Investor nature and climate efforts must both focus on – and learn from – action on deforestation, argues Olga Hancock
Last week's London Climate Action Week highlighted how the twin crises of nature loss and climate change are inextricably linked.
It saw the launch of the Nature Action 100 (NA100) Investor Expectations for Companies and key sectors, including pharmaceuticals, meat and dairy, consumer goods and metals and mining – unified by their impacts on habitat loss, overexploitation of resources, and soil, water, and solid waste pollution for engagement.
As investors further their activities to tackle nature-related risk and impacts, it is crucial that we draw on lessons learned, and experience gained, from our efforts to date to tackle the crucial issue that sits at the very heart of the climate, nature, and human rights challenges – deforestation.
If forests go, we go too
From the giant otter to the leafcutter ant, hundreds of thousands of different species of plants and animals have their homes in the world's great forests. With the greatest biodiversity of any biome on the planet, they are the lungs of the world, absorbing more carbon every year than the US emits. If they go, we go.
Yet deforestation is responsible for 11% of our annual carbon emissions and a massive driver of nature destruction.
"No investor strategy on climate and nature is complete without a focus on deforestation"
No investor strategy on climate and nature is complete without a focus on deforestation – it's the crucial bridge between the two, and the issue is encapsulated in the Paris agreement and REDD+ (whereby countries receive payments for emission reductions resulting from reduced deforestation) and the all-important COP 26 pledge to end and reverse deforestation by 2030.
Deforestation has local biodiversity impacts within supply chains and is also a systemic risk with global climate impacts.
It is something financial institutions need to get to grips with to meet the asks of forthcoming requirements to disclose nature-related risks and impacts through the Task Force on Nature-related Financial Disclosures (TNFD,) and in order to work towards aligning financial flows with biodiversity values, as stipulated by the newly agreed Global Biodiversity Framework (GBF).
The crucial stepping stone to wider nature action
Ending deforestation and scaling nature-based solutions – such as natural flood management, reforestation and regenerative agriculture