks the FI is exposed to and subsequently developing an anti-financial crime strategy and risk appetite framework.
Mapping out best practices for implementing internal policies, procedures, and controls aimed at managing financial crime risks associated to land conversion for FIs. This provides a repertoire of best practices and useful guidance on anti-financial crime policies, procedures, and processes, including those specific to supply chain due diligence, transaction monitoring and customer due diligence.
Understanding what systems, tools and safeguards a firm needs so that it can mitigate its risk exposure to environmental crime and associated illicit financial proceeds. A particular focus is placed on the tools that can help firms undertake their customer, supply chain or staff due diligence and monitor customer transactions and payments. Another key component is identifying technology that can help enhance supply chain traceability.
Highlighting the importance of ensuring that all relevant internal stakeholders are engaged with environmental crime as an issue - and that this is a topic championed by the CEO or a member of the board or senior management team. Also including information about a training gap analysis to understand the firm’s specific training needs.
Setting out how firms are going to monitor and manage their adherence to their environmental crime strategy and policy and how to measure the pulse of how well teams are adopting processes, as well as the effectiveness of any related controls. This section underlines the importance of management information plans, in that senior management and boards can only make the right decisions if they have the right level of data reaching them on a regular basis. It also helps firms determine what level of information and data should be provided, to whom and how frequently.
Setting out an assessment process and checklist for FIs to periodically assess their exposure to environmental crime-associated financial and environmental risks, including assessing changes in supply chain risk exposure, as well as emerging risks related to new financial crime techniques and environmental crime typologies.
Mapping out and describing how ESG functions and controls can help FIs manage their exposure to land conversion risk and identifying the greatest area of risk based on both ESG benchmarks and the United Nations Sustainable Development Goals.
This framework addresses three key environmental crime types:
Deforestation & Land Conversion - The illegal clearing of forests and natural ecosystems for agriculture, development, or resource extraction.
Illegal Wildlife Trade - Trafficking of protected flora and fauna and derivatives across domestic and international borders.
Illegal Mining - Extractive activities occurring without proper permits, in protected areas, or in contravention of relevant laws.
Understand – Do you understand your organisation’s specific vulnerabilities to environmental crime and associated financial crime risks?
Identify – Are you confident you would be able to spot potential links to environmental and related financial crime, even if through indirect exposure?
Innovate – Are you using the most up-to-date technology and tools to conduct due diligence and manage financial crime risks?
Act – Are you confident your team would know what to do if a potential suspicion was raised internally? How would you report such suspicions to relevant authorities?
Support – Do you have the framework in place to continue to grow and support your company’s anti-environmental crime and anti-financial crime efforts?
Improve – Do you review and refresh your policies, systems and controls annually to ensure they continue to be robust in the face of evolving risks?
Identifying, analysing and managing the likelihood and impact of environmental crime risks.
In order to understand and mitigate environmental crime risks, it is essential to carry out periodic business-wide risk assessments to understand and manage exposure to environmental crime and associated financial crimes. Conducting thorough risk assessments allows firms to identify potential exposure and develop strategies to manage them effectively.
An assessment should be business-wide and the first step in completing your firm’s response to environmental crime and associated financial crime risks.
An assessment should be aligned with your firm's governance framework and risk appetite.
An assessment should be carried out not only on direct investments or clients, but also on indirect risks within supply chains and portfolios.
Firms should consider performing risk assessments at least annually. However, assessments that are more frequent or less frequent may be justified, depending on the circumstances.
The specific risks faced by a firm will be dictated by, for example, the services it offers, the jurisdictions it operates in, the types of customers it attracts, and the complexity of its business operations.
Firms should identify their comfort level and risk appetite based on resources available and what measures are needed to protect against environmental, legal, financial, and reputational risks.
Firms should consult guidance issued by regulators, industry working groups, trade associations, specialised research outlets and civil society organisations when compiling their assessment.
Environmental crime should be included in all climate change impact assessments and net-zero commitments, as a key driver of global emissions.
