Deforestation is a material risk that companies can no longer ignore - Instituto Ecológica

Deforestation is a material risk that companies can no longer ignore

As the cycle of forest fires burning through the Amazon has captured the world’s attention, institutional investors have seized the opportunity to shift the focus to some of the root causes of the problem: decades of poor forestry and land-use management and poorly managed agricultural supply chains.

While Unilever and Nestlé have made strides towards implementing no-deforestation policies, the vast majority of companies have not. Now some of the world’s biggest institutional investors are pushing for change through the Investor Initiative for Sustainable Forests, says Julie Nash of Ceres

Earlier this month, in the run-up to Climate Week New York, an unprecedented number of investors – 230 institutional investors representing $16.2trn in assets under management – issued an urgent plea to companies to take action against deforestation. Among the investors are some of the largest investment managers and asset-owners from around the globe, representing more than 30 countries.

Major investors increasingly recognise that deforestation creates material financial risks for companies, including reputational and market risks. In addition, deforestation exacerbates systemic risk across portfolios by contributing to the global climate crisis. A recent Intergovernmental Panel on Climate Change report found that 11% of global greenhouse gas emissions are caused by poor forestry and land-use management, including commodity-driven deforestation. It also warned there is no way to limit average global temperature rise to 1.5C – and thus avoid catastrophe – without halting deforestation.