Financial Institution Trends
Strong policies from a small - and slowly growing - number of leading financial institutions are yet to be matched by their peers. Across all commodities, only 31% of financial institutions have a sustainability policy for at least one commodity. As with companies, there is variation in the number of commodity-specific policies, with soy and cattle lagging behind palm oil and timber. Only 13 financial institutions have a policy for investing in or lending to cattle companies, while 38 have a policy for timber companies.
Strong deforestation policies from financial institutions need to require companies to protect priority forest types, yet few financial institutions have policies that require or encourage protection of these landscapes. Of those that have policies, less than half of the commodity-specific policies which ask companies to protect priority forest types state this as a requirement. The rest only encourage protection of these areas, limiting the financial institutions' ability to hold companies accountable.
Note on the financial institution scoring methodology: The scoring methodology for Financial Institutions was updated in 2017. Unlike previous years, financial institutions no longer receive points for general sustainability policies but instead need to have sustainable financing policies that explicitly focus on forests to score points. Furthermore, the new scoring methodology assesses the scope of financial institution’s policies in more depth (i.e. whether the policy applies to all portfolio companies or only a subset). As a consequence of these changes, many Financial Institutions have received a lower score for their policies this year compared to 2016. This is largely due to the change in the methodology rather than a change in their policies.