A new report published on Wednesday found that 40% of the companies and financial institutions most at risk of driving the loss of tropical forests have not yet set a single deforestation policy or target.

This year’s Forest 500 report from green organisation Global Canopy tracked the policies and performance of 350 companies and 150 financial institutions most likely to be linked to deforestation, spanning at-risk sectors such as palm oil, soy, beef, leather, timber, and pulp and paper.

The analysis found that 201 of the 500 have no policies or plans to address deforestation, including asset managers Blackrock, Vanguard, and State Street, as well as companies such as automobile manufacturer Volkswagen and footwear retailer Deichmann.

“We started writing [these reports] in 2014 to hold companies and institutions accountable to the deforestation commitments they made as part of the New York Declaration on Forests, which originally was to eliminate deforestation by 2020,” Global Canopy’s Forest 500 lead, Emma Thomson, told Carbon Pulse.

“We wanted to assess them, hold them accountable to these commitments, and make sure they were making progress,” she added.

Those 2020 targets were missed, Thomson said, noting that these types of voluntary actions have not worked in the past, but that her organisation continues to monitor progress, or lack thereof.

Expert coalitions such as the Accountability Framework Initiative have shown that to reach net zero GHG emissions the majority of commodity-driven deforestation must be halted by 2025 – while land-use change is also the leading driver of biodiversity loss.

Yet governments have been slow to enact policies related to the drivers of deforestation, with the EU’s new due diligence legislation seen as most advanced in the area, effectively looking to ban the import of commodities associated with deforestation from as early as next year.

“It is now universally accepted that ending tropical deforestation is pivotal to meeting vital global goals on both climate and nature,” said Niki Mardas, executive director at Global Canopy.

“But those companies now putting up their hands to lead on tackling nature risk cannot be taken seriously if – as so many are – they are already failing to act on deforestation,” she added.

FINANCING LOSS

While 109 companies, or 31% of those studied, still had no deforestation commitments for any of the commodities to which they were exposed, 61% of financial institutions were shown to have no deforestation policies, almost unchanged from last year’s report.

Together, the 150 financial institutions provided $6.1 trillion in annual investment to the companies studied in the report – including through loans and underwriting, bond holdings, and shareholdings ­– with $527 bln of this going to companies without a single deforestation commitment.

“The worst were JP Morgan Chase, Bank of America, and Mitsubishi UFJ Financial, who collectively provided $72 billion in finance to Forest 500 companies without any deforestation commitments,” the authors wrote.

Only 11% of the financial institutions have a deforestation policy for all at-risk commodities – up from 7% last year.

However, for those financial institutions that have committed to a deforestation policy, more than two-thirds are actively monitoring those policies, but none have demonstrated strong engagement activities with suppliers.

EFFORTS 

Some 29% of companies now have a deforestation commitment for all of their at-risk commodities, the authors found, including consumer goods and supermarket chains Unilever and Sainsbury.

Only half of these companies, however, are actively implementing those commitments, such as through monitoring programmes.

Thomson said that she would like to see companies actively working with their suppliers to reduce deforestation, including through engagement activities that could include clear timelines to implement improvements.

Companies and financial institutions have never had better data, more advanced tools, and more detailed guidance to help them eliminate deforestation and associated human rights abuses, the report’s authors pointed out.

“There’s a huge amount of data, tools, and guidance out there to help financial institutions do this,” Thomson said.

“In fact 2023 can be that watershed year on action against deforestation, because of all these new tools that are available,” she added, pointing to initiatives such as Forest IQ that help provide deforestation intelligence to guide investment decisions.

PUSH FOR PROGRESS

The report highlighted a few cases of improvement, such as asset management company Schroders committing to eliminate commodity-driven deforestation in its investment portfolios by 2025.

But the authors cautioned that these examples of progress are limited, and that governments will need to help accelerate what has mostly been voluntary action to date.

“There are some companies and institutions that will take action on deforestation proactively and voluntarily. But there are still a lot of companies, and two-thirds of financial institutions, that aren’t willing to make that change voluntarily, or at the pace that we need,” Thomson said.

The EU’s imported deforestation legislation could be finalised as early as this spring, for example, and once in force, operators and traders will have 18 months to implement the new rules.

However, the requirements currently only apply to importing companies and not their financial backers, something that Global Canopy hopes will be strengthened in years ahead.

“We really need legislation to not just push companies forward, but push the financial institutions forward as well, because they have so much influence that currently the majority are just not using effectively on these issues,” Thomson said.

By Katherine Monahan – katherine@carbon-pulse.com