Insight

More than half of Welsh public pension investments at risk of financing deforestation

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New research reveals that £14 billion, or 55% of the investments made by the eight Welsh public pension funds, are at risk of financing deforestation.

Size of Wales and Global Canopy have taken an in-depth look at how the Local Government Pension Schemes in Wales, under the umbrella of the Wales Pension Partnership, are exposed to deforestation risk through their financing activities.

The research found at least £1 in every £10 of the Wales Pension Partnership’s investments are at high risk of financing deforestation. A further 45% of investments are in clients or holdings that are likely exposed to deforestation risk.

Tropical rainforests are vital allies in the fight against climate change – there is no way to reach our Paris climate goals without an end to deforestation. And they are home to 80% of the world’s life on land – crucial to maintaining biodiversity and vital ecosystems. Plus they support the lives and livelihoods of 1.6 billion people.

But despite this, tropical forests are being lost at an alarming rate. In 2022, an area of forest more than 11 times the size of Wales was lost. This is mainly through the production, procurement and financing of a handful of commodities, including beef, soy, and palm oil.

Emma Thomson, Global Canopy Forest 500 and Tracking Lead said: “Globally, pension funds are responsible for financing tropical deforestation through their investments. This is no different in Wales where a significant portion of the £22 billion invested by eight Welsh county pension funds is at risk of funding activities that are destroying tropical forests. But deforestation is a solvable crisis and the data, tools and guidance exist to help Welsh pension funds stop financing nature destruction before it’s too late.”

Through their financing, Welsh pension funds have a huge potential to drive change. The newly launched ForestIQ data platform can provide the information pension funds need to engage directly with the companies and holdings they finance. There is also specific guidance for pension funds showing them how to remove deforestation from their portfolios.

A spokesperson for the Guarani People, an Indigenous community in Brazil, said: “We call on Wales and countries around the world to act to ensure that investments in pension funds are not driving the destruction of our home in the Atlantic forest. We must believe that the world can be different.”

Barbara Davies-Quy, Deputy Director, Size of Wales added: “We encourage local authorities across Wales to engage with our report and take action to be globally responsible and meet their decarbonisation targets by 2030. We need to work together to ensure public pensions provide for our future and don’t put that future at risk.”

Read the full Size of Wales report