IIPP’s research reveals global banks’ role in funding ecosystem destruction ahead of key COP summits

As the world prepares for the UN Biodiversity COP16 in Colombia and the Climate COP in Baku, IIPP’s groundbreaking research reveals the significant role that banks from the U.S., UK, France, China, and Japan play in financing companies linked to the irreversible destruction of two of the world’s most vital ecosystems.

The study, titled Financial System Interactions with Ecosystem Tipping Points, was conducted by UCL’s Institute for Innovation and Public Purpose (IIPP) in partnership with the University of Exeter’s Global Systems Institute (GSI). It examines how financial institutions are funding multinational companies whose supply chains contribute to deforestation in the Brazilian Amazon and the degradation of Indonesian peatlands—ecosystems critical for global climate stability.

The research traced over $500 billion in financial flows between 2014 and 2023, supporting 39 multinational companies involved in soy, beef, palm oil, and wood pulp production. These industries are directly linked to deforestation and land degradation, threatening vital carbon sinks and biodiversity hotspots. Alarmingly, this sum could have funded the $100 billion per year climate commitment from wealthy nations to developing countries for five years.

Among the financial institutions named are Citigroup, Bank of America, JPMorgan Chase, Barclays, BNP Paribas, and HSBC. These banks are implicated in activities that endanger up to 200 gigatonnes of carbon stored naturally in these ecosystems, exacerbating the global climate crisis.

The research reveals that financial institutions from the U.S. are the largest backers of deforestation in the Brazilian Amazon, responsible for 22.7% of total funding, with the UK, China, Japan, and France also significantly involved. Meanwhile, for Indonesia's peatlands, domestic and regional financial institutions, including China, Japan, and Singapore, lead the funding with little to no restrictions on how the proceeds are used.

A Tipping Point for Global Ecosystems

The Brazilian Amazon and Indonesian peatlands are not only biodiversity-rich but also critical carbon sinks. The research warns that further destruction could push these ecosystems past their tipping points, leading to their collapse and potentially destabilizing global climate systems.

“Human life and nature are undeniably interconnected. When ecosystems collapse, we lose much more than biodiversity—the economy suffers, and financial risks escalate,” said Professor Tim Lenton, one of the report’s authors.

“The degradation of these ecosystems disrupts essential services like carbon sequestration, which help regulate climate and maintain economic stability.”

The findings call for urgent financial sector reforms. “Banks and other financial institutions must be included in the global effort to halt deforestation and land degradation,” said Lydia Marsden, lead author from UCL IIPP.

She emphasized the need for regulations that address financial flows linked to environmental destruction, particularly as the European Union introduces new supply chain regulations aimed at reducing imported deforestation.

Financial Sector at the Centre of the Climate and Biodiversity Debate

As COP16 and COP in Baku approach, the role of the financial sector is under increasing scrutiny. The report urges policymakers to include nature-negative financial flows in regulations as part of international climate and biodiversity commitments under the Paris Agreement and the Kunming-Montreal Global Biodiversity Framework.

“This is a pivotal moment for governments to take bold action on protecting nature and biodiversity,” said Professor Josh Ryan-Collins at UCL IIPP. “Addressing the financial flows that contribute to ecosystem destruction must be part of a broader mission to reverse biodiversity loss and mitigate climate change.”

The report highlights the need for coordinated action between governments, financial regulators, and the private sector to redirect capital away from activities that threaten critical ecosystems.

“The findings emphasize the urgent need for financial regulation and corporate accountability to tackle the systemic risks posed by environmental degradation,” said Dr. Jesse Abrams of the University of Exeter.

Read the full report, here: Financial System Interactions with Ecosystem Tipping Points: Evidence from the Brazilian Amazon and Indonesian Peatlands.

For more information contact the authors Lydia Marsden, Research Fellow in Sustainable Finance at UCL IIPP and Josh Ryan-Collins, Professor of Economics and Finance at UCL IIPP.

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