Financing Environmental Crime: Financial Sector Complicity in Global Deforestation and Opportunities for Regulatory Intervention

In recent years, governments around the world have passed laws that criminalise the importation of illegally harvested timber in an effort to combat harmful deforestation and protect vital forest ecosystems. These ‘destination country laws’ focus on one important aspect of this substantial challenge, but they ignore the role of financial institutions in enabling harmful deforestation and facilitating illegal logging practices on a global scale. This chapter summarises the existing regulatory landscape and limits of destination country laws, before exploring financial sector complicity in global deforestation, mapping the ways that finance contributes to deforestation incentives and facilitates the transfer of wealth from illegal logging practices. The chapter goes on to present several regulatory interventions that could incentivise shifts in governance practices within the financial sector, leveraging the power and influence of these important stakeholders to support, rather than undermine, the goals of environmental protection and sustainable development. Due to the complexity of the global financial system and the numerous avenues for engagement and intervention, this chapter establishes the foundation for ongoing research and analysis on this important topic. It is argued that the challenge of illegal logging and harmful deforestation cannot be overcome without support from the financial sector, and furthermore, that such support will facilitate enhanced opportunities for sustainable and regenerative economic development on a global scale.