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J.P. Morgan and Societe Generale join 10 other banks in adopting the 'Soft Commodities' Compact

last modified Nov 26, 2015 03:02 PM
26 November 2015 – J.P. Morgan, one of the ten largest banks in the world, has adopted the ‘Soft Commodities’ Compact, becoming the first US bank to join an initiative that mobilises the banking industry to combat deforestation. Last week, French bank Societe Generale also adopted the Compact.

These announcements bring the total number of banks who have adopted the 'Soft Commodities' Compact to twelve, representing a combined share of over 50 per cent of the global trade finance market.

The move comes just days before the United Nations climate change conference in Paris (COP21), where addressing deforestation will be discussed as a critical component of avoiding dangerous climate change. 

The 'Soft Commodities' Compact is a joint initiative of the Banking Environment Initiative (BEI) and the Consumer Good Forum (CGF), a body representing 400 of the world’s biggest consumer goods retailers and manufacturers. It aims to mobilise the global banking industry to help remove deforestation from soft commodity supply chains and achieve zero net deforestation by 2020.

Compact Banks make two principal commitments:

  1. To raise industry-wide banking standards and reinforce the development of new market norms by aligning the terms of their corporate and investment banking services with the sustainable procurement policies already being implemented by CGF companies; and
  2. To finance the transformation of supply chains with targeted financing products by working with CGF supply chains to identify interventions whereby banks can support the growth of commodity production meeting the CGF’s required zero net deforestation standards.

Andrew Voysey, Director of Finance Sector Platforms at the University of Cambridge Institute for Sustainability Leadership (CISL), which convenes the Banking Environment Initiative, said:

“One of the key tests for COP21 in Paris is the confidence governments can give the private sector that they are serious about addressing climate change. The fact that twelve major global banks have committed to change how they finance forest-sensitive agricultural commodities in advance of COP21 shows the extent to which confidence in this direction of travel is growing.”

Matt Arnold, Global Head of Social and Sustainable Finance, J.P. Morgan Chase & Co, said:

“J.P. Morgan is very pleased to support the Soft Commodities Compact as an important part of our ongoing commitment to sustainable and inclusive economic growth. We continue to invest in clients and partnerships that take a strategic approach to environmental and social challenges, develop innovative solutions to address deforestation and generate positive financial returns.”

Jean-Michel Mépuis, Sustainable Development and CSR Director, Societe Generale, said:

“Joining the Soft Commodities Compact is fully consistent with the commitments Societe Generale has already made regarding the fight against deforestation through its sector policies. We value the fact that this initiative is client-led, thus promoting joint environmental approaches.”

J.P. Morgan and Societe Generale – who are not members of the BEI – join existing BEI members Barclays, BNP Paribas, Deutsche Bank, Lloyds Banking Group, RBS, Santander, Standard Chartered Bank and Westpac as well as non-members Rabobank and UBS in making the commitment.

The 'Soft Commodities' Compact is gaining momentum at a time when governments in countries with key tropical forests underline the importance of action on deforestation. In October, Brazil’s Finance Minister, Joacquim Levy, noted at an event in London that addressing deforestation in Brazil was critical to efforts to manage the drought that has had profound economic impacts on his country. Meanwhile, Indonesian President Joko Widodo has banned peatland development amidst estimates that the recent haze crisis caused by illegal forest fires has cost Indonesia $47 billion.

Ignacio Gavilan, Director of Sustainability at the Consumer Good Forum, said:

“The global challenges business and society face today are too complex for any one player to solve by themselves, so it’s important to us that the consumer goods industry works with key intermediaries in the economy such as international banks. The BEI is providing impressive leadership by changing the norms for how banks integrate a strategic response to deforestation into their financing policies and products such as trade finance solutions.”

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