by Sarah Rogerson and Helen Burley
How would you feel if you knew that your pension fund or life-savings were being invested in destroying tropical forests and other important wildlife habitats? That they were funding the expansion of agriculture into native forest – forcing people, plants and animals off the land? Perhaps better to imagine a world where that is not the case…?
And perhaps that imaginary world might have come a step closer with the news that a group of financial institutions have signed up to the Cerrado Manifesto Statement of Support.
Seventeen financial institutions – all part of the FAIRR initiative - have joined the 70 global brands calling for an end to deforestation and native vegetation conversion in Brazil’s Cerrado, one of the world’s most important grasslands.
The move comes amidst growing awareness of the financial risks of investing in activities that contribute to climate change, encouraged by the Task Force on Climate-Related Financial Disclosures (TCFD). Perhaps shifting our understanding of what good investment looks like.
Follow the money
And such change comes none too soon.
Global Canopy’s Forest 500 index has been assessing the performance of the financial institutions that have the most power to address tropical deforestation since 2014. Our most recent assessment of 150 financial institutions’ policies for investing in or lending to companies involved in forest-risk commodities revealed plenty of room for improvement.
We found that less than one in three of the investors and lenders assessed had either a palm oil or timber specific lending or investment policy. Even fewer had policies for companies in the cattle or soy supply chains, (9% and 11% respectively).
Two of these Forest 500 powerbrokers are on the list of institutions that have signed the Cerrado Manifesto Statement of Support – Legal & General Investment Management & Robeco (assessed under its parent, Orix). They both scored just one out of five in last year’s Forest 500 assessment, only gaining points for demonstrating an awareness of the risks of deforestation. Neither of them had a specific policy or commitment to act on these risks in their lending or investments.
Moving forward
By signing up the Cerrado Manifesto Statement of Support, all 17 of the supporting financial institutions are publicly declaring their recognition of the problem. The next step is for them to do something about it.
First, they need to introduce investment and lending policies– as called for in the Manifesto. We recommend that these policies require companies in their portfolios to act to protect the Cerrado and other areas of native vegetation from clearance.
In particular, financial institutions should start with the companies they finance that are involved in soy and cattle supply chains and ask those companies to provide proof that their products are not connected to recently cleared land.
“The undersigned civil society organizations call for immediate action in defense of the Cerrado by companies that purchase soy and meat from within the biome, as well as by investors active in these sectors. This includes the adoption of effective policies and commitments to eliminate deforestation and conversion of native vegetation and disassociate their supply chains from recently converted areas.”
(Extract from the Cerrado Manifesto)
Forest 500 identifies the 150 institutions that provide the greatest amount of financing to the most powerful companies in forest risk commodity supply chains. These are the 150 financial institutions who could have the greatest impact on deforestation and native vegetation clearance, if they were to require action by the companies they finance.
It is therefore disappointing that only two of these key financial institutions included in the Forest 500 have signed the Statement of Support so far. Greater awareness and commitment to resolve the problem is needed from the whole sector.
Photo Credit: Daniel Meyer