Disclosing the results of their environmental crime risk assessment and strategy transparently (e.g. in an annual report) can introduce some external accountability (e.g. from customers, clients, NGOs and rights-holders) which helps keep momentum and focus as well as justify resource, and also encourage other firms to follow suit.
When assessing exposure to illegal wildlife trade, financial institutions could, for example:
Identify nexus points between their business activities and wildlife trafficking routes, particularly in Asia, Africa, and transit countries
Consider connections to high-risk sectors including luxury goods, traditional medicine, exotic pet trade, tourism, and shipping/logistics
Map exposure to wildlife trafficking hotspots, including countries with high biodiversity but weak enforcement
Analyse transaction patterns involving cash-intensive businesses in proximity to protected areas or known trafficking hubs
Assess client relationships with businesses operating near wildlife reserves or in trading centres known for wildlife products
Assess both the impact and likelihood of environmental crime risks.
Understand the jurisdictional risk exposure of your firm.
Define key mitigating controls.
Map against firm’s risk appetite.
Map against long term environmental crime and anti-financial crime strategy.
When assessing exposure to illegal mining activities, financial institutions could, for example:
Identify geographical exposure to mining hotspots, particularly in the Amazon basin, Sub-Saharan Africa, and parts of Southeast Asia
Evaluate connections to minerals with high illicit trade risks (gold, diamonds, cobalt, tantalum, tin, rare earths, lithium)
Consider exposure to cash-intensive businesses in mining regions with weak governance
Assess supply chain links to refineries, processors, or traders who may be mixing legal and illegal mineral sources
Map financial flows between high-risk mining regions and international commodity trading hubs
Evaluate client relationships with businesses adjacent to protected areas or operating in regions with significant artisanal mining activities
For a detailed risk assessment of potential exposure to environmental crime-related financial crime broken down by country, commodity and environmental crime type, please see the Risk Assessment
Setting overarching rules and guidelines and specific operational steps in relation to potential environmental crime exposure; for example, through No Peat, No Deforestation and No exploitation (NDPE), Mining and Metals, or Forestry and Agricultural Commodities policies.
It is important for firms to set out clear policies and procedures for an effective organisation-wide response to tackling potential links to environmental crime and associated financial crime. These policies and procedures provide a framework for identifying, assessing, and mitigating risks across all levels of a firm.
While a policy should work across the whole firm, we recommend that you create specific procedures for each different business line or team, e.g. front-line business teams, risk and compliance, operations, and procurement.
Policies should document a company’s approach to legal and regulatory requirements, including AML/CFT and anti-bribery and corruption.
ESG policies are also beneficial to prevent and mitigate environmental crime risks, and can be implemented to help protect a company from regulatory or reputational risks.
Policies should cover all relevant commodities that a firm might deal with (e.g. soy, beef, minerals, timber, cocoa, coffee, rubber, wildlife, etc.) and apply to all segments of a supply chain across all sourcing, transit and destination geographies.
Policies should be holistic; for example, covering land conversion of all natural ecosystems rather than just deforestation, or considering the illegal trade in lesser-known species such as orchids and succulents as well as higher profile ones such as elephants and pangolins.
Policies should set out quantifiable and specific targets, goals, commitments and timelines rather than generic aims.
Financial institutions should develop specific policies addressing:
Zero tolerance for financing projects directly linked to illegal land conversion in high conservation value areas
Clear time-bound targets for achieving deforestation-free portfolios and supply chains
Enhanced due diligence requirements for clients in forest-risk sectors and geographies
Requirements for clients to demonstrate traceability in commodity supply chains back to production level
Protocols for verifying land tenure rights and Free, Prior, and Informed Consent from Indigenous communities
Support for clients transitioning to sustainable land use practices and certification schemes
Regular monitoring and verification of client compliance through satellite imagery and field verification
Financial institutions could develop specific policies addressing:
Zero tolerance for financing businesses involved in trafficking CITES-listed species
Enhanced due diligence requirements for clients in high-risk sectors (exotic pet trade, luxury goods, traditional medicine)
Clear procedures for identifying and verifying legitimate wildlife trade permits and documentation
Requirements for clients in wildlife-adjacent industries to demonstrate compliance with international wildlife protection standards
Commitment to support international wildlife conservation efforts and anti-trafficking initiatives
Starting from the top with senior leadership is important to ensure there is buy-in for the policies and procedures from everyone across the organisation. Leadership should also ensure clear responsibilities are in place to make sure employees know how specific policies apply to their roles and teams.
