Finance sector backs new deforestation data initiative

Update on 13 December 2022: The Aligned Accountability Project has been renamed to Forest IQ.

Global banks and investors are stepping up to support a new initiative to improve the data and metrics on corporate links to deforestation, increasing understanding of the potential risks and opportunities for financial institutions and informing decision making.

With more than 1,000 fires currently burning in the Brazilian Amazon, and deforestation in Brazil at its highest level since 2008, there is a growing recognition of the need to address deforestation globally to reduce climate risks and meet the goals of the Paris Agreement, with the President of COP26, Alok Sharma calling for deforestation-free finance by 2025.

The Aligned Accountability project, a partnership project between Global Canopy, ZSL, Trase and the Accountability Framework Initiative, will bring together the best available open data on company performance on deforestation risks in commodity supply chains and create standardised common metrics. Ultimately this will support the finance sector to make more sustainable investments and improve their risk management.

To maximise market relevance and uptake, a Working Group, made up of representatives from leading banks and financial institutions including BlackRock, the International business of Federated Hermes and Lombard Odier will provide structured inputs to the process.
Robert Hall, Associate Director – ESG, Impact and Innovation at the International business of Federated Hermes, one of the financial institutions represented on the Working Group, welcomed the initiative as a much-needed step forward to support action to address nature-related risks and opportunities for the finance sector:

“The transition to deforestation-free soft commodity supply chains is an urgent and important issue, presenting both risks and opportunities for banks and investors. Deeper data sets and more comprehensive and standardised metrics will enable providers of finance to act more quickly and with greater confidence in re-directing the flow of money to more sustainable outcomes.”

Robert Hall, Associate Director – ESG, Impact and Innovation at the International business of Federated Hermes

Work to design the database and develop a standardised set of priority metrics in alignment with the Accountability Framework is already underway. And the first consultation with the Working Group is scheduled for September.

The results will provide banks and investors with clearer insight into what companies are doing, and whether they are following the best practice guidance already developed by the Accountability Framework Initiative to address deforestation risks in their supply chains.

According to analysis carried out by Global Canopy’s Forest 500 project, the financial institutions most exposed to deforestation risks currently provide more than USD 5.5 trillion in finance to companies with high exposure to forest-risk supply chains.

Sarah Rogerson, Global Canopy’s Corporate Performance lead, said:

“There is no solution to climate change without a solution to deforestation. Record-breaking deforestation and fires in Brazil are perhaps the starkest reminder of the urgency. Yet even the big banks and investors have struggled to systemically address deforestation risks or identify where there are opportunities for more sustainable finance.”

“By bringing together the best available data, and by developing standard metrics, we can help fill that data gap and provide the information needed to redirect finance away from companies linked to forest loss and towards more sustainable alternatives.”

Sarah Rogerson, Global Canopy’s Corporate Performance lead

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Contact: Helen Burley, [email protected]

Global Canopy​

Global Canopy is an innovative environmental organisation that targets the market forces destroying tropical forests. Our mission is to help achieve a more sustainable global economy – through improved transparency, innovative finance and strategic communications.

ZSL (Zoological Society of London) 

Founded in 1826, ZSL (Zoological Society of London) is an international scientific, conservation and educational charity whose mission is to promote and achieve the worldwide conservation of animals and their habitats. Our mission is realised through our ground-breaking science, our active conservation projects in more than 50 countries and our two Zoos, ZSL London Zoo and ZSL Whipsnade Zoo. For more information visit www.zsl.org 

About SPOTT 

Developed by the Zoological Society of London (ZSL), SPOTT is an online platform supporting sustainable commodity production and trade. By tracking transparency, SPOTT incentivises the implementation of corporate best practice. SPOTT assesses commodity producers, processors and traders on their public disclosure regarding their organisation, policies and practices related to environmental, social and governance (ESG) issues. SPOTT scores companies annually against sector-specific indicators to benchmark their progress over time. Investors, buyers and other key influencers can use SPOTT assessments to inform stakeholder engagement, manage risk, and increase industry transparency.  For more information, visit www.SPOTT.org  

Federated Hermes

Federated Hermes, Inc. is a leading global investment manager with $645.8 billion in assets under management as of June 30, 2021. Guided by our conviction that responsible investing is the best way to create wealth over the long term, our investment solutions span equity, fixed-income, alternative/private markets, multi-asset and liquidity management strategies. Providing world-class active investment management and engagement services to more than 11,000 institutions and intermediaries, our clients include corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers.

Headquartered in Pittsburgh, Federated Hermes’ nearly 2,000 employees include those in London, New York, Boston and offices worldwide.

For more information, visit FederatedHermes.com

The International Business of Federated Hermes is majority owned by Federated Hermes, Inc. The International Business’ views and positions are those of the International Business and/or its clients, and do not necessarily represent the views or positions of Federated Hermes, Inc., its investment advisory subsidiaries or their clients, due to differences in goals, objectives, time horizons, obligations or other factors among these organizations or their clients.