European investment funds marketed as “sustainable” continue to hold large positions in companies whose activities drive deforestation and fossil-fuel expansion, revealing a significant gap between their branding and actual financial flows. €9 billion in so-called green funds are effectively bankrolling activities linked to Amazon degradation, despite commitments under the EU’s Sustainable Finance Disclosure Regulation. Major asset managers have included fossil fuel and agriculture-linked firms in portfolios labeled as sustainable, raising concerns about widespread greenwashing in the financial sector. Critics argue that current ESG criteria are too weak or too loosely applied, allowing capital to flow to companies with business models at odds with stated climate and biodiversity goals. The investigation also highlights the lack of transparency in how funds define and screen for sustainability, which can mislead investors and the public. Calls for regulatory tightening and clearer standards are growing, as policymakers and civil society push for sustainable finance to align more closely with environmental outcomes.
According to Global Canopy, US$6.1 trillion in funding was provided to the 350 companies with the greatest risk exposures to tropical deforestation by some 150 financial institutions in 2023.
Through this exposure, land conversion presents numerous supply-chain risks to firms, namely:
- The reputational risks posed by adverse media (exacerbated further if linked to any human-rights abuses in the context of land conversion).
- The legal risks represented by increasing regulatory and legislative pressures on companies and financial institutions to prevent deforestation.
- The physical risks present, given that most bank-financed businesses and commercial services ultimately depend on natural capital and resources directly or through their supply chains. Aggressive consumption of resources reduces their availability in the long term, undermining sustainable development and creating economic instability. Indeed, the World Economic Forum (WEF) has estimated that at least 50 percent of global GDP is reliant on nature and warned that the impacts of climate change would significantly destabilise global trade.
Click here to access the Global Illegal Logging and Associated Trade (ILAT) Risk assessment tool and to download the Forest Trends User Guide describing the functionality of the ILAT Risk Data Tool.
Click here to access the Cattle Data Tool.

