Investors step up actions to fight against deforestation
Following last year devasting fires in the Amazon, there has been a growth in actions to halt deforestation among institutional investors, who are becoming increasingly aware of how deforestation can contribute to climate change and have financial implications. 230 institutional investors representing USD 16.2 trillion of assets under management paved the ground in September 2019 by calling on companies to take measures to eliminate deforestation from their supply chains.
With the aim of supporting operationally investors in this approach, the CERES, a major US non-profit organization, which works with investors to promote sustainability, published in June 2020 a guide to help investors understanding and engaging on deforestation-driven climate risks across their portfolios. This guide provides investors with an engagement framework to assess how companies in their portfolio are mitigating the risks associated with deforestation, including market and reputational risks. The CERES framework involves three main steps:
- setting targets with companies to reduce GHG emission from deforestation
- encouraging them to implement no-deforestation policies
- progressing on disclosure
Two additional recent initiatives illustrate how a handful of investors start using their influence to engage with their stakeholders on deforestation.
First, BlackRock, the world’s largest asset manager, announced in June 2020 that it will tackle deforestation through its stewardship policy, by voting against company directors where it does not see enough progress on supply chains and deforestation.
Then, a group of leading institutional investors, including Storebrand Asset Management, BlueBay Asset Management or NN Investment Partners, has engaged directly with the Brazilian government and succeeded in July 2020 in persuading it to ban setting fires in the Amazon for 120 days. If engagement with sovereign entities is rather unusual for investors, this success may prove to be a blueprint for further engagement with countries that do not meet environmental standards yet.
These recent initiatives reflect a dynamic around the topic of deforestation and more widely around biodiversity. The development of tools to measure the impact of investments on biodiversity contributes to foster the momentum and their adoption by investors will be determinant for future advancements. (see our previous newsletter article here).