- There is growing recognition of the importance of the finance sector to forest landscapes. A number of financial service providers (FSPs) are introducing diverse green banking and sustainable finance initiatives to help manage the environmental impacts of their investments and clients.
- Customer due diligence (CDD) protocols are important, if poorly recognized legal resources for emerging sustainability efforts among FSPs. The financial sector is increasingly pressed to ensure their investments and client services are legally compliant and unconnected to money laundering or corruption.
- Most countries already require FSPs to implement CDD protocols to target terrorism financing, the drug trade and political corruption. Similar protocols are needed for addressing forest-related crimes such as illegal logging, illegal agricultural expansion and illegal wildlife trade.
- Evidence from Indonesia highlights significant progress in strengthening of CDD standards, including those related to forests, and to challenges of operationalizing CDD protocols. Since 2003, only 19 formal reports linked to the forest sector have been issued.
- CDD protocols in the forest sector will require FSPs to use new tools and expertise in order to access, analyze and verify forest-related transactions. They will also require corresponding action from banking regulators and enforcement bodies.
- While promising strategies for targeting forest-related crime, there is a need to evaluate the feasibility of implementation, and the effectiveness of using CDD and other green banking strategies to strengthen forest governance.
Topic: forests, financial, monetary policy, corruption
Series: CIFOR Brief no. 33
Publisher: Center for International Forestry Research (CIFOR), Bogor, Indonesia
Publication Year: 2015Creative Commons Attribution 4.0 International License.