Investors still ignoring deforestation, report finds

January 14, 2022

Nearly three-quarters of financial companies do not have a deforestation commitment for all relevant commodities in their supply chains, according to a new report from non-profit organisation Global Canopy.

The international body's latest Forest500 report revealed global asset managers such as Vanguard, BlackRock and State Street have all failed to formulate public policies to minimise deforestation risk.

The report ranks 350 companies that use, produce, sell or trade the largest amounts of these commodities, along with the 150 biggest banks, institutional investors and pension funds. It found that, overall, institutions were still providing $5.5 trillion worth of financing to companies with large exposures to deforestation.

Meanwhile, 28 companies published new commitments to address deforestation risk since last year, the report said - but just 11 have made a commitment for all commodities they are exposed to. Financial institutions are poorly prepared for regulation ahead, the Forest500 report argued.

“Ultimately only mandatory action and reporting will drive market-wide change at the scale required,” it stated. “The new political space created at COP26 can pave the way for stronger and more broadly applicable legal frameworks.”

“Important first steps are already being taken with potentially groundbreaking legislative proposals in the UK and the European Union. But these proposals could be strengthened and must be enforced, with clear accountability and penalties for breaches. Regulation is also needed for the finance sector - and critically other nations and trading blocs must follow this lead.”

The 93 financial institutions without deforestation policies provide $2.6 trillion in finance to companies with the highest exposure, the Forest500 report revealed.

According to the report, the most influential companies still do not recognise deforestation as a risk, revealing a significant lack of progress since Forest500 began its rankings. This is also despite recent commitments made at the COP26 conference last year.

It stated that companies needed to set and implement strong deforestation commitments and policies, covering deforestation, conversion, and associated human rights abuses.

Minerva has published a briefing and adjoined webinar on biodiversity for investors exploring the risk it poses. Watch it to learn more about the growing consensus on biodiversity risk.