Investors have a crucial role to play in eliminating deforestation and associated risks from their financial assets, with a new report outlining recommendations to help take action.
"From risk to revenue: The investment opportunity in addressing corporate deforestation" by global environmental disclosure organization CDP, said investor action will reduce the risks faced by companies and will allow them to "tap into more stable and lucrative markets for sustainable forest-risk commodities." The report said such action will also generate positive social and environmental outcomes.
CDP found that up to $941 billion of turnover in listed companies is dependent on commodities linked to deforestation. While 87% of companies identified risks from deforestation, 32% are already feeling the impact of those risks.
The report added that 87% of companies report production, marketing or sustainable sourcing opportunities for forest-risk commodities, and cited reports showing that $200 billion of deforestation-free finance and investment is needed every year.
CDP asked 1,103 of the largest global companies to provide data about their efforts to stop deforestation, with 272 companies responding.
CDP set out a "roadmap" of four recommendations for investors to work with companies on deforestation. The first is to draft a deforestation policy, communicating expectations regarding deforestation risk.
The second recommendation is for investors to request disclosure and transparency from companies on the topic.
Investors should also work to understand risks, opportunities and corporate progress, focusing on a number of areas including risk assessment regarding how companies cover their supply chain, as well as their own operations, in terms of risk. They should also consider governance, policies and standards, certification, implementation and supplier engagement, asking whether companies work with their suppliers to help them address deforestation.
The final recommendation is to engage with companies exposed to deforestation risk across all the relevant commodities.
CDP added that, between 2011 and 2017, sustainability organization Ceres recorded 51 shareholder resolutions focused on deforestation-related issues. Twenty-three resolutions went to a vote at the company, with just more than half of those leading to a commitment by the company to address the issue.
The report was written on behalf of 380 investors representing a total $29 trillion in assets. Signatories to CDP's forests program include the 758.1 billion Danish kroner ($118.8 billion) ATP, Hilleroed, Denmark, and the $201.3 billion New York State Common Retirement Fund, Albany.