Investments by private individuals promote deforestation

One of the most important causes of deforestation is the investment of private individuals in the expansion of cultivated areas - especially in tropical regions. Deforestation not only releases carbon, but also leads to the loss of biodiversity and ecosystems and diminishes their vital functions.

A particularly important role is played by so-called flex crops - agricultural products such as soy, palm oil or sugar cane that serve both human nutrition and animal feed production or industrial purposes. Previous studies have shown that the cultivation of oil crops such as palm oil or soybean alone is responsible for about a quarter of the emissions caused by deforestation worldwide. The boom in flex crops can be traced back to various global socio-economic developments; one of which is rising inequality. So far, the influence of investments by extremely rich private individuals has remained largely unexplored.

More wealth leads to increase in flex-crop acreage

A new study conducted by Graziano Ceddia at the University of Bern's Centre for Development and Environment (CDE) was the first to examine how agricultural investment by the super-rich affects the expansion of flex crops in the Global South. The study, which focused on 21 countries in Latin America and Southeast Asia over the period 1991-2014, provides evidence: Growth in the wealth of wealthy individuals correlates strongly with the inflow of foreign direct investment into agriculture in these two world regions - leading to the expansion of flex crops.

At the same time, it showed that global investors were attracted by the expectation of high returns on such capital investments. "Private investors are putting their capital in the agricultural sector in the global South because returns on traditional investments have declined," said study author Graziano Ceddia.
In summary, wealth concentration among wealthy private investors plays a critical role in the expansion of agricultural land in the Global South, directly contributing to deforestation. According to the study, now published in Nature Sustainability, during the period studied, a 1 percent increase in the wealth of the super-rich led to a 2.4 to 10 percent expansion in flex-crop acreage.

Distribution of wealth even more important than distribution of income

"The study results highlight the importance of studying the impact of inequality on the environment, focusing not only on the distribution of income, but also on the distribution of wealth," says Graziano Ceddia. After all, it is only large fortunes that enable large-scale private investment in the agricultural sector. And wealth is distributed much more unequally than income, he adds. "The study makes it obvious that inequality urgently needs to be reduced if environmental risks are to be minimized." In addition, research on the links between wealth distribution, investment and environmental degradation needs to be intensified, he said.