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Tackling deforestation represents a key opportunity for the financial sector to advance toward net zero, reduce risk and boost resilience.
- 11%: of annual global greenhouse gas emissions are attributed to deforestation driven by land-use change and agriculture, according to the IPCC.
- 1.5°C: chance will be kept alive if all deforestation must end urgently, with the majority of commodity-driven land clearance halted by 2025 ) and all land use change eliminated by 2030.
- 60%: of total deforestation is caused by agricultural commodities production, which predominately occurs in the operations and supply chains of major FLAG (forestry, land use, and agriculture) companies.
Investments in nature-based solutions will help meet the climate, nature, and land-neutrality targets.
- 50%: is dependent on nature thriving.
- 2025: timeline for increasing investments in nature-based solutions.
- USD$4.5 trillion: could be generated through by developing and tapping solutions for a net zero, nature positive, resilient food system by 2023.
Deforestation sits at the intersection between climate and nature: net-zero targets will be out of reach unless deforestation is urgently halted and reversed.
By committing to work to eliminate agricultural commodity-driven deforestation from portfolios and drive the sustainable transition of the agricultural sector, financial institutions can simultaneously enable the delivery of climate targets, support biodiversity and food security, mitigate against risk, and prepare for forthcoming regulations.
Launched at COP26, the Finance Sector Deforestation Action (FSDA) is a results-driven collaborative of financial institutions that unites signatory organisations around a shared engagement approach to tackling deforestation, creating essential convergence across other climate and nature-related initiatives. Launched at COP26 in Glasgow.
37 financial institutions with more than (US) $8.5 trillion in assets under management are committed to eliminating agricultural commodity-driven deforestation risks in their investment and lending portfolios by 2025. To read the commitment letter, please click here.
Finance and Deforestation Advisory Group: FSDA members have the support of the Finance and Deforestation Advisory Group, which is focused on helping signatories to meet their Commitment. The Group provides ongoing advice and support on data, tools, and best practices. This group includes Conservation International, Global Canopy, Global Optimism, High-Level Champions for Climate Action Team, Nature4Climate Coalition, and WEF Tropical Forest Alliance.
Join the Finance Sector Deforestation Action Initiative by signing the Commitment on Eliminating Agricultural Commodity-Driven Deforestation:
As FSDA members are implementing their commitment, they have developed investor expectations to support company engagements. These expectations are grounded in the Commitment, informed by relevant science and best practices, and anticipated to evolve over time.
Click here for details.
Address deforestation risk:
- Finance Sector Roadmap: AFI-aligned and endorsed Finance Sector Roadmap provides stepwise guidance and actions for financial institutions to tackle deforestation in their portfolios and meet the Commitment. It brings together the best available data and tools, showing financial institutions how they can map risk, set policies, identify and engage with non-compliant portfolio constituents, and look to increase exposure to nature-positive activities.
- Examples of instruments that can be used by clients and holdings to combat commodity deforestation: SBTi-FLAG , SBTN, TNFD and CDP.
Platform examples related to NbS Investment
- NBS pilot investment platform is focused on Nature-based Solutions (NbS), including Regenerative and Sustainable Agriculture, Forests, and Land Use. It is a nascent platform intended to begin filling a void in this crucial area, demystifying the landscape of NbS investment opportunities, and evolve over time as those opportunities expand. It is not a platform for investment advice.
- The Little Book of Investing in Nature offers an essential overview of biodiversity finance and gathers information on various innovative financial products and services developed by the public and private sectors to shift investment away from nature-damaging activities to nature-positive ones.
- Fund for Nature: a first-of-its-kind debt fund for nature-based carbon projects which aims to increase the supply of high-quality nature-based carbon projects to meet the growing demand from corporate off-takers while increasing the economic benefit to project implementers and local communities.
Progress so far:
- Investor Expectations & Company Engagements: FSDA signatories developed and published shared investor expectations that they have been using in connection with stepping up engagement with companies on increasing actions that address their deforestation impact.
- Data Providers: FSDA signatories are engaging with major data providers to call for issuer-level data on deforestation risk exposure and management.
- Policies: Investors have made progress in enhancing or establishing deforestation policies.
- Investment in Nature-Based Solutions: FSDA signatories are implementing strategies and increasing investments in nature-based solutions:
- Case studies and more to be shared soon.
Tackling deforestation is essential to achieving net zero targets and reversing nature and biodiversity loss
Signals of Change
- Kunming-Montreal Global Biodiversity Framework (GBF)includes a clause on biodiversity disclosures, aiming to shield 30% of the world’s natural assets by 2030 while investing in nature-based solutions projects.
- Glasgow Leaders’ Declaration on Forests and Land Use: endorsed by141 governments covering 90% of the world’s forests, agreed to halt and reverse deforestation by 2030
- GFANZ co-chairs and vice-chairs call to action on deforestation note transition
- plans that lack objectives and clear targets to eliminate and reverse deforestation are incomplete.