Clear procedures should define and streamline communication and coordination among different departments and roles, which can help ensure no risks go undetected.
Policies and procedures should be displayed in a way that is accessible, effective, and understood by all relevant staff.
Management information (MI) helps provide senior leadership with a comprehensive understanding of environmental and financial crime risks and how these are being managed across your firm.
Senior management can only make the right decisions if they have the right level of data being fed to them on a regular basis, and if this data is both specific and up to date.
Your MI plan should outline what level of information and data you are providing, to whom, and how frequently.
Regulators will often want to see what MI is being fed into senior management and other levels of the organisation.
In many countries, it is a regulatory requirement for MLROs to produce annual reports. These should reference all associated financial crimes, including those linked to environmental crime.
Effective MI for environmental crime should include:
Statistics on transactions/clients flagged for potential links to deforestation, illegal mining, and wildlife trafficking
Updates on regulatory developments affecting all three environmental crime areas
Client exposure metrics broken down by environmental crime risk type and geography
Tracking of internal training completion rates on environmental crime topics
External developments in criminal methodologies across all environmental crime types
Cross-correlation analysis showing connections between different environmental crime types in client portfolios
Performance metrics on environmental crime risk mitigation efforts
Policies should be reviewed regularly to account for new risks and external events. This is especially important for environmental crime risks, as these crimes are often transnational, evolving quickly and heavily impacted by external events.
Policy makers should understand that the highest risk commodities and jurisdictions may change over time as new trends emerge and put in place a mechanism for updating these as new information comes to light.
Financial institutions could develop specific policies addressing:
Clear exclusion criteria for financing entities linked to illegal mining operations
Enhanced due diligence procedures for clients operating in mineral supply chains from high-risk regions
Requirements for mineral sourcing documentation and chain of custody verification
Integration with international standards such as the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals
Specific procedures for verifying mining permits, licenses, and environmental compliance
Commitments to support responsible sourcing initiatives
Progress towards commitments made in policies should be published on an annual basis (e.g. in a report or on a firm’s website) using quantifiable metrics.
A good governance and management framework will help keep a pulse on whether your firm is effectively implementing all components of its strategic framework.
A good governance framework sets out how your company will monitor, evaluate, and manage adherence to its environmental crime and financial crime strategies and policies.
As part of this, your firm should map out which governing bodies and leadership will be responsible for oversight of your policies, as well as which body is responsible for the detailed monitoring and testing of effectiveness.
ESG governance can be an important line of defence against environmental and financial crime risks as well. By asking the right questions and holding your organisation accountable to certain environmental and governance standards, you can increase both your environmental crime understanding and risk analysis.
Having clear policies and procedures for due diligence and ongoing monitoring is essential for keeping your firm safe from environmental crime and associated financial crime exposure - as is red flag screening.
Firms should conduct thorough due diligence on customers, staff, suppliers, investments, and third parties to identify and prevent direct and indirect links to environmental crime and associated financial crimes.
Due diligence should be robust, rigorous and verifiable by third parties.
The responsibility for due diligence should not be shifted onto other businesses in the value chain; businesses should each feel responsible for conducting thorough due diligence on their entire supply chain and for assessing risks related to all their activities.
Due diligence across the industry can be improved by effective internal and external communication and information sharing.
Firms should be ambitious with their screening and aim to go beyond standard industry practice. For example, this might include screening not just for illegal deforestation but more widely, in alignment with initiatives such as the Consumer Goods Forum’s Forest Positive Coalition.
