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The finance sector needs an action mindset on deforestation which is constant and contagious

Insight / 11 Jul 2024

Halting and reversing deforestation is an essential step if we’re to meet our net-zero goals. Pioneering collaborations like the Deforestation-free Transition (DEFT) Pathway are vital catalysts for finance sector action.

The world is moving away from just talking about the twin climate and nature crises. In previous years we’ve had (and then mostly missed) commitments that have promised change. Now, time-bound transition plans for action are a reality for the leaders and a non-negotiable must-have for everybody else. 

Deforestation is a vital bridge between the intertwined climate and nature crises. It is responsible for 11% of our global greenhouse gas emissions and forests offer up to a third of the solution.

Deforestation is also driving the systematic destruction of life on earth, destroying biodiversity and harming the lives and livelihoods of 1.6 billion who rely on forests. It also impacts rainfall and crop yields and makes natural disasters worse – damaging the very industries that are driving the problem in the first place.

Now, with the Paris Agreement on climate mirrored by the Global Biodiversity Framework on nature, and the Task Force on Climate-related Financial Disclosures mirrored by the Taskforce on Nature-related Financial Disclosures, we are beginning to have the lexicon and linkages of ever more aligned targets, metrics, and data on climate and nature. And we can see ever more clearly how tackling deforestation can — and must — be at the heart of joined up action on those two intertwined agendas. 

So as climate transition planning takes centre stage, very serious efforts are underway to codify the contribution of nature in climate transition plans, as well as to develop Kunming-Montreal nature transition plans in their own right. The Deforestation-Free Transition Pathway (DEFT), launched with our partners in June,  is a vital part of this process because deforestation offers an opportunity to progress on both fronts at once.

It is an example of radical collaboration, developed by leading institutions and experts working to end market-driven deforestation, including Global Canopy, the UN Climate Champions, Global Optimism, the Accountability Framework initiative (AFi), the Tropical Forest Alliance, Proforest and ZSL, in consultation with leading finance sector networks.

Sue Reid, Climate Finance Advisor to Christiana Figueres, Global Optimism, talking about DEFT at London Climate Action Week

Launching in beta later this year, DEFT Pathway categorises companies according to their level of progress and then highlights priority timebound next steps. This will enable financial institutions to maximise effective engagement with their portfolio companies most exposed to deforestation, conversion and associated human rights abuses.

Crucially, the Pathway synthesises existing frameworks, guidance and metrics – aligning with both climate and nature transition plans. Progress on deforestation hinges on effective engagement. By exerting better-targeted and more joined-up pressure on at-risk companies, DEFT Pathway will support a critical mass of financial institutions to collectively make clear asks on these companies. 

Our Forest 500 research shows that $6.1 trillion in private finance is going into the 350 companies most exposed to deforestation alone. Any nature-positive finance is being undermined by a wall of money that is helping drive deforestation. We need to keep them tethered together and bring them into balance. Meaningful progress requires financial institutions to implement transition plans that prioritise action on their biggest climate and nature impacts. Deforestation is part of that.

For almost 20 years we have been fighting to have deforestation recognised in the climate change conversation. This is not a new story – but it is now a global priority for action. COP30 at the end of 2025 will be in the Amazonian city of Belém, with a reinvigorated Brazilian government bringing forests and nature to the heart of COP. Tackling deforestation can and must be at the heart of joined up action on the intertwined climate and nature agendas. DEFT Pathway further narrows the ever-diminishing set of excuses for inaction.

This insight was first delivered as a speech announcing DEFT at London Climate Action Week

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