Australian banks fail to manage financed deforestation: Report

Latest findings identified mortgages provided by major banks are contributing to deforestation, with just one bank having made a 'No deforestation' commitment.

The Australian Conservation Foundation (ACF) conducted analysis of 100 land titles and found that Australian banks are highly exposed to deforestation through their lending portfolios.

NAB was the most exposed, financing twice as many of these properties as other banks. It is followed by ANZ, Commonwealth Bank, Rabobank and Westpac.

In several cases, mortgages were issued or reissued during or just after the clearing; the ACF believes this raises "serious questions" about due diligence or ignorance on the part of the banks.

Alarmingly, 42 cases are likely to have impacted Matters of National Environmental Significance (MNES) without federal approval, potentially breaching national environment law, with the findings also referred to related authorities.

"It is not a shortage of data that is the barrier to action on deforestation, but the inability or unwillingness of banks to leverage and interpret information that is available to them," the report said.

ACF policy analyst - corporate responsibility Audrey van Herwaarden said Australian banks have been "too slow" to respond to the issue.

"Two years after ACF's Banking on nature destruction report, Westpac is the only Australian bank to have made a no deforestation commitment," van Herwaarden said.

"By examining 100 cases of deforestation that are tied to banks via a mortgage over the land title, our analysis gives just a small picture of the total deforestation likely to have occurred in the 12-month period we examined.

"The financial sector has a special responsibility to halt and reverse nature destruction because it finances industries that have the greatest impact on nature."

Van Herwaarden believes weak due diligence policies benefit landholders who are destroying the natural environment.

"Our analysis shows banks still have a long way to go to mitigate the risks - and seize the opportunities - associated with their impacts and dependence on nature," van Herwaarden added.

"By taking bold, science-aligned action now, Australian banks can help halt deforestation, protect biodiversity and lead the transition to a more resilient economy.

"Banks need to adopt clear policies to eliminate deforestation from their lending portfolios and invest in internal capability to identify and monitor nature related risk."

Additionally, ACT identified 583 cases of significant native vegetation loss between winter 2023 and winter 2024 and found 159 met the UN Food and Agriculture Organisation definition of deforestation.

Urging the banking sector to eliminate deforestation, the ACF is calling on banks to adopt a clear policy, invest in internal expertise and geospatial capabilities and engage customers in high-risk sectors to transition toward nature-positive operations.

Meanwhile, the ACF is urging the Australian government to also take part in strengthening the environmental law and improving access to environmental data, as well as mirroring other nations' commitments in developing a national strategy to end deforestation by 2030.

The ACF remains concerned about deforestation across the whole economy, not just the banking sector.

"Bank loans through securities on title are a common method for agribusinesses to finance deforestation, but ACF cannot be certain the loans identified were used specifically to finance the deforestation we observed," it said.