Why deforestation and NBS?Tackling deforestation Investing in NBS
Tackling deforestation represents a key opportunity for the financial sector to advance toward net zero, reduce risk, and boost resilience.
11%: of annual global greenhouse gas emissions are attributed to deforestation driven by land-use change and agriculture, according to the IPCC.
1.5°C: to keep the chance of 1.5°C alive, the majority of commodity-driven deforestation needs to be halted by 2025 and land-use “conversion” eliminated by 2030.
60%: of total deforestation is caused by agricultural commodities production, which predominantly occurs in the operations and supply chains of major FLAG (forestry, land use, and agriculture) companies.
Investments in high-integrity nature-based solutions will help meet the climate, nature, and land-neutrality targets.
One-third of climate mitigation solution: Nature provides enhanced resilience and one-third of the mitigation solution to achieve a 1.5°C pathway.
USD$4.5 trillion: could be generated annually by developing and implementing solutions for a resilient, net-zero, nature-positive agricultural system by 2030.
Deforestation sits at the intersection of climate and nature: net-zero targets will be out of reach unless deforestation is urgently halted and reversed.
By committing to work to eliminate agricultural commodity-driven deforestation from portfolios and drive the sustainable transition of the agricultural sector, financial institutions can simultaneously enable the delivery of climate targets, support biodiversity and food security, mitigate against risk, and prepare for forthcoming regulations.
Launched at COP26, the Finance Sector Deforestation Action (FSDA) is a results-driven collaborative of financial institutions that unites signatory organisations around an engagement approach to addressing nature-related risks and opportunities by tackling deforestation, and creating essential convergence across other climate and nature-related initiatives.
38 financial institutions with more than (US) $8.9 trillion in assets under management are committed to eliminating agricultural commodity-driven deforestation risks (from cattle, soy, palm oil, pulp, and paper) in their investment and lending portfolios by 2025. To read the commitment letter, please click here.
Finance and Deforestation Advisory Group: FSDA members have the support of the Finance and Deforestation Advisory Group, which is focused on helping signatories to meet their Commitment. The Group provides ongoing advice and support on data, tools, and best practices. This group includes Conservation International, Global Canopy, Global Optimism, High-Level Champions for Climate Action Team, Nature4Climate Coalition, and WEF Tropical Forest Alliance.
Address deforestation risk:
- Investor Expectations: FSDA members have developed investor expectations to support company engagements. These expectations are grounded in the Commitment, informed by relevant science and best practices, and anticipated to evolve over time. Click here for details.
- Finance Sector Roadmap: AFI-aligned and endorsed Finance Sector Roadmap provides stepwise guidance and actions for financial institutions to tackle deforestation in their portfolios and meet the Commitment. It brings together the best available data and tools, showing financial institutions how they can map risk, set policies, identify and engage with non-compliant portfolio constituents, and look to increase exposure to nature-positive activities.
- Examples of tools that can be used by clients and holdings to combat agricultural commodity deforestation: are SBTi-FLAG, SBTN, TNFD, CDP, etc.
Platform examples related to NbS investment
- NBS pilot investment platform: focused on NbS, including regenerative and sustainable agriculture, forests, and land use.
- The Little Book of Investing in Nature: offers an essential overview of innovative financial products to increase investment in nature-positive activities.
- Fund for Nature: debt fund for nature-based carbon projects.
Progress so far:
- Company Engagements: FSDA signatories have been using the investor expectations they developed and published to step up engagement with companies on increasing actions that address their deforestation impact.
- Data Providers: FSDA signatories are engaging with major data providers to call for issuer-level data on deforestation risk exposure and management.
- Policies: FSDA signatories have made progress in enhancing or establishing deforestation policies.
- Investment in NbS: FSDA signatories are implementing strategies and increasing investments in nature-based solutions.
- Case studies to be shared soon.
Momentum Shift Leading to Inevitability of Action
- Kunming-Montreal Global Biodiversity Framework (GBF) includes goals and targets relevant to the finance sector, including disclosure on nature-related risks, impacts and dependencies, and alignment of financial flows.
- Glasgow Leaders’ Declaration on Forests and Land Use commitment to halt and reverse forest loss and land degradation by 2030 is endorsed by over 141 governments covering 90% of the world’s forests.
- GFANZ co-chairs and vice-chairs call to action on deforestation note that transition plans that lack objectives and clear targets to eliminate and reverse deforestation are incomplete.
