More than 30 leading financial institutions, collectively with over US$ 8.7 trillion in assets under management (including Aviva Plc, Storebrand Asset Management, Generation Investment Management, JGP Asset Management, NEI Investments, Impax Asset Management, Church Commissioners for England and Boston Common Asset Management) have committed to tackle agricultural commodity-driven deforestation as part of broader efforts to drive the global shift towards sustainable production and nature-based solutions. Ending deforestation and implementing natural climate solutions could provide a third of the solution to achieving the Paris climate target, help halt and reverse biodiversity loss, and support human rights and food security – but only if urgent action is taken.
With most deforestation driven by unsustainable production practices for palm oil, soy, cattle products and pulp and paper, resulting in more carbon emissions annually than the EU, action on these commodities is particularly urgent – which is why this is the focus of the commitment made today.
The commitment – to use best efforts to eliminate agricultural commodity-driven deforestation from portfolios by 2025 – is clear evidence of the financial sector’s increasing awareness of the systemic risks and associated actions needed to address deforestation related to production of these commodities and accelerate the transition to sustainable commodity production. Financial institutions making today’s commitment say they recognise that tackling deforestation is crucial to meeting their net zero targets as well as addressing the growing ESG, market, reputational and litigation-related risks associated with the value chains of these agricultural commodities.
Efforts to tackle deforestation as part of the commitment will focus on continuing to finance the production of commodities in a way that supports sustainable economic development and the global transition towards sustainable production. Financial institutions will focus on sustained engagement with companies and/or clients (i.e., direct financing recipients) exposed to deforestation risks through these commodities, using active ownership and ongoing stewardship to catalyse actions to eliminate deforestation across supply chains. This will include publicly disclosing risks, establishing policies to address agricultural commodity-driven deforestation, deepening engagements, publicly reporting progress on efforts to tackle forest risk, agricultural commodity-driven deforestation, and increasing investment in nature-based solutions.
This engagement approach is critical for local communities, ensuring support for sustainable livelihoods as these agricultural commodities transition to sustainable production. Ultimately, redirection of finance from companies and/or clients with material exposure to agricultural commodity-driven deforestation impacts may be appropriate where risk-reduction criteria are not met.
“Protecting our forests and their biodiversity is fundamental to the fight against climate change,” Amanda Blanc, Group CEO, Aviva Plc, said. “Financial institutions have a pivotal role, using our influence on the companies we invest in to encourage and ensure best practice. Aviva is proud to sign the commitment to end deforestation, helping build a critical mass for change. Together we can reduce risk to the planet and the financial markets and capitalise on the opportunities that come from more sustainable investment.”
Emine Isciel, head of climate and environment, Storebrand Asset Management, added that the need to act on deforestation is urgent. “Halting deforestation can make a dramatic contribution to mitigating and adapting to climate change while helping to achieve biodiversity targets,” she said. “Deforestation is not only a risk to climate and biodiversity, but it can pose financial risks to our portfolios. A huge number of economic sectors are exposed to increasing physical and regulatory risks associated with deforestation.”