Tools for managing commodity risks 

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New research from Global Canopy, developed in partnership with the World Wildlife Fund, has found that banks in South East Asia and parts of Latin America stand to benefit from improving policies to manage the environmental and social impact of beef, soy, palm oil, and seafood production.

The WWF has valued goods and services from the ocean economy at around $2.5 trillion each year, with SE Asia set to produce a quarter of the world’s seafood by 2030, a core sector of the blue economy.

However, despite some safeguards against labor rights issues, none of 24 banks in the region assessed have a seafood-specific lending policy.  This contrasts with the eight large global banks that have operations in SE Asia, including Deutsche Bank and Standard Chartered, who all have some form of sustainability policy on seafood. Banks can upgrade their policies to include seafood and make the most of the opportunity that sustainable seafood represents now and in the future.

In the case of palm oil, the research found that almost 30 percent of SE Asian banks now have a specific policy to govern lending to companies in the palm oil sector, and two have introduced innovative financial incentives to palm oil companies to be more sustainable.

Corporate guidance and a briefing paper to set expectations for the boards of companies operating in seafood supply chains.

The findings emerged from a new package of support added today to Global Canopy’s SCRIPT (the Soft Commodity Risk Platform), which was launched in April and aims to help banks and investors analyze their exposure to risk in soft commodity supply chains.

The guidance and policy tool have been developed to meet the needs of banks in South East Asia and Latin America and to minimize the environmental and social impacts of their loan books. Financial support for the project has come from the Gordon and Betty Moore Foundation.

The package of support added to SCRIPT includes:
An updated policy benchmarking tool to help banks assess the strength of their deforestation and seafood policies against 60 peers globally and regionally.

Materiality guidance to demonstrate the business risks facing companies operating unsustainably in seafood supply chains.

Corporate guidance and a briefing paper to set expectations for the boards of companies operating in seafood supply chains. The expectations are intended to foster more effective financial institution-to-company engagement around environmental and social impacts associated with aquaculture and fisheries.

Tom Bregman, Senior Sustainable Finance Associate, Global Canopy said:
“The banking sector in South East Asia has a historic opportunity to underwrite regional food security and reap the multi-trillion-dollar benefits across its lending and investment portfolios.

But first there is a real need to put in place policies that properly assess the environmental and social risks of those they finance. Every year, over nine million hectares of tropical forests are cleared to make way for the production of soft commodities such as palm oil, soy, cattle, and timber. And more than 30 percent of the world’s fisheries have been pushed beyond their biological limits.

Raj Kundra, vice president, International Finance, World Wildlife Fund:
“While there are encouraging signs that regional banks are starting to act in areas such as labor rights or palm oil, there is still a long way to go. The majority of banks assessed do not have adequate seafood and soft commodity policies to seize the opportunity of financing the food security of tomorrow. That’s why today’s tool and guidance is so important. They help provide a platform to bridge the capacity gap, enabling banks to develop meaningful policies that help manage supply chain risks and opportunities.”

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