Data should be requested directly from a third party where it is not publicly available.
Ongoing monitoring helps firms screen business relationships against specific environmental and financial crime data and red flags to identify any potential links to criminal convictions both during onboarding and on an ongoing basis. High risk third parties should be reviewed on at least an annual basis and non-compliant entities and those which are making too little measurable progress should be identified and engaged with.
Due diligence results should feed into policy decisions (e.g. certain trends or techniques that are being observed should be used to update high risk commodities or geographies).
The importance of having clear policies and procedures for reporting suspicious activity and transactions cannot be overstated. As outlined in the Typologies, Red Flags and Reporting panel of this toolkit, the financial services sector plays an essential role in identifying and reporting activities with links to environmental and related financial crimes.
It is important to have an effective internal reporting framework where staff know when, how, and who to report to when suspicions of links to environmental crime or related financial crimes arise.
It is important to have clear procedures as well on how to report any suspicions to relevant authorities. Your firm’s Money Laundering Reporting Officer (MLRO) should oversee and report suspicious financial activities to relevant authorities.
Devices and software that help to mitigate exposure to environmental crime at scale, such as data analytics tools or automated monitoring software.
It is crucial to implement effective systems and controls to identify and manage direct and indirect environmental and financial crime exposure. It is also key to innovate and use the latest technologies across these systems and controls.
Designed to identify potential risks and suspicious activity.
Make the internal reporting of these suspicions effective and clear.
Help operationalise the policies and procedures you have in place.
Include a combination of technology and human-driven due diligence and screening, customer and third-party onboarding, transaction monitoring, network mapping, fraud detection, and risk assessment.
Can be a mix of custom-built internal resources (including spreadsheets, databases, risk maps and calculators etc) as well as external technology and platforms that can help you complete your customer, supply chain or staff due diligence and monitor your customer transactions and payments.
Financial institutions can leverage specialised tools for monitoring illegal wildlife trade:
Wildlife trade databases and watchlists (CITES database, TRAFFIC wildlife trade monitoring network)
Specialised transaction monitoring rules to identify patterns consistent with wildlife trafficking
Digital certification systems to verify legal wildlife product supply chains
NGO intelligence networks that provide updated information on trafficking routes and methods
Specialised adverse media screening incorporating wildlife crime terminology
The most effective systems and controls integrate innovative technologies and tools that work within your business environment – ask your teams what systems, software, and platforms they need to ensure success.
Some potential systems and tools include:
End-to-end SaaS screening, monitoring, and investigations platforms that can help optimise the effectiveness and efficiency of identifying and assessing potential links to environmental crime and related financial crime risks.
Risk mapping software that helps search and investigate network connections between individuals and legal entities.
Automated ongoing monitoring systems that can conduct daily ongoing screening across all clients and counterparties, incorporating a rich array of data sources, as well as specific key word searches and red flag indicators.
eID&V tools that can perform live biometric facial recognition and verify documents for authenticity.
Digital risk assessment diagnostic and benchmarking tools to provide automated, tailored financial and environmental crime risk assessment reports.
Climate and environmental data analytics tools, which can analyse data to identify emerging trends and patterns associated with environmental crime risk.
Satellite imagery, geospatial and remote sensing data to monitor land use changes in areas where firms have investments, particularly in sectors like agriculture, forestry, and mining.
Supply chain transparency tools to trace the origin of products and commodities in investment portfolios. Blockchain technology, for example, enables transparent and immutable records of supply chain transactions.
Financial institutions can leverage specialised tools for monitoring illegal mining:
Mineral supply chain traceability systems (e.g., blockchain-based mineral tracking)
Satellite monitoring platforms that detect mining operations in protected or restricted areas
Mineral fingerprinting technologies to verify origin of precious metals and gemstones
Databases of authorised mining concessions and permits for verification
Specialised transaction monitoring scenarios to detect patterns associated with illegal mining
Partnerships with initiatives like the Responsible Minerals Initiative or Extractive Industries Transparency Initiative
Tools that track water pollution and environmental degradation indicators near mining sites
Mercury trade monitoring to identify potential illegal gold mining operations
Data is key to any effective system or use of technology. Specialist data that draws on international databases and research into different financial crime typologies is particularly valuable.
