$8.7trn investor coalition aims to eliminate agricultural commodity-driven deforestation from portfolios

Announcement comes amid a swathe of nature-related developments at COP26

Investors with more than $8.7trn in assets under management have committed to “using best efforts” to eliminate agricultural commodity-driven deforestation from their portfolios by 2025.

The group – which includes investors such as Aviva, AP2, Generation Investment Management, Church Commissioners for England, and Storebrand Asset Management – will focus on cattle products, palm oil, soy, and pulp and paper production, and have pledged to publicly disclose risks in portfolios, deepen engagement and increase investment in nature-based solutions.

“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,” said Emine Isciel, Head of Climate and Environment, Storebrand Asset Management. 

A roadmap with a set of time-bound actions will be launched tomorrow to accompany the announcement.   

The resource has been developed by the Finance and Deforestation advisory group – consisting for example of the PRI and Global Canopy. Organisations within the advisory group will “closely engage with and support signatories, track their progress, and continue to enhance the Roadmap to ensure it remains aligned with the latest relevant best practices, data, and research.” 

Several of the group’s signatories – including Schroders, Fidelity International, and Impax Asset Management – are also amongst the 12 new members of the Natural Capital Investment Alliance.

Launched in January 2021 by Prince Charles, the initiative plans to mobilise more than $10bn towards natural capital themes by the end of 2022.

Also today, multilateral development banks, led by the Inter-American Development Bank, have promised to mainstream nature across their policies and to significantly boost nature finance for member countries.   

Governments have also committed to nature action at COP26. Today, leaders representing more than 85% of the world’s forests have pledged to work collectively to halt and reverse forest loss and land degradation by 2030, while delivering sustainable development and promoting an inclusive rural transformation.

The commitment, which already has more than 100 nations signed up, will be bolstered by the provision of £8.75bn ($12bn) in public finance from 12 countries, including the UK, to support activities in developing countries, including restoring degraded land, tackling wildfires, and supporting the rights of indigenous communities.  

Despite the announcements today, new research by Forests & Finance, claims that since the adoption of the Paris Climate Agreement in 2015, commercial banks have provided more than $238bn in credit to 300 companies linked to tropical deforestation globally.  

The banking sectors most responsible for financing tropical deforestation are those of Brazil, Indonesia, China, the United States, and Japan, according to the report.

Moving forward, it called on the financial sector to immediately end support to deforestation, forest degradation and fossil fuel expansion, as well as exclude loopholes from accounting and reporting, “such as offsetting”, to ensure real emissions are reduced to as close to zero as possible.