The world’s forests absorb a third of the carbon dioxide emitted from the burning of fossil fuels each year, while playing an important role in protecting global biodiversity and food security, according to a signed letter of commitment issued by the participating financial companies (PDF of 4 pages / 426 KB). However, deforestation associated with the production of “forest-risk” agricultural products, including beef, soil, palm oil, paper and pulp, now itself accounts for 8% of global emissions. of CO2, more than the whole of the EU.
Participating companies will assess their individual exposures to these “forest risk” commodities by the end of 2022, engaging with affected customers and developing investment and lending policies that respond to this type of risk, according to the letter. By 2023, they will disclose deforestation risks and mitigation activities in their portfolios, along with due diligence and engagement. Public reporting on “credible progress” towards eliminating exposure to these risks will follow by 2025, when participating companies intend to provide financing only to customers who have met the criteria. risk reduction.
At the same time, participating companies intend to increase their investments in “nature-based” solutions to deforestation and support the transition to a sustainable agricultural sector. A UK government announcement referred to newly mobilized private sector funding of “at least £5.3 billion” to support efforts to reverse deforestation and land degradation in developing countries, alongside £8.75bn in public funding from 12 countries, including £1.5bn. UK over the next five years.
The UK funding includes a £200m commitment to a new £1.1bn fund to protect the world’s second largest rainforest, in the Congo Basin, as well as £200m for the LEAF (Releasing Emissions by Accelerating Forest Financing) coalition. LEAF, which provides finance to tropical and subtropical countries that have successfully reduced emissions from deforestation and degradation, has already raised $1 billion from public and private sector funders.
Aviva Group chief executive Amanda Blanc said financial firms had a “central role” to play in efforts to tackle climate change, “using our influence over the companies we invest in to encourage and ensure best practices”.
Environmental law expert Fiona Ross of Pinsent Masons, the law firm behind Out-Law, welcomed the commitment.
“We have already seen increased levels of activity in the field of forest conservation and restoration funded by large multinationals, and it has been particularly interesting to see and advise on some new and innovative structures in this field. “, she said.
“The work done by, for example, the working group on financial information relating to the nature (TNFD) will increasingly result in the inclusion of nature-based disclosures in corporate reporting, which should in turn lead to greater recognition of a company’s impacts in this regard, allowing for the identification of appropriate commitments and targets to address these impacts. We expect to continue to see growth in this area,” she said.
Launched in June, the TNFD is a global, market-led initiative working on a framework for organizations to report and act on evolving nature-related risks. It is intended to build on the work of the Taskforce on Climate-Related Financial Disclosures, which has developed risk-based measures and targets which some governments, including the UK, are now seeking to enact into law. .