Despite bold net zero pledges, deforestation not a priority for investors

Developing and implementing a deforestation strategy is still no priority for big investors. At least, it is not part of their net zero commitments, according to a new report shared with Net Zero Investor.

Ahead of the COP28 climate summit, which is kicking off later this week in Dubai, the research finds that while most financial powerhouses and large investors have "high profile climate commitments", their deforestation performance is "poor".

Three quarters of financial institutions assessed have no public deforestation policy, showing only a small overall improvement (two percentage points) since 2022.

It assessed more than 700 financial institutions, insurance firms and large investors with climate and net zero commitments.

The report by Global Canopy comes in the wake of the UN’s warning that the world is on track to see nearly 3 degrees of warming. 

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GFANZ members

Its Deforestation Tracker singled out some prominent members of the UN-backed Glasgow Financial Alliance for Net Zero, GFANZ.

Members including Baillie Gifford, Blackrock, Royal Bank of Canada, Royal London Mutual Insurance Society, and Vanguard do not have a deforestation policy, said Niki Mardas, executive director of Global Canopy.

Multiple reports and research have shown that deforestation contributes 11% of the world’s greenhouse gas emissions, is a major contributor to biodiversity loss, and is frequently associated with human rights abuses.

At COP27 last year, the UNHLEG, the United Nations High Level Expert Group, stated that financial institutions need to eliminate agricultural commodity-driven deforestation by 2025 as part of their climate commitments, or be at risk of greenwashing.

Moreover, in December 2022, a Global Biodiversity Framework was agreed, and related compliance risk is growing for financial institutions in major markets like the EU.

The outlier initiative within GFANZ is the Net Zero Banking Alliance, Mardas said, pointing out it performed above average, with 42% of their members having published at least one commodity-specific deforestation policy.

Meanwhile, groups like the Finance Sector Deforestation Action initiative, that have made action on deforestation a focus, are doing better still.

“Change is happening at a far slower pace than required," warned Mardas.

He said that despite ambitious net zero targets, many players have "an inexplicable blind spot on deforestation, conversion, and associated human rights abuses."

While the situation is stark, there is some cause for optimism, Mardas added.

"A few frontrunners are showing the rest of the pack what good looks like, and how straightforwardly it can be achieved."

He called for "rapid, transparent action and corporate engagement to move their portfolios away from deforestation as part of an urgent sector wide transition to net zero."

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