The UK-based not-for-profit has called for faster action, after finding that three-quarters of financial institutions did not have a public policy on deforestation in place, despite pledging action on net zero.
The gap between words and deeds when it comes to tackling deforestation as part of the fight to contain global warming is highlighted by research from not-for-profit Global Canopy, which, it said, showed most financial institutions are failing to act fast enough on the themes, even though they have signed up to high profile net zero initiatives.
An assessment of action on deforestation by over 700 financial institutions with strong net-zero commitments found that 75% still did not have a public deforestation policy, and only 10% had a deforestation policy in place for all commodities with the highest risk. Global Canopy’s Deforestation Action Tracker assessment includes all financial institutions in the GFANZ and Race to Zero groupings, as well as the members’ alliances of each coalition.
The report was released to coincide with the COP28 climate change talks in Dubai, where measures to reverse deforestation are being considered, including a Brazilian proposal to establish a $250bn (€232bn) global fund to finance forest conservation to be financed by investors such as sovereign wealth funds.
Slow pace of change
Global Canopy noted that deforestation contributed around 11% of the world’s greenhouse gas emissions, according to a 2019 Intergovernmental Panel on Climate Change report, as well as contributing to biodiversity loss and human rights abuses.
Niki Mardas, Global Canopy’s executive director, said that while the 2023 Deforestation Action Tracker figures represented a slight improvement on results in its inaugural 2022 report, change was happening at a far slower pace than required.
“The great majority of financial institutions with strong net-zero targets have an inexplicable blind spot on deforestation, conversion, and associated human rights abuses. This comes despite the clearest of statements from the GFANZ leadership on deforestation and a wide set of stepwise guidance, tools and data ready to go,” he said.
The assessment did provide a few rays of light, according to Mardas, who said a few frontrunners were “showing the rest of the pack what good looks like, and how straightforwardly it can be achieved”.
The Deforestation Action Tracker found that 44% of financial institutions covered were involved in a collaborative sector initiative on deforestation or in advocating for legislation focused on deforestation, land conversion or associated human rights abuses. Meanwhile, small groups of institutions were going further, taking measures to meet ambitious 2025 targets, and collaborating on the elimination of agricultural commodity-driven deforestation, according to Global Canopy.
At COP27 in Egypt, a United Nations High Level Expert Group said financial institutions need to eliminate commodity-driven deforestation by 2025 as part of their climate commitments or risk being accused of greenwashing.
In its report, Global Canopy said financial institutions also needed to act due to the increasing pressure they are coming under to disclose and mitigate their impacts on nature, and to meet tighter regulatory and compliance requirements likely to face them in coming years.
Measures such as the Global Biodiversity Agreement signed in December 2022, and the prospect of a tougher regulatory environment for financial institutions regarding nature-related risks in the EU show the direction of travel, the not-for-profit said.
In November, Global Canopy, alongside the Stockholm Environment Institute (SEI) and the Zoological Society of London (ZSL), officially launched Forest IQ, a data platform for financial institutions that looks at how more than 2,000 major companies are addressing their links to deforestation by facilitating rapid scanning of portfolios, providing in-depth analysis and promoting engagement.
Mardas also explained more about Global Canopy’s work and objectives in an interview with Impact Investor in February this year, emphasising the need for investors to recognise the deforestation risks associated with the supply chains of the companies they finance.