Raising the bar for finance sector action on deforestation

One year ago at COP26, financial institutions joined companies and governments in signing up to new net zero commitments including through the Glasgow Finance Alliance to Net Zero (GFANZ). Delivering on those commitments means halting and reversing deforestation because we cannot and will not achieve net zero if forests continue to be cleared.

By Helen Burley

Corporate Performance Comms Lead

One year on, Global Canopy has launched our new annual Deforestation Action Tracker, set up to monitor the progress of the finance sector in eliminating deforestation, conversion, and associated human rights abuses from their portfolios, as part of their net zero commitments.

For the inaugural Tracker, we carried out a baseline review of current action on deforestation – focusing on 557 financial institutions that have made a commitment to net zero either through the GFANZ or the Climate Champions Race to Zero initiative.

Raising the bar: a baseline review of finance sector action on deforestation reveals that many of the financial institutions with net zero commitments are still at the starting line when it comes to addressing deforestation. Four out of five (83%) have not recognised deforestation as a risk.

Just 20% (109) of the 557 financial institutions had a publicly-available policy in place to address deforestation risks in at least one forest-risk commodity. Just 6% (36) had a policy in place covering all four of the highest risk commodities: cattle products (beef and leather), soy, palm oil, and timber products (including pulp and paper).

Just 20%

of the 557 financial institutions had a publicly-available policy in place to address deforestation risks in at least one forest-risk commodity.

Financial institutions have a major role to play in eliminating deforestation and delivering on net zero targets, but they need to recognise the risk and work with companies to deliver deforestation-free supply chains.

Guidance is available for financial institutions to help make this transition. Global Canopy’s Finance Sector Roadmap sets out how to identify and address deforestation risks, recognising the need for urgency with a target of eliminating commodity-driven deforestation by 2025.

Next year, the Deforestation Action Tracker will carry out a full assessment of the financial institutions committed to net zero. The race has begun and the finance sector needs to be quicker out of the blocks.