Deforestation should be more of a priority among financial institutions in order to tackle climate change, a major new report urges.
Deforestation for agricultural commodities, including palm oil, soy, and beef, currently accounts for 10 per cent of global carbon dioxide emissions, more than the aviation sector.
Action to halt the pillaging of forests is essential for achieving net zero targets but financial institutions are at the starting line when it comes to action, according to Global Canopy’s new Deforestation Action Tracker.
The Tracker, which will become an annual accountability mechanism, provides an independent baseline review of action on deforestation for the 557 financial institutions that are part of the GFANZ and Race to Zero.
Financial institutions who have committed to net zero targets must prioritise deforestation, according to a recent Statement on Deforestation Financing by Michael Bloomberg, Mark Carney, and Mary Schapiro, the co-chairs and vice chair of GFANZ.
Global Canopy’s baseline review found that one year on from COP26, just one sixth (17 per cent) of the 557 financial institutions reviewed, who together have at least $130 trillion in assets under management, publicly acknowledged that they faced business risks linked to deforestation, with half of those seeing this as a financial risk, and half as a reputational risk.
While some financial institutions are leading the way, taking tangible action to eliminate deforestation, only 20 per cent (109) currently have published a commodity-specific policy on how they will address deforestation risks – and just six per cent (35) have a policy that covers all four main forest-risk commodities. Just one of the financial institutions has all the relevant policies on human rights for each commodity.
“Those continuing to finance deforestation are causing huge impacts on the climate, on biodiversity and on people. And they are increasingly at odds with tightening legislative measures, and in most cases with their own high-profile commitments on net zero. Our baseline review suggests the vast majority are at a standing start on deforestation,” said Global Canopy’s executive director Niki Mardas.
Financial institutions have access to an increasing number of tools and datasets for tackling deforestation. Global Canopy’s Finance Sector Roadmap, published at COP26, sets out a six-phase approach, with a target of eliminating deforestation by 2025. Financial institutions are expected to map their risk and implement policies in the first phases, followed by implementation through engagement with the companies in their portfolios.
“In a world of increasing commitments but seemingly little action, accountability is more important than ever and we will be conducting a full and detailed assessment of their progress next year.” added Mardas.
The Deforestation Action Tracker baseline review tracks the progress of the 557 financial institutions that have signed up to pan-finance sector net zero action through Race to Zero and the Glasgow Financial Alliance for Net Zero (GFANZ) through their published, publicly available policies and reporting. The baseline review methodology looks at four forest-risk commodities: cattle products including beef and leather, soy, timber products including timber and pulp, and palm oil.