Bank and Investor Risk Policies on Soft Commodities Report

Publication / 6 Jul 2015

The Natural Capital Declaration (NCD) has developed a lending and investment policy tool and accompanying report for financial institutions to reduce the deforestation risk caused by the unsustainable production, trade, processing and retail of soft commodities, especially soy, palm oil and beef. The production of these commodities drives deforestation and forest degradation in tropical forest. Financial institutions can be exposed to risks from deforestation by financing companies whose activities contribute to deforestation and forest degradation through their operations or soft commodity supply chains.

To help banks and asset managers manage these risks, the Natural Capital Declaration (NCD) has developed the Soft Commodity Forest-risk Assessment (SCFA) tool with Sustainalytics. The self-assessment tool enables banks, investors and other financial institutions to take action by using the tool to inform, develop or update their soft commodity risk policies. Financial institutions are encouraged to identify how they can improve their own lending and investment risk policies to systematically consider natural capital in the credit policies of specific sectors, including commodities, that may have a major impact on natural capital either directly or through the supply chain.

Guidance on the using the tool is included in the related report – Bank and Investor Risk Policies for Soft Commodities – that examines the types of risk policies on soft commodities banks and investors have developed in order to reduce or limit the chance of clients significantly impacting on tropical forests. The study and the tool help financial institutions gain insight into criteria to address risks and opportunities linked to soft commodity value chains, such as the potential to support sustainable production through financial products and services.

This NCD report and tool provides:

  • Greater clarity on criteria that banks and investors can adopt to strengthen policies and address exposure to deforestation and forest degradation risks from the production of palm oil, soy and beef.
  • An analytical framework with criteria to assess the scope, strength and implementation, reporting and monitoring of policies.
  • The Excel-based tool is free to download, allowing financial institutions to assess their own lending and investment policies and explore how changes would affect their score. Financial institutions can benchmark their policies against those of 30 financial institutions.

The Soft Commodity Forest-risk Assessment (SCFA) tool is no longer available.

Trase Finance is an available tool which links the trade in commodities to investors and lenders worldwide. It enables financial institutions to improve the sustainability of their portfolios, and manage their deforestation risk.

Forest 500 ranks the most influential companies and financial institutions in forest-risk supply chains based on their policies, commitments and action to prevent deforestation.

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