This includes official conviction data published by national and international authorities, as well corporate records, sanctions and PEPs lists, and adverse media. A rich dataset comprised of these components is essential for effectively screening clients, suppliers, and third parties against all potential risk exposure and links to environmental crime and associated financial crime.
Promoting a culture of openness, education, and awareness is important for ensuring the effectiveness of any anti-environmental crime and related financial crime response at your firm. Ensuring a strong culture and effective training goes beyond box ticking and should be embedded in the day-to-day actions of the firm. A strong culture will also help prevent inappropriate and risky behaviour that could damage reputation or lead to financial or legal consequences, and protect against employee, stakeholder, or investor backlash.
Transparency, open communication, and ethical and environmentally friendly decision-making.
Collective values, attitudes, norms, and behaviours.
Senior leadership plays a crucial role and has a duty to set a clear tone from the top. This includes:
Promoting a positive and consistent message.
Embedding transparency and accountability into day-to-day decisions.
Creating an environment of safety over fear.
Incentivising and recognising positive behaviour.
Companies should ensure all staff possess the skills, knowledge, and expertise needed to carry out their functions effectively. Many staff will not be fully aware of the scale and impact of environmental crime and associated financial crimes, or how it relates to their specific role and daily work. Busy staff also face multiple competing priorities. Raising awareness of environmental and associated financial crime risks through periodic training is therefore vital to ensure that focus on these threats is not lost.
Firms should incorporate environmental and financial crime risks into their enterprise-wide financial crime training programmes, given their status as predicate crimes to money laundering.
Training should incorporate guidance on how to spot signs of environmental crime and associated financial crime risks, and then how to report these internally. Having a clear internal reporting system that is understood by all staff is vital.
Staff across all functions of a business should be given appropriate training on how to implement anti-financial crime policies, systems, and controls.
Training and awareness building can take many forms. It is worth considering incorporating a blend of digital learning, classroom-based training, and other educational resources such as research reports, to appeal to individuals with different learning styles/preferences.
Financial institutions could incorporate in their training:
Case studies of wildlife trafficking financial flows and methods
Information on major wildlife trafficking routes and products
Red flags specific to wildlife trafficking financial transactions
Overview of relevant laws (CITES, national wildlife protection laws)
Guidance on identifying shell companies and front businesses commonly used by wildlife traffickers
Examples of how legitimate businesses can be unknowingly connected to wildlife trafficking
Financial institutions should incorporate in their training:
Education on the environmental and social impacts of illegal mining
Information on high-risk minerals and regions for illegal mining activity
How to identify shell companies and complex ownership structures used to obscure illegal mining
Red flags for financial transactions related to illegal mining operations
Training on supply chain verification documentation for precious metals and minerals
Case studies showing how illegal mining proceeds are laundered through formal financial systems
Guidance on identifying legitimate artisanal mining versus illegal operations
If firms don’t consistently review and assess their effectiveness in detecting potential links to environmental crime and associated financial crimes at all levels of the business, efforts will invariably stagnate and cannot be effectively evaluated, which risks inefficiency and wasted resource.
Dynamic and regularly updated.
Test and measure the effectiveness across different levels of the organisation so that you can continuously adapt and improve your corporate response and culture.
Assessment results should be incorporated into a firm’s performance management framework and ongoing training needs analysis.
Firms can also consider completing company-wide corporate culture assessments, as another means of assessing and checking the understanding of environmental crime and associated financial crime risks and the practical application of their specific control framework across the organisation.
Senior management should be looking to strengthen the effectiveness of controls and culture through a combination of internal and external reviews. Senior management should also keep up to date on emerging threats and legal and regulatory requirements.
Financial institutions should periodically assess:
Evolution of trafficking methods in the wildlife trade, including new laundering techniques
Shifts in illegal mining activity to new geographic areas or targeting new minerals
Changes in deforestation patterns and drivers, including new commodities causing land conversion
Technological developments being used by criminal networks (cryptocurrency, encrypted communications)
Regulatory developments affecting environmental crime enforcement
Connections between different environmental crime types and overlapping criminal networks
Effectiveness of existing controls against newly identified typologies
An enterprise-wide monitoring plan should be developed and competed using the “Three Lines of Defence Model”, which broadly incorporates:
1st Line of Defence: Quality Assurance – scoring and assessment done on an individual or team basis, by the functions that own and manage the risk.
2nd Line of Defence: Compliance Monitoring – periodic assessments of your policies and procedures across specific thematic areas or sections of your organisation, by the functions that oversee the risk or who specialise in compliance.
3rd Line of Defence: Internal Audit – evaluating the effectiveness of the approach, reporting into a board or committee, by functions that sit outside the risk management processes of the first two lines of defence.
Environmental, social, and governance (ESG) factors are critical in helping financial institutions and other businesses manage their exposure to environmental crime risk. As more firms are facing increasing pressure to identify ESG risks and incorporate them into risk management efforts – both from external stakeholders like customers and clients and internal stakeholders like shareholders - understanding how environmental and financial crimes factor into ESG risk is paramount to ensuring the long-term success of your business.
From investment decisions to lending practices, the overall ESG risk management strategy of a firm should promote sustainable, ethical, and legal practices.
Financial institutions can use ESG criteria to assess the environmental crime risks and environmental impact of their investment portfolios and clients in higher risk sectors such as agriculture, forestry, and mining.
Firms should develop and enforce exclusion policies that avoid investment in companies or projects linked to illegal land use practices.
Firms can promote and invest in sustainable financial products and practices aimed at conservation and reforestation projects.
ESG goes beyond just environmental and financial crime risks. Social and human rights risks related to environmental crimes are also key to consider. It is important for firms to engage with local communities, including Indigenous Peoples, and NGOs to understand the social impacts of environmental crime and incorporate these into decision-making and risk management.
Transparency and reporting are also important. Firms should publicly report their progress on land conversion impact and other ESG commitments and Key Risk Indicators (KRIs). Impact and annual reporting can serve as a key way to increase transparency and accountability.
Firms should establish robust governance frameworks that include clear policies on environmental crime and sustainability. This should be backed by board-level oversight and accountability. Incentive structures that follow sustainable practices and anti-environmental crime can also be a great way to foster positive decision-making across your firm.
Financial institutions should integrate into their ESG frameworks:
Investment exclusion criteria for businesses linked to illegal forest clearing and land grabbing
Positive screening for companies with zero-deforestation commitments and implementation Portfolio forest footprint assessments and net-positive nature targets
Support for sustainable landscape management and agroforestry systems
Indigenous rights considerations in land-based investment decisions
Investment exclusion criteria for businesses connected to illegal wildlife trade
Positive screening for companies supporting wildlife conservation
Portfolio biodiversity impact assessments
Support for sustainable alternatives to wildlife products
Community engagement in areas affected by wildlife trafficking
Investment exclusion criteria for businesses without mineral supply chain verification
Assessment of mining-related water pollution and ecosystem damage
Human rights considerations including child labour and forced labour in mining
Community engagement in mining regions to understand social impacts
Firms should adhere to key international standards and frameworks such as the Forest Stewardship Council (FSC), the Roundtable on Sustainable Palm Oil (RSPO), and the No Deforestation, Peat and Exploitation (NDPE) Commitment, the Kimberley Process,
Firms should adhere to the recommendations as laid out by The Financial Action Task Force (FATF):
The FATF recommends that environmental crime – which includes illegal logging, forestry crimes, illegal mining, and the illegal wildlife trade – be considered a predicate crime to money laundering in all countries’ national legislation.
Several of the FATF’s 40 Recommendations are of particular relevance to environmental crime, including:
Recommendation 4 - Competent authorities should freeze or seize and confiscate assets laundered or proceeds from predicate offences.
Recommendation 10 - Financial institutions are required to undertake Customer Due Diligence (CDD) whilst establishing business relationships and when carrying out transactions which are of a suspicious nature.
Recommendations 20 & 23 – If a financial institution has reasonable grounds to suspect that funds may be the proceeds of a criminal activity, it should promptly report its suspicions to the FIU.
Financial institutions could incorporate these key frameworks:
Accountability Framework initiative (AFi) core principles
Forest Stewardship Council (FSC) certification
Roundtable on Sustainable Palm Oil (RSPO) standards
Convention on International Trade in Endangered Species (CITES)
United for Wildlife Financial Taskforce principles
The UNODC Global Programme for Combating Wildlife and Forest Crime
OECD Due Diligence Guidance for Responsible Supply Chains of Minerals
Extractive Industries Transparency Initiative (EITI)
Kimberley Process for diamonds
Firms should benchmark their ESG criteria against the United Nations Sustainable Development Goals (SGDs), as this can help align firm practices with SDGs. It is important to keep in mind how environmental crime relates to all SDGs, but some key ones to consider are:
SDG 3: Good Health and Well Being – firms can help decrease health related consequences of environmental crime, such as exposure to mercury from illegal mining, or the spread of zoonotic diseases via the illegal wildlife trade.
SDG 6: Clean Water and Sanitation – firms can help decrease water contamination and pollution from illegal mining.
SDG 8: Decent Work and Economic Growth – given the prevalence of forced labour in deforestation and illegal mining, firms can help promote productive and decent work for all, as well as inclusive and sustainable economic growth.
SDG 12: Responsible Consumption and Production – By promoting high standards for investments and clients related to production and consumption, firms can help reduce deforestation, illegal land conversion, illegal mining, and the illegal wildlife trade.
SDG 13: Climate Action – By reducing deforestation, firms can help mitigate climate change and its impacts.
SDG 15: Life on Land – By integrating anti-deforestation commitments into ESG frameworks, firms can help protect and promote sustainable use of forests and other ecosystems, including halting land degradation and biodiversity loss.
Firms should also bear in mind the EU Taxonomy Regulation:
The EU Taxonomy Regulation establishes a classification framework that defines when an economic activity can be considered sustainable in the EU. The regulation came into effect in 2020 and applies to financial institutions, requiring them to disclose the proportion of their financial activities that are taxonomy-eligible and aligned. The framework serves as an important market transparency tool and helps direct investments to the economic activities most in line with environmental and sustainability objectives.
Firms should adhere to the Sustainable Finance Disclosure Regulation (SFDR):
The SFDR, adopted into law in March 2021, sets stringent minimum-disclosure standards to prevent greenwashing in investment products that claim ESG or ESG-related objectives. Applicable to all EU financial institutions and financial advisors, the SDFR aims to bring higher transparency to sustainability-related disclosures in the financial services sector at both the entity and financial product levels. This dual-level, double materiality reporting is intended to be integrated into their investment decision-making processes.
While the SDFR does not primarily focus on deforestation, the regulation’s mandatory and voluntary disclosures will expose financial institutions which invest in companies with detrimental land-use practices that negatively affect biodiversity-sensitive areas, or those that lack a policy regarding deforestation. However, land degradation falls under the banner of voluntary rather than mandatory disclosures under the SFDR.
By integrating ESG criteria and controls, financial institutions can significantly mitigate their exposure to environmental crime risk and associated financial crime, thereby contributing to global sustainability goals and ensuring a successful business.
The Environmental Crimes Financial Toolkit is developed by WWF and Themis, with support from the Climate Solutions Partnership (CSP). The CSP is a philanthropic collaboration between HSBC, WRI and WWF, with a global network of local partners, aiming at scaling up innovative nature-based solutions, and supporting the transition of the energy sector to renewables in Asia, by combining our resources, knowledge, and insight.
