Global investors join deforestation initiative

Updating on progress and expectations at COP27

Asset managers from Africa, Chile and Europe have joined an investor initiative to end deforestation, the Finance Sector Deforestation Action (FSDA).

As it updates delegates at COP27 on how it is pushing to end deforestation by 2025, FSDA announced pan-African investment company SouthBridge Group – the first African financial institution to sign up to the initiative – and Banco Estado de Chile, are joining. Existing members from the Global South include JGP (Brazil) and Bancolombia.

Asset manager GAM Investments and London CIV, which manages London local government pension scheme assets, also join FSDA today. FSDA now has 37 members including LGIM, Aviva, AXA, Schroders, Storebrand, Impax and Generation Investment Management.

Each member commits to use active ownership to try and eliminate forest-risk agricultural, commodity-driven deforestation activities in issuer companies in investment portfolios and financing activities by 2025.

Investor expectations

The initiative has recently published shared investor expectations for companies. Members expect companies to make a public commitment to deforestation with a target date of 2025. Issuers are further expected to publicly commit to trace supply in order to know and control the deforestation, conversion, and human rights impacts of materials in their supply chain. Finally, companies must commit time and resources to collaborative actions to advance sustainability in agriculture commodity production and sourcing.

Members are using the expectations to engage companies on increasing actions to address deforestation impacts, assess deforestation risk exposures, transform supply chains and disclose their deforestation risk exposures, impacts and progress.

See also: – All ESG Clarity’s COP27 coverage

Outside of active ownership activities, FSDA members such as Aviva and Impax have been adopting and publishing deforestation policies. Signatories have also been engaging with major data providers to call for issuer-level data on deforestation risk exposure and management.

Michelle Scrimgeour (pictured left), CEO of LGIM, said the group has made much progress on deforestation since joining: “Deforestation is a priority: forests are both a vital carbon sink and an important home for nature and we believe the interdependencies between nature and climate are of critical importance.

“Over the past year, as a member of the FSDA group, we have made significant progress – set investor expectations and initiated targeted corporate engagements to drive action. For LGIM specifically, we have taken actions that include committing to a deforestation policy; reaching out to 300+ companies with deforestation risk exposure, and advancing efforts to integrate deforestation risk considerations across our investment process.”

Dr. Frannie Leautier, CEO of SouthBridge Group, said: “Africa is the last continent in the world with contiguous forest. We are focused on creating innovative financing solutions, specialised funds and tailored products to reforest, develop sustainable agroforestry and scale nature-based solutions.”

Yesterday at COP27 saw UK prime minister, Rishi Sunak, announced world leaders were launching a Forests and Climate Leaders’ Partnership funding programme committed to halting and reversing forest loss and land degradation by 2030.