- Deforestation-free procurement acts are emerging, such as US Forest Act, European Union Regulation on deforestation-free supply chains , and UK Environment Act 2021.
Guidance, Tools, and Frameworks are Emerging Accelerate Action
- SBTi FLAG Guidance stipulates a no-deforestation commitment with a target date no later than 2025.
- Taskforce on Nature-related Financial Disclosures (TNFD) framework v.40 for companies and financial institutions to assess, disclose and manage nature-related risk with the final framework expected in September 2023.
- Science Based Targets Network (SBTN) is developing guidance for companies to set appropriate targets to reduce, eliminate, and reverse biodiversity loss in their operations and supply chains.
- Updated Race to Zero – Leadership Practices include recognition of the need for organizations to set net-zero commitments to halt deforestation and protect biodiversity.
- GFANZ Financial Institution Net-zero Transition Plan Guidance incorporates guidance on tackling commodity-driven deforestation.
- Finance for Biodiversity Foundation/Finance and Deforestation Advisory Group Webinar: in collaboration with Finance for Biodiversity
- Nature Positive for a Net Zero Future: London Climate Action Week 2022
- Nature Positive for a Net Zero Future: Climate Action Week New York 2022
- Financing Nature Podcast: Financing Nature’s COP27 Special Series
- FSDA at COP15: Ending Commodity-Driven Deforestation and Scaling up NBS
UPCOMING in 2023: London Climate Action Week 2023
- ESG Investor: Creativity and Collaboration Vital to Finance Nature
- UNEP: CBD COP15 ends with landmark biodiversity agreement
- Nature Action 100: At COP15, investors announce Nature Action 100 to tackle nature loss and biodiversity decline
- BNN Bloomberg: Asset Managers Forced to Confront Biodiversity Risk Most Had Ignore
- Responsible Investor: Carney calls on FIs to integrate nature and biodiversity in transition plans.
- IFRS: ISSB announces plans to advance work on natural ecosystems and just transition
- IPE: Why we need deforestation-free portfolios by 2025
- Responsible Investor: 100+ days since COP Deforestation Commitments – why every investor needs to act now
- Race to Zero: Leading financial institutions commit to actively tackle deforestation
- Investment Week: Asset management firms pledge to fight deforestation by 2025
- FT: COP26: Global leaders sign pledge to halt deforestation
- Race to Zero: COP27 Press Briefing
- Race to Zero: Assessing the Financial Impact of Land-Use Transition on the Food & Agricultural Sector
- Race to Zero:Why Net-Zero Needs Zero Deforestation Now
- Forest 500: 2023: A watershed year for action on deforestation
- Make My Money Matter: Cutting Deforestation from Our Pensions
(US) $8.9 trillion Assets under Management
The signatory financial institutions commit to use best efforts to tackle commodity-driven deforestation impacts in their investment and lending portfolios by 2025. The commitment is focused on addressing agricultural commodities that are responsible for the lion’s share of deforestation impacts: beef, soy, palm oil, pulp & paper. Their stated intention is to reduce deforestation-related risks while supporting the transition to a sustainable agricultural sector.
The signatory organisations will individually create organisational plans, milestones, and incentives to meet the proposed timelines, aligned with a Paris Agreement-compliant 1.5°C pathway.
ACTIAM; AP2; Australian Ethical Investment; Aviva plc; AXA Group; Banco Estado de Chile; Boston Common Asset Management; Capital + SAFI S.A.; Church Commissioners for England; Church of England Pensions Board; Comgest; CPEG; Domini Impact Investments LLC; East Capital Group; Fidelity International; GAM Investments; Generation IM; Grupo Bancolombia; Impax Asset Management PLC; International Business of Federated Hermes; JGP Asset Management; Local Authorities Pension Fund (LAPF); Legal and General Investment Management (LGIM); LGPS Central Limited; Lombard Odier; London CIV; Menhaden PLC; NEI Investments; NN Investment Partners; Robeco; Schroders; SCOR SE; Skandia; SouthBridge Group; Sparebank 1 Forsikring; Storebrand Asset Management; Sumitomo Mitsui Trust Asset Management; TCI Fund Management Ltd.
Interested in learning more about the Financial Sector Commitment Letter on Eliminating Agricultural Commodity-Driven Deforestation?
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