IPDD investors begin outreach to US government agencies on deforestation

Dialogues will likely be closed-door given the political environment, says Brandywine Global.

The US workstream of the Investor Policy Dialogue on Deforestation’s (IPDD) demand-side programme has begun outreach to government agencies, but dialogues will likely be closed-door given the political environment, one of its leads has told Responsible Investor. 

Launched in July 2020, the IPDD – which is supported by 78 financial institutions, including Legal & General Investment Management, Robeco and Storebrand Asset Management – aims to co-ordinate public policy dialogues on halting deforestation. 

The initial workstreams engaged with policymakers and industry associations in Brazil and Indonesia, reflecting the group’s focus on links between commodity production and deforestation. In 2022, a third stream was launched to look at how demand in the EU, UK and US contributes to deforestation. 

At the time, the aim was to also include engagement with China. Reina Berlien – head of ESG at Brandywine Global, one of the leads of the US workstream – said this was still being discussed, “but we have our hands full with the three jurisdictions we’re working on now and we need to make sure we get the right investor involved”.  

Stakeholder map

On the US workstream, Berlien said its main focus so far had been on creating a stakeholder map, which was unveiled to IPDD members during New York Climate Week. 

The document categorises US government agencies and legislators at the federal level by their likely willingness to engage on the topic of deforestation, according to Berlien. It also covers 10 companies across the consumer staples, consumer discretionary and agriculture sectors.

“We’re going to focus on talking to the government agencies first, followed by private companies, that were flagged as being willing to have conversations, and understanding the trade and economic risk of importing these deforestation-risk commodities,” Berlien said. 

During Climate Week, the workstream initiated dialogue with a “notable government agency”, she added. It has also reached out to another agency identified in the mapping and hopes to start a dialogue before the end of the year. 

According to Berlien, this second agency will be well placed to discuss the trade and economic risks associated with the importation of commodities produced on deforested land.  

“In our view, there is a direct connection to GDP growth in the US, and this would also apply to the EU and UK,” she said.

She added that the discussion would also help gauge how major trade partners are reacting to the EU’s deforestation regulation, what work is needed to improve supply-chain transparency and how US agencies and legislators should be thinking about this risk.

“Ultimately, it would be helpful to solicit feedback from the US public and private sectors on what a revised US Forest Act could look like, especially in response to the EU deforestation regulation.” 

Closed-door meetings

Berlien said the US investor group may keep a lower profile, however, opting for closed-door meetings and “potentially refraining from public statements” – an approach that, she noted, worked “really well” for IPDD’s Brazil workstream during the tenure of former president Jair Bolsonaro.

“I think given the political environment in the US, some of the entities in the stakeholder mapping will be far more conducive to having a frank dialogue if it is confidential,” she said. “So, unfortunately, we won’t be able to freely share information about what’s going on, unlike the Indonesian workstream and the Brazil workstream under the new political administration.” 

Berlien added that, given the politicisation of environmental issues in the US, “it’s really hard to take what one state is doing and bring it to federal level as an example of what can be done”.  

At the same time, she said it would be helpful to meet policymakers in California and New York to learn from their experience and apply it at a federal level.  

For the coming year, Berlien said one of her key objectives for the IPDD’s US workstream is helping to ensure that addressing sustainability risks does not fall off the agenda for the private and public sectors.  

“Legislators and corporate management teams have a lot to contend with, and that list is growing. Geopolitical risk, inflation, outstanding debt and borrowing costs are just a few important items on those lists.

“As investors, we are concerned about them too, so we have the opportunity to remind these stakeholders of the economic, financial, social and environmental risks associated with the demand, importation and consumption of deforestation-linked commodities and weigh practical solutions.”