Stockholm (NordSIP) – Environmental non-profit Global Canopy’s (GC) latest annual report paints a sorry picture of the global efforts to limit deforestation on the part of companies and financial institutions. GC keeps a close eye on the 500 firms that have the greatest influence on the state of the planet’s forests, either through their supply chains or funding activities. Despite forests’ fundamental role in the climate and biodiversity crises, a shocking 40% of GC’s Forest 500 companies have no deforestation policies in place. Forests also play a key role in other sustainability issues such as food security, indigenous rights, and human displacement. GC assesses companies on their approach to four different commodities with the greatest impact on forests: palm oil, soy, beef and paper.
Financial institutions are the worst culprits
While some corporations in the Forest 500 score reasonably well, the same cannot be said for financial institutions. Just 6 out 150 manage an overall score of 3 out of 5, with the overwhelming majority scraping a measly 1 out of 5. These financial institutions are behind USD 6.1 trillion invested in high deforestation impact companies in 2022. The absence of even minimal formal policies addressing the issue is hard to understand, especially in light of COP15 agreements and major supranational moves like the EU’s new regulation on deforestation-free supply chains. GC makes the point that deforestation represents multiple reputational, regulatory and physical risks to investment assets. These can translate into hard financial losses, with UN-sponsored analysis showing that food and agriculture companies could lose more than a quarter of their market value by 2030 if they continue to ignore the issue.
Lack of data is no longer a valid reason for inaction. A range of tools relating to deforestation and soft-commodity-related human rights is laid out specifically for financial institutions by the Accountability Framework. GC also urges deforestation laggards to get to grips with the new Forest IQ database, which is available as a beta test before its full roll-out planned for April 2023. The database is designed to offer investors consistent, comparable data on investee companies’ exposure, materiality, commitments and performance on deforestation. The objective is to encourage action leading to deforestation-free portfolios by 2025. It remains that only 11% of the financial institutions within the Forest 500 have policies in place for the four deforestation-related commodities assessed by GC.
Company targets either hopeful or non-existent
55% of the scrutinised companies including Adidas and Kraft Heinz have set 2025 as the latest date for eliminating deforestation impact from their value chains. GC’s report shows that many of these firms are not on track to meet that target. Even more concerning are the 39% of companies that have targets beyond 2050, or no commitments whatsoever. This is where you will find the likes of Starbucks, Prada and Toyota. GC makes it clear that, with the support of governments and civil society, companies and financial institutions should:
“Recognise deforestation as a risk to their business and set commitments and policies that achieve deforestation, conversion and associated human rights abuses-free supply chains and financing no later than 2025. It is long overdue for companies and financial institutions with exposure to deforestation to put this basic building block in place. In parallel, they should convert promises into action by making and reporting on progress against best-practice guidance.”
Inaction bordering on criminal negligence
The arguments are clear and there should be no remaining doubts regarding the huge contribution of land use and deforestation on the root causes and potential mitigation of the climate crisis. Vast economic blocs like the EU are taking a firm stand, and consumers will also likely shun the worst offenders as they are exposed. The quality and range of deforestation-related metrics and data are reaching a very high level, so there can no longer be any excuses for ignorance and inaction.
