Victor Moriyama

Making deforestation-free private wealth a reality

Insight / 13 Dec 2022

New deforestation-free investment mandate can be a game changer for family offices and foundations to ensure their investments don’t undermine their philanthropic giving

Family offices and foundations have a long history of philanthropic giving and in particular supporting the environment. There are the high profile big name givers like Jeff Bezos and his Earth fund and Jeremy Grantham and his foundation for the protection of the environment. And, behind the headlines, there are scores of other examples that inspire. But lurking beneath this good work, is a hidden danger that deforestation in investment portfolios could be undermining  philanthropic giving many times over.

The nature crisis and the climate crisis are inextricably linked. Deforestation is responsible for 11% of our global greenhouse gas emissions. If it were a country it would be the third highest emitter in the world behind the US and China. Over 90% of deforestation is caused by agriculture, much of which is funded by our investments.

The problem with investments is that their impacts are often hidden. How many pension holders know that for every £10 invested in a UK pension, £2 could be funding deforestation? Through  our annual Forest 500 ranking we know that collectively the 150 financial institutions at most risk of driving deforestation provide more than $6.1 trillion in finance to the companies most exposed to deforestation. Now, for the first time, Global Canopy’s Deforestation, Conversion and Abuse-Free Investment Mandate provides a blueprint for family offices and foundations to ensure their investments are not part of the problem.

Deforestation, the conversion of land and human rights abuses are all connected. Deforestation-free portfolios means portfolios that are free from both legal and illegal deforestation. Conversion-free means not investing in activities that convert natural ecosystems, for example turning a savannah into pasture. And abuse-free demands that internationally recognised human rights, like the Free, Prior, and Informed Consent (FPIC) of Indigenous peoples and local communities (IPLCs) and labour rights of workers are protected in line with the UN Guiding principles.

Most family offices and foundations will already have an investment mandate in place that might address environmental, social and governance considerations. The Deforestation, Conversion and Abuse-Free Investment Mandate is designed to work as an addendum to existing investment mandates. It is an extra resource and serves as a blueprint that can prompt asset managers into action in the area of halting and reversing deforestation, given how key this is to the climate crisis. 

The mandate sets a tight deadline – 2025. But that’s essential if we are to meet the 2030 target date set by world leaders at COP26 for halting and reversing deforestation. We also know that the Intergovernmental Panel on Climate Change says that global greenhouse gas emissions must peak and begin to fall by 2025 if we are to prevent global warming above 1.5 degrees celsius.

It’s also in line with initiatives like the Race to Zero, the UN-backed campaign striving for a net-zero economy, and the Glasgow Financial Alliance for Net Zero, who have set new expectations for their members to act on deforestation.

The mandate uses Global Canopy’s Finance Sector Roadmap to provide a clear timeline for action. Mapping risk should be complete within nine months. Setting an effective policy and managing that risk should be completed within 15 months. Monitoring, engaging and disclosing action should be complete within two and half years of starting and by year four deforestation should be eliminated from portfolios. The best time to start on this journey is right now.

For decades philanthropic giving from family offices and foundations has led the way on environmental funding. Now we’re asking for family offices and foundations to lead the way on eliminating deforestation, conversion and human rights abuses from investment portfolios.

This new mandate is only the beginning. Over the coming months we plan to build on this uptake and engagement with training on how to utilise the mandate. We will also produce a series of case studies so that family offices and foundations can learn from each other and help create that change together. It’s only through collective action that we will begin to see the systemic change we need.

The leverage and influence that family offices and foundations command is unique and offers a real opportunity to lead the way for all asset owners, large and small, in achieving deforestation free portfolios.

This insight was first published on the Environmental Funders Network.

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