Majority of financial institutions are failing to enact policies that track and reduce exposure to land conversion-related crimes, survey finds
Leading financial institutions are failing to track and reduce their exposure to land conversion and related financial crimes, a new survey has revealed.

A report published this morning by environmental charity WWF and financial crime software company Themis reveals more than 60 per cent of financial services professionals said their firm had not yet enacted a land conversion risk policy.

Of 644 professionals surveyed in the report, 45.7 per cent said their firm's land conversion risk policy was "non-existent", with a further 18.6 per cent such a policy was not yet developed or in place.

More than a quarter of respondents, who hailed from 17 different countries, said their firms did not undertake sufficient due diligence on land conversion and related financial crime in high-risk sectors or areas, with just 17 per cent reporting their firms' monitored or screened companies and clients on a periodic or ongoing basis.

This is despite half of the financial institutions in the sample operating in sectors or areas at high risk of driving land conversion, which frequently converges with a host of financial and predicate crimes, including corruption and bribery, fraud, money laundering, tax evasion, and drugs, wildlife, and human trafficking, WWF and Themis said.

Olivia Dakeyne, associate director of insight at Themis, said the report was designed to show firms "the extent of the damage that land conversion can cause - to them as well as the wider world".

"Land conversion is responsible for a wide range of environmental and social ills, including human rights violations, biodiversity loss and the removal of carbon sinks," she said. The impact on businesses is no less severe, when considering reputational, legal and physical or supply chain risk."

Banks, asset managers, and other investors continue to plough significant sums into the companies most responsible for deforestation and other forms of land conversion, despite the destruction of ecosystems being a major driver of both climate change and nature loss.

Figures published by Global Canopy this year estimated that 150 financial institutions had provided $6.1tr in funding to the 350 companies with greatest risk exposure to tropical deforestation in 2023.

WWF and Themis said the overall amount of funds provided by financial institutions to land conversion last year was "likely to be much higher" once broader array of land types, such as grassland, savannah and swamps were accounted for. The destruction of biodiverse ecosystems that contain more than one land type, like the Brazilian Cerrado, tends not to fall under the label of deforestation, they noted.

John Dodsworth, environmental crime expert at WWF, said environmental crimes like deforestation and land conversion had been viewed through a narrow lens by financial institutions for too long.

"These offences can no longer be dismissed as outside the realm of financial crime and financial institutions are facing greater exposure than ever before," he said. "This report alongside the toolkit WWF and Themis are developing will provide practical information to support financial institutions to better detect environmental crime, strengthening internal teams' ability to address financial flows and put appropriate policies and systems in place."

On top of setting out how land conversion dovetails with financial and predicate crime, the report details the ways in which firms may be exposed to land conversion activity through high-risk commodities, including cattle, soy, palm oil, timber, coffee, cocoa, rubber, and minerals.

It comes just a day after the European Parliament approved the Corporate Sustainability Due Diligence Directive (CSDDD), a sweeping new package of legislation that places much more demanding requirements on large firms to undertake thorough due diligence across their supply chains to guard against environmental damage and human rights violations.