Deforestation-free finance: Roadmap sets clear steps for financial institutions to address deforestation exposure, now with special focus on Brazil’s cattle sector

Global Canopy is releasing a Portuguese-language Finance Sector Roadmap customised for Brazilian financial institutions. It sets out practical steps they can take to address exposure to deforestation, conversion and associated human rights abuses in their portfolios, with a special focus on cattle-related clients, holdings operations and supply chains. 

Texto também disponível em português.

The Roteiro de Finanças Livres de Desmatamento is built on the Finance Sector Roadmap for Eliminating Commodity-Driven Deforestation.

Originally launched in 2021 by a group of leading experts in sustainable finance, the Roadmap defines international best practice for financial institutions exposed to deforestation through commodity supply chains. 

The original English-language Roadmap has also been updated, including information specific to Brazil’s cattle sector displayed alongside the Roadmap’s broader recommendations. It clearly defines the regulatory requirements financial institutions must follow and provides essential information and tools to assess and manage these risks in the Brazilian context. 

By leveraging these resources, financial institutions can enhance their risk management strategies related to the cattle supply chain in Brazil and fulfill their zero-deforestation commitments with greater efficiency and transparency. 

Deforestation risks for financial institutions

Financial institutions are exposed to deforestation risks through investments, services or loans to companies that produce or use agricultural commodities such as beef and leather.

This exposure carries financial and reputational risks. Nature loss and climate disruption are already triggering a cascade of severe physical effects, including extreme and unpredictable weather that threatens economic stability, particularly agribusiness. 

Scientists estimate that climate-driven changes in rainfall could negatively affect 51% of agricultural land by 2030. Lower profitability, more volatile earnings and potentially stranded assets could translate to permanent loss in the value of loans and investments held by financial institutions.

Recent studies show that climate change could hit Brazil’s GDP due to shifts in temperature and rainfall patterns, with annual losses projected at approximately R$3.5 billion by 2050, increasing to R$8 billion by 2080. In the frontier region between the Amazon and the Cerrado, changes to the regional climate will compromise the viability of 74% of current agricultural lands by 2060.

“There is growing international interest in deforestation. Progress to net zero relies critically on addressing deforestation, and COP30 will place deforestation at the centre of the climate agenda.”

Isadora Carvalho, Sustainable Finance Engagement Lead at Global Canopy

Cattle is a critical sector and offers an opportunity for action

Of all economic activities, cattle is the sector that drives the most deforestation globally, and Brazil accounts for almost 60% of the world’s deforestation linked to pastures.

Successful transition in this sector will require action from both domestic and international stakeholders. Data from Global Canopy shows that, of the financial institutions that provide the most financing for the cattle supply chain in Brazil, more than a third (36%) are based in the United States and 40% are distributed among other countries, including Canada, Japan, the United Kingdom and France. Almost a quarter (24%) are Brazilian financial institutions.

Alignment with best practices among these major players can drive more effective action in this key sector. Among the financial institutions with the greatest influence on Brazil’s cattle supply chains, 80% have not yet published deforestation policies for cattle products.

This includes Vanguard, BlackRock and JP Morgan Chase, the three institutions providing the most finance to the most influential companies in these supply chains.

A solvable crisis

Yet deforestation is a wholly solvable crisis. High-quality data and frameworks are available and have been successfully applied by leaders in the financial sector. With the clear and practical steps set out in the Finance Sector Roadmap and the Roteiro de Finanças Livres de Desmatamento, financial institutions can start to take action today. 

The original English-language Roadmap builds on the Accountability Framework’s principles and guidance for companies, and has been endorsed by the Accountability Framework initiative as a means to help financial institutions to act in accordance with the Framework to address these risks. 

Partners who developed the original Roadmap include the Finance & Deforestation Advisory Group, consisting of Conservation International, Global Canopy, Global Climate Action High-Level Champions team, Nature4Climate Coalition, WEF Tropical Forest Alliance, and the Head of Environmental Issues at Principles for Responsible Investment.

For more information:

Access the free Finance Sector Roadmap, available at guidance.globalcanopy.org