Two thirds of tropical deforestation is driven by the global trade in key commodities. But the capital that makes this global trade flow comes from financial institutions: through loans, shareholdings, banks, pension funds and asset managers.
Eliminating deforestation from financial portfolios is therefore an essential component of achieving biodiversity targets and climate goals. Over the past year, the Deforestation-Free Finance Advisory Group has brought together experts in deforestation, nature-loss and sustainable finance to guide financial institutions as they seek to address their deforestation risks.
This group has created the Finance Sector Roadmap for Eliminating Commodity-Driven Deforestation, which defines best practice for financial institutions who are exposed to deforestation, conversion and associated human rights risks.
The Roadmap was launched at COP26, drawing on input from more than 60 financial institutions. Subsequent guidance is now being created to target specific types of financial institutions in order to support them on the details of strategies and tools they can use to engage with their clients or holdings.