If you invest your money in Sweden, several of the largest banks in the country offer to let your money prosper by investing it in food commodities. Many have done so. Right now approximately DKK 3 billion (EUR 400 million) has been invested in food commodities through Handelsbanken, SEB and Nordea.
As in the Danwatch survey of Danish Banks, Swedish banks, too, fail to tell you that this type of investment contributes to raising food prices. According to the World Bank and the UN, food commodity speculation contributes to increased prices for basic food commodities like wheat and maize.
During the 2008 food crisis, the prices of food commodities reached an all-time high and drove 100 million people into hunger and extreme poverty. So did the extent of speculation in food commodity prices. After the crisis, food prices fell drastically, but in 2011 prices have once again reached 2008 levels. Due to the current price increases, 44 million people have been driven into extreme poverty and hunger so far.
Nordea says stop to food speculation
At Nordea, SEB and Handelsbanken, approximately DKK 3 million (EUR 400 million) has been invested in structured bonds based on agricultural commodity futures. In addition to this amount, DKK 1.2 billion (EUR 160 million) and 210 million (EUR 28 million), respectively, has been invested in Denmark through Nordea and Danske Bank. Among the five largest banks in Sweden, only Swedbank does not provide such financial products for its customers.
Furthermore, it is also possible to invest in derivatives such as certificates and warrants at SEB and Handelsbanken.
The five largest banks in Sweden profile themselves as socially responsible and have all joined the UN Global Compact, which states that companies should support and respect the protection of internationally declared human rights and ensure that they are not complicit in violating these.
According to the UN's Universal Declaration of Human Rights and International Covenant on Economic, Social and Cultural Rights, everyone has a right to food.
But several large banks – SEB, Handelsbanken and Danske Bank – see no problem in food commodity speculation. The banks do not include food commodity speculation in policies on social responsibility and do not inform their customers that speculation in itself can lead to rising and falling food prices.
”We think it is important to underline that the academic community presently is not in agreement on whether commodity linked financial savings products affect the prices of the underlying agriculture commodities,” says Cecilia Widebäck West, Head of Corporate Sustainability at SEB. Danske Bank, too, does not believe that there are unequivocal conclusions on whether food commodity speculation in itself can cause price fluctuations for food commodities.
””We, having looked very closely and carefully, do not see any harmful connection between financial food commodity investment and higher or lower food prices. No credible impartial research has, to our knowledge, been able to identify causality between financial market activity and physical food prices”, says Magnus Strömer, Head of Commodities at Handelsbanken.
Nordea has in the annual report published in March 2012 on responsible investments announced that the bank no longer will offer customers to invest in financial products having food commodities as underlying assets.
“Our decision is based on a number of international analyses showing a connection between increased speculation on the financial markets and volatile (and all-time high) food prices,” says Klaus Fridorf, Director of Responsible Investment and Governance at Nordea.
Consequently, when the bonds purchased by Nordea's Swedish and Danish branches – worth DKK 130 million (EUR 17 million) and 1.2 billion (EUR 160 million), respectively – expire, the bank's customers will no longer be able to invest in this kind of financial products.
