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Forest 500 update of financial institutions with greatest exposure to tropical deforestation

Forest 500 has updated its selection of financial institutions, with the greatest exposure to tropical deforestation, with 36 new financial institutions added.

By Emma Thomson

Every two years, Global Canopy re-identifies the 500 companies and financial institutions with the greatest exposure to tropical deforestation risk through beef and leather, soy, palm oil, timber and pulp and paper supply chains. Agricultural conversion for these commodities drives over two-thirds of tropical deforestation. 

First, we select the 350 companies with the greatest exposure to deforestation, and then we identify the 150 financial institutions that provide the most finance to those companies through shareholdings, bond holdings, loans and underwritings. 

The 150 financial institutions identified this year provide $6.1 trillion* of financing to the 350 companies

Why are financial institutions important?

These 150 financial institutions are exposed to tropical deforestation risk through their financing of the Forest 500 companies. This means they have significant leverage and opportunity to drive change through these companies and can use their financing activities to change the way companies in forest-risk supply chains operate. Their influence can help reduce tropical deforestation and associated human rights abuses in supply chains, and in doing so reduce their exposure to the financial risks that they are exposed to through deforestation. 

By setting policies on deforestation and associated human rights abuses, and taking practical steps to implement them, financial institutions can help transform forest-risk supply chains.

The Forest 500 financial institutions and companies are assessed annually on the strength and implementation of their publicly available policies on deforestation and associated human rights abuses. Our 2022 assessment methodology is now available. 

The financial institution assessments are scheduled to run from July to September 2022, and will be published on in early 2023, highlighting which financial institutions are using their influence for good, and which are still lagging behind. To keep updated on the findings of the Forest 500 assessments, you can sign up to our newsletter.

Which financial institutions are new to the Forest 500?

In 2022, 36 new financial institutions have been added to the Forest 500 that were not assessed in 2021 - including Orix Corporation, Pictet, the New York State Common Retirement Fund, Canadian Imperial Bank of Commerce, and the Qatar Investment Authority. Collectively, the updated 150 list provides $6.1 trillion* of financing into the companies most exposed to tropical deforestation risk through shareholdings, bondholdings, and loans and underwritings.

How are the financial institutions assessed?

Since 2014, Forest 500 has been annually assessing companies and financial institutions on the strength and implementation of their commitments on deforestation and human rights. 

For financial institutions our assessments look at the policies they apply to their financing activities on deforestation and associated human rights, as well as how they evidence their implementation of these policies, for example reporting on outcomes of non-compliance monitoring and engagement.

The assessments are based only on publicly available information, published on the financial institution’s website. All are assessed in their native language where possible, as well as in English, with a team of language consultants working on the assessments alongside the Forest 500 assessment team. 

Why do the Forest 500 financial institution assessments matter?

Without addressing their exposure to deforestation, conversion, and associated human rights abuse risks, financial institutions are exposing themselves to significant financial risk. They are also failing to use their influence to address climate change and biodiversity loss.

The Forest 500 assessments also provide a useful framework for financial institutions to improve their approach to deforestation and associated human rights abuses, with the 2022 methodology being aligned with the Finance Sector Roadmap.

Financial institutions have a hugely influential role in forest-risk commodity supply chains, but our 8th annual assessment and ranking, published in January 2022, found that most are failing to take effective action on deforestation. 

Assessing finance sector action on deforestation - the 2022 Forest 500 methodology

'Assessing finance sector action on deforestation - the 2022 Forest 500 methodology' webinar recording from 15 June 2022


*On 14 December 2022 we corrected this figure from $7.1 trillion to $6.1 trillion.

When we select financial institutions for the Forest 500, active loans are considered as well as shareholdings and bond holdings. In last year’s data (2021/22 data for the 2022 selection) the loan maturity data was corrupted, which resulted in more loans appearing to be active than should have. The companies still received this financing, but the loans matured before the cut off for our selection. This means that $6.1 trillion figure is a fairer assessment of active financing during the selection period, and more comparable with previous Forest 500 financing figures (e.g. $5.5 trillion in 2020).

Image credit: Photo by drmakete lab on Unsplash