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Explainer

How do we assess the Forest 500 financial institutions?

Understand the Forest 500 financial institution assessments with our explainer

What is Forest 500?

Forest 500, a Global Canopy project, identifies and ranks the 500 companies and financial institutions with the greatest influence on tropical deforestation. The 150 financial institutions are selected as they invest in and lend to the 350 companies with the greatest influence on tropical deforestation. Through their financing activities they have the power to enable sustainable business practices and encourage companies to become deforestation-free.

Understanding your Forest 500 score: financial institutions

Watch Emma Thomson explain how financial institutions are assessed.

What did the latest Forest 500 assessment reveal about financial institutions?

One of the key findings from this year’s Forest 500 assessment is that financial institutions are not yet using their influence to encourage companies to address deforestation risks. In a trend that has continued since the first assessments in 2014, 63% of the 150 financial institutions do not have any overarching commitment or make any statement that they will remove or reduce the amount of deforestation and/or conversion of all natural ecosystems caused by companies in their portfolios. 

Forest 500 assesses the four forest-risk commodities groups which currently drive two thirds of tropical deforestation: soy, palm oil, timber and beef products. The majority of financial institutions with at least one policy are focusing on just one of these commodities rather than taking a more holistic approach to the deforestation risk in their portfolios. Only 19% of those assessed have a policy for all four forest-risk commodities. 

How are financial institutions assessed? 

Financial institutions are assessed on the deforestation policies that they apply to the companies in their financial portfolios. Through their policies, financial institutions can require and encourage the companies they finance to take action on deforestation. 

Forest 500 assessments are based on the information made publicly available on the financial institution’s websites. They are assessed against 46 indicators that look at the strength and implementation of their deforestation policies, including social issues and legal compliance.

The assessment methodology is reviewed annually by Global Canopy and external experts, to ensure that it continues to reflect best practice. Wherever possible, financial institutions are assessed in their native language to allow for nuances in the interpretation of information. 

Why don't we ask financial institutions for input?

Forest 500 assesses financial institutions on their publicly-available policies and does not allow financial institutions to review or input into their assessment before publication. We do this because transparency on exposure to tropical deforestation through financial portfolios is critical in achieving a deforestation-free economy.

Developing a clear deforestation policy ensures that the financial institution applies its standards and engagement systematically, rather than focusing on high-profile companies. Making this publicly-available allows others to hold the financial institution to account on implementation.

What makes up a financial institution’s score?

We assess financial institutions across four key forest risk commodities (palm oil, soy, cattle products, and timber products) and, as shown in the table below, the assessment is split out into four key areas.

Table of policy areas

Overall Approach

Forest 500 looks for an overarching commitment to remove or reduce the amount of deforestation and/or conversion of all natural ecosystems caused by companies in portfolios. This should be a clear statement of intent to tackle, deforestation or conversion, and must apply to all financing activities. 

Commitment strength

While an overarching commitment shows that financial institutions recognise deforestation-risk within their portfolios at the high-level, they are also assessed on whether they require companies to have commodity-specific deforestation policies[1] (across palm oil, soy, cattle products, and timber products). These specific policies are critical in providing clear requirements on deforestation for companies, such as requiring certification via credible certification schemes, or purchasing deforestation-free supplies. 

Social commitments 

Human rights violations, such as forced labour, child labour and encroachment on indigenous territories, are also serious risks in forest-risk commodity supply chains. For each forest-risk commodity, Forest 500’s methodology looks at multiple social indicators, assessing financial institutions for policies that require human rights to be respected in investment and lending portfolios, such as ensuring gender equality, and the inclusion and support of smallholder farmers within the companies’ operations. 

Reporting and Implementation

Forest 500 assesses financial institutions on the implementation and reporting of their policies. A financial institution should have processes to identify and engage with non-compliant companies, and actively report on the outcomes of engagement and rates of compliance within their portfolios. Financial institutions that transparently report on progress against their policies and commitments are able to responsibly monitor and address any exposure to deforestation in their portfolios.

Changes since 2019 - New anti-corruption indicator

This year, a new indicator has been added to the assessment methodology that asks if the financial institutions require portfolio companies to have an anti-corruption policy, as well as a policy prohibiting abusive tax arrangements. By adding this, Forest 500 now aligns with the indicators within the Rainforest Action Network, it assesses the accountability of companies within their portfolios regarding corruption throughout their forest risk supply chains, and if they look for and discourage involvement in illegal financial activity.

Interested in finding out more?

Watch a recording of our webinar for financial institutions below.

Forest 500 financial institution methodology webinar


[1] For financial institutions a deforestation policy is defined as a commodity-specific policy focused on forest protection, or a policy to protect primary, intact or high conservation value forests, or commits to a credible certification scheme that protects these