Investor Guide to Deforestation and Climate Change

Even as the COVID-19 pandemic throttled the global economy, deforestation continued largely unchecked in many parts of the world. Every day, vast swaths of tropical forests are razed for production of agricultural commodities such as soybeans, palm oil and beef that eventually make their way to grocery shelves world- wide. Clearing and burning forests emits staggering amounts of greenhouse gases (GHGs) and reduces the land’s ability to store carbon. Protecting and restoring forests and other natural ecosystems are second only to eliminating fossil fuel use as a solution to climate change.

 

The stakes – and opportunities – are enormous. Companies that fail to reduce emissions from deforestation will face reduced market access, reputational risks, legal sanctions and other forms of financial exposure due to increasingly stringent policies, regulations and consumer expectations as the world shifts to a low-carbon global economy. Eliminating deforestation from supply chains is an achievable way to significantly reduce corporate greenhouse gas emissions and the systemic burden of climate change. Investors can use their influence as shareholders to engage with companies on deforestation as a way to mitigate portfolio-wide climate risks.

 

This guide gives investors a framework to help them understand and engage on deforestation-driven climate risks across their portfolios. It is especially intended for investors who are relatively new to deforestation and may be engaging on climate risk but not deforestation risk. The guide will help them understand the drivers of deforestation risk and prioritize company engagements based on industries, geographies and sourcing patterns. It also outlines key expectations that investors should be looking for in corporate climate and deforestation commitments and example questions for company and sector engagements. Lastly, the guide provides concrete next steps investors can take to address deforestation risk.