- Deforestation-free procurement acts: US Forest Act, European Union Regulation: Deforestation-free procurement laws and policies, UK Environment Act 2021.
Target-setting, disclosure, and action frameworks increasingly specify the need for addressing nature-related risks and opportunities
- SBTi FLAG Guidance: SBTi FLAG guidance stipulates a no-deforestation commitment with a target date no later than 2025.
- Taskforce on Nature-related Financial Disclosures (TNFD): released a framework (v0.3) for companies and financial institutions to assess, disclose and manage nature-related risk building on the work of existing initiatives in this space (TCFD).
- Science Based Targets Network (SBTN): is developing guidance for companies to set appropriate targets to reduce, eliminate, and reverse biodiversity loss in their operations and supply chains.
- Updated Race to Zero – Leadership Practices include recognition of the need for organizations to set net-zero commitments to halt deforestation and protect biodiversity.
- GFANZ has released Financial Institution Net-zero Transition Plan Guidance, incorporating the approaches and timelines on commodity-driven deforestation consistent with the FSDA initiative.
- UN’s High-Level Expert Group report recommends financial institutions should have a policy of not investing or financing businesses linked to deforestation and should eliminate agricultural commodity-driven deforestation from their investment and credit portfolios by 2025.
Finance for Biodiversity Foundation/Finance and Deforestation Advisory Group Webinar: in collaboration with Finance for Biodiversity
Nature Positive for a Net Zero Future: London Climate Action Week
Nature Positive for a Net Zero Future: Climate Action Week New York
Financing Nature Podcast: Financing Nature’s COP27 Special Series
FSDA at COP15: Ending Commodity-Driven Deforestation and Scaling up NBS
UPCOMING in 2023: London Climate Action Week 2023 (details to follow)
Assessing the Financial Impact of Land-Use Transition on the Food & Agricultural Sector
Why Net-Zero Needs Zero Deforestation Now
5 ways businesses can implement the new Global Biodiversity Framework
TNFD launches latest framework for nature-related financial disclosure
UNEP: CBD COP15 ends with landmark biodiversity agreement
Responsible Investor: Carney calls on FIs to integrate nature and biodiversity in transition plans.
BNN Bloomberg: Asset Managers Forced to Confront Biodiversity Risk Most Had Ignored
Responsible Investor: COP15 deal should make financial regulators ‘sit up and listen’- Schroders.
Forest 500 report assesses finance institutions in the Race to Zero, GFANZ, or with other significant climate commitments annually on their efforts to address deforestation.
Nature Action 100 engages companies in key sectors deemed systemically important in reversing nature and biodiversity loss by 2030.
Race to Zero: Leading financial institutions commit to actively tackle deforestation
IPE: Why we need deforestation-free portfolios by 2025
FT: COP26: Global leaders sign pledge to halt deforestation
Responsible Investor: Letter from Brazil: Meeting net zero and eliminating deforestation
Investment Week: Asset management firms pledge to fight deforestation by 2025
Euractiv: G7 leadership is critical to put the brakes on deforestation
Responsible Investor: 100+ days since COP Deforestation Commitments – why every investor needs to act now
Make My Money Matter: Cutting Deforestation from Our Pensions
Thomson Reuters: OPINION: Nature will help drive a better, faster COVID-19 recovery
Investment Week Storebrand AM: Eliminating commodity-driven deforestation
$8.9 trillion Assets under Management
The signatory financial institutions commit to use best efforts to tackle commodity-driven deforestation impacts in their investment and lending portfolios by 2025. The commitment is focused on addressing agricultural commodities that are responsible for the lion’s share of deforestation impacts: beef, soy, palm oil, pulp & paper. Their stated intention is to reduce deforestation-related risks while supporting the transition to a sustainable agricultural sector.
The signatory organisations will individually create organisational plans, milestones, and incentives to meet the proposed timelines, aligned with a Paris Agreement-compliant 1.5°C pathway.
Signatories
ACTIAM; AP2; Australian Ethical Investment; Aviva plc; AXA Group; Banco Estado de Chile; Boston Common Asset Management; Capital + SAFI S.A.; Church Commissioners for England; Church of England Pensions Board; Comgest; CPEG; Domini Impact Investments LLC; East Capital Group; Fidelity International; GAM Investments; Generation IM; Grupo Bancolombia; Impax Asset Management PLC; International Business of Federated Hermes; JGP Asset Management; Legal and General Investment Management (LGIM); LGPS Central Limited; Lombard Odier; London CIV; Menhaden PLC; NEI Investments; NN Investment Partners; Robeco; Schroders; SCOR SE; Skandia; SouthBridge Group; Sparebank 1 Forsikring; Storebrand Asset Management; Sumitomo Mitsui Trust Asset Management; TCI Fund Management Ltd; The Local Authority Pension Fund Forum.
Interested in learning more about the Financial Sector Commitment Letter on Eliminating Agricultural Commodity-Driven Deforestation?
Please click here for Frequently Asked Questions.
ADVISORY GROUP
