Financial institutions must back companies that are removing unsustainable and illegal deforestation from their value chains or risk saddling themselves with unprofitable clients and stranded assets, a new report launched at the Oslo Tropical Forest Forum warns.
The Tropical Forest Alliance (TFA 2020), a partnership hosted by the World Economic Forum, says that banks, lenders and investors must support efforts by agriculture producers, traders and consumer-facing companies to end deforestation, a major cause of climate change.
Its new report, Roadmap to Financing Deforestation-Free Commodities, says that the economics of this industry is worth over $941 billion a year and could fundamentally change as businesses and governments ramp up their ambitions after the Paris Agreement on climate change.
Governments are deploying more stringent land-use regulations to end deforestation in countries such as Brazil and Indonesia. Businesses – particularly large consumer brands or those facing shareholder pressure – are also tightening policies in the supply chains of beef, soy, paper and pulp and palm oil, the four commodities that are behind half of all agricultural-driven land clearance and deforestation.
“These risks are largely unknown and unmanaged by financial institutions,” said Marco Albani, Director of the TFA 2020. “But they could radically change an unsustainable means of production through practices such as disclosure policies on deforestation in their investment portfolios, improved data gathering and monitoring techniques and improved environmental, social and governance structures.”
The TFA 2020, hosted by the World Economic Forum, is working with more than 60 global businesses – alongside over 80 governments, international organizations, civil society and non-governmental organizations – to support their efforts to stop deforestation in their supply chains.