Companies, finance must act on deforestation: Report

Companies and financial institutions with the most exposure to and influence on tropical deforestation must take "long overdue" action to set commitments to achieve deforestation-free supply chains and financing "no later than 2025", a report from non-profit Global Canopy recommended today.

Of the 350 companies and 150 financial institutions linked to tropical deforestation, 201 or 40pc have not set a single policy on deforestation, Global Canopy's Forest 500 report found today. The companies tracked are those most exposed to forest-risk commodities — beef, leather, soy, timber, palm oil and pulp and paper — which drive more than two thirds of tropical deforestation.

Companies have progressed marginally more than the financial sector, Global Canopy found. Of the 350 companies assessed, 100 or 29pc have a deforestation commitment in place for all commodities for which they were tracked, while an additional 141 or 40pc of companies have made public a deforestation commitment for at least one, though not all, of the highest forest-risk commodities to which they are exposed.

The 150 financial institutions assessed by Global Canopy provided $6.1 trillion in finance to the 350 forest-risk companies last year, the report found. This includes $3.6 trillion from 92 financial institutions with no policy on deforestation at all. "The finance sector as a whole is still woefully behind", Global Canopy said.

This is despite the Glasgow Financial Alliance on Net Zero (GFANZ) — which has more than 550 members representing assets of more than $140 trillion — setting out action on deforestation as a key tenet of its transition guidance.

Separately, more than 30 financial institutions representing around $8.7 trillion in assets pledged at the UN Cop 26 climate summit in 2021 to report deforestation risk across their investments. The group also committed to, by 2025, only finance clients that have met risk-reduction criteria.

Deforestation pledges gathered pace at Cop 27 last year, although the most tangible action is likely to be driven by Brazil's president Luiz Inacio Lula da Silva, who took office in January and significantly reduced deforestation rates in Brazil during his previous two terms in office in 2003-10.

Eva Zabey, executive director of environmental organisation Business for Nature, noted today that action on deforestation must now be driven by regulation, rather than a voluntary approach.

Global Canopy pointed to recent ambitious EU legislation, on which a preliminary deal was reached in December 2022, which will require companies to verify that certain forest-risk products have not led to deforestation or forest degradation anywhere after the end of 2020. Other jurisdictions should follow the EU's example, the non-profit said.

By Georgia Gratton