Deforestation and Land Use 

We are at the start of the journey in assessing nature related material impacts and dependencies, including indirect deforestation in our customers supply chains, having undertaken an initial TNFD pilot in 2024. As a UK focused bank, we do not have significant direct lending exposure in countries with tropical rainforest. Our exposure to in-scope* direct deforestation risk-related commodity customers was £327m at year end 2024, representing 0.046% of our total balance sheet exposure.⁵ However, the UK is a major consumer of commodities linked to deforestation, with 40% of the UK’s overseas land footprint being in countries with high or very high risk of deforestation.⁶  Many of our customers, along with suppliers in our value chain, will have operations that indirectly contribute to deforestation, resulting in nature related impacts and dependencies. Consequently, they could be exposed to both physical and transition risks associated with these commodities.

In 2024 we undertook a TNFD pilot, we utilised the Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) to perform an initial assessment of our nature-related impacts and dependencies across NatWest Group’s wholesale portfolio. Results of initial analysis indicated that approximately 16% of NatWest Group’s 2023 balance sheet had exposure to sectors with potential heightened dependence or impact on nature. This top-down analysis, assessed on a test-and-learn basis, was used to select three sectors for a deeper dive, bottom-up analysis as part of the LEAP framework for assessment, as recommended by the TNFD. For more information please see page 62 in our Sustainability Report.

UK relevant commodities

World Wide Fund for Nature UK (WWF UK) 2020 report with Royal Society for the Protection of Birds (RSPB) identified an area equivalent to 88% of the total UK land area was required to supply the UK’s demand for just seven commodities between 2016 and 2018⁸. As highlighted in the 2024 House of Commons Environmental Audit Committee report,⁹ the UK’s deforestation footprint per tonne of product consumed is high compared to most other countries. There is pending secondary legislation in the UK to the 2021 Environment Act¹⁰ for ‘forest risk’ commodities as well as regulations such as the EU Deforestation Regulation¹¹ which includes wide geographies and derived products, which are examples of aspects that are not covered in our current approach to DRC’s. In addition, both require that products have been produced in compliance with human rights legislation. In 2023 we identified both contribution to climate change and land rights as 2 of the 5 most salient human rights issues for NatWest Group (PDF, 358 KB) for more information please see related topics at the end of this page.

DRC Customer engagement & collaboration   

Our deforestation risk-related commodity approach is partly integrated within our Environmental Social and Ethical risk acceptance criteria (PDF, 179 KB) (ESE RAC). Our approach defines in scope customers as those that import or directly produce soya, palm oil, timber, pulp & paper, beef, leather, cocoa and rubber in tropical areas. Our 2024 ESE criteria sets out we will prohibit: Soft commodities producers operating in tropical regions who have not obtained sustainable certification of their direct soft commodities activities and supply chain by 31st December 2024.  In 2024 we engaged with the small number of customers that did not have the certification and/or membership, as specified in our ESE RAC, from the 2023 published results. Following this engagement, we were able to clarify customer approaches. Customers were able to provide certification or equivalent data, including from third parties, for sourcing locations and mean species abundance in the case of timber. There were also international conglomerates where the subsidiary we support is not in scope of tropical commodities as defined by our approach criteria*, these were removed from the analysis. As a result, 2023 in-scope customers met our certification requirements, or suitable equivalents, as at 31 December 2024. 

Environmental crime is the third largest form of transnational organised crime in the world. Globally, the illegal timber trade is estimated to be worth up to $152 billion per year. In 2024 as members of The Financial Services Task Force (FSTF) NatWest Group collaborated with WWF UK, Themis, HSBC and World Resources Institute. Providing inputs to help develop a toolkit which could assist financial institutions to monitor such crimes.

Deforestation related risk commodity reporting is limited compared to other reporting that we undertake. It is a manual process and as such whilst effort is taken to include in scope customers there could be a number that have not been included. Issues that can cause this include but are not limited to industry classification data and self-disclosure of activities by customers at the point of onboarding.

This is a specific analysis of potential tropical deforestation; it is not and does not give any indication of NatWest customers dependence on nature and is very limited in terms of impact on nature. We note that NWG is at the start of a journey regarding customer value chain exposures through the TNFD pilot.

Whilst we cite the relevance of climate and human rights this is only with relevance to deforestation. Although some of the certifications have human rights obligations and commitments, NWG have not analysed this.

Larger customers with a small percentage of their trading activities in specified commodities may not be within ESE FFA scope, for example large retailers. However, in terms of risk mitigation new legislation upcoming stipulates that organisations using ‘forest risk’ commodities in UK supply chains are in-scope if they have a global turnover of over £50 million. Unlimited variable monetary penalties will be available as a civil sanction for breach of the Forest Risk Commodities Regime rules.

Certification bodies are reliant on their processes of due diligence to ensure that the standards are kept to. We rely on their website membership lists being kept up to date and accurate. The process is reliant on the certificate and membership bodies having adequate controls NatWest has not investigated the legitimacy of these certificate issuers or membership bodies.

There is a reliance on external data resources being accurate as well as customer self-declaration to RM’s at ESE reviews and onboarding.