Globally, over 90% of forest loss is thought to be from conversion of land from forest into agricultural land, according to satellite imagery from the Food and Agriculture Organisation of the UN (FAO).
Financial services and products are primarily linked to land conversion through the financing of commodity production. A specific focus should therefore be applied on transactions relating to high-risk products.
The predominant commodities driving land conversion around the world are cattle, soy, palm, timber, coffee, cocoa, rubber, minerals, oil, and gas. The level of risk associated with each commodity depends on the region of origin. For example, research indicates that in Southeast Asia, rubber, paper and pulp, and palm oil are the commodities that most drive land conversion; in South America, soy and cattle; and in Africa, cocoa, coffee and timber.
The following commodities are high risk for land conversion across the Southeast Asia and Pacific, Sub-Saharan Africa and South and Central America regions, and clients and transactions relating to these sectors should be scrutinised more closely for associated financial crimes linked to land conversion.
For the specific risk intersection of countries and commodities, and how these apply to particular financial crime along the value chain, see also the Risk Assessment panel of the toolkit.
Cattle grazing is a primary driver of land conversion, particularly in Brazil (where it accounts for 72% of the country’s forest loss). Indeed, between 2001 and 2015, the conversion of forests to cattle pasture around the world was five times higher than for any other commodity. Brazil accounted for 48% of this, followed by Paraguay (9%) and Colombia (5%). Globally, around 40% of deforestation can be attributed to livestock grazing (and this figure does not consider the additional land converted to soy plantations driven by demand for soy-based livestock feed).
High-risk products:
Oil palm is a popular crop owing to its 25-30-year economic lifespan, relatively low labour requirements, and comparatively high income-generating abilities compared to subsistence food crops. Land is cleared to make way for plantations, which includes the planting of crops and erection of processing mills on site (bunches of palm fruit must be processed within 24 hours of harvesting to maintain the quality of the oil)—and is most prevalent in Southeast Asia. Some studies indicate that half of new palm oil plantations in Indonesia and Malaysia replace forests and that this deforestation is very much market-driven, since annual peaks in forest loss for this purpose correspond with peaks in palm oil prices (offset by a one-year lag).
High-risk products:
Almost all (circa 97%) land converted for soy production is in South America (predominantly across Brazil, Argentina, Bolivia, and Paraguay). Today, Around 77% of this is used as livestock feed, for poultry, pigs and aquaculture. Research also suggests that as soy production expands into former pastures, it pushes this pasture further into forested land, expanding the frontier. This means that some forest areas that have been replaced by cattle grazing pasture may not be attributable to increased direct demand for beef or dairy so much as displacement caused by production of soy crops (although, in a reciprocal relationship, soy expansion is also itself driven by demand for livestock feed).
High-risk products:
Although cocoa is produced in 62 countries across the world, the majority (65%) is from Africa followed by Indonesia (17%). Research suggests that cocoa cultivation is an underlying driver of over 37% of forest loss in protected areas in Côte d’Ivoire and up to 40% in Ghana. Cocoa-driven deforestation in West Africa is exacerbated because the associated agricultural activity damages the soil, so farmers may expand to new areas, freshly converting land in the hope of greater productivity and yields.
High-risk products:
Natural rubber (rather than synthetically produced from petroleum byproducts) is derived from the rubber tree, which is now predominantly grown in Southeast Asia, which accounts for over 90% of global production (although native to Brazil and the Guianas, South American rubber trees often suffer from a fungal leaf blight). The remainder comes from South and Central America and Central Africa.
High-risk products:
Forest loss and land conversion from coffee production occurs predominantly in Indonesia, Brazil, Madagascar, Peru, Colombia, and Vietnam. Coffee plants become less productive as they age, producing fewer berries (the seeds of which are the ‘beans’), which then incentivises farmers to convert more land for the purpose of planting new trees.
High-risk products:
The timber sector covers trees harvested to produce, among other things, sawn-wood, plywood, particleboard, furniture, fuelwood, pulp, and paper. Existing forest can be cleared to make way for monoculture plantations, or trees can be felled and sold for timber and associated products (like wood pellets, derived from forests in West Africa and used to heat low-carbon boilers in homes across Europe). Globally, there has been a shift in the sector over the past couple of decades away from wood being felled from natural forests towards land clearing for the purpose of cultivating monoculture plantations. Although paper consumption in North America and Europe has decreased since the early 1990s, given the rise in digital communication, demand across Asian market continues to rise.
High-risk products:
In some areas, like Suriname and Guyana, hard commodities like minerals have overtaken soft commodities like cattle and agriculture as the leading cause of deforestation (mining is currently considered to be the fourth largest driver of deforestation worldwide). This is something of an accelerating trend: more than 35% of all mining-related deforestation in tropical forests from the past two decades has occurred in the last five years. Minerals related to land conversion are primarily gold, coal, bauxite, iron ore, and copper. Minerals required for ‘green’ or ‘clean energy’ technologies like electric cars also contribute to land clearing. Despite the increase in demand for clean energy minerals, however, 71% of global direct mining-related deforestation can still be traced to just two mineral commodities: coal and gold.
Key Minerals:
High-risk products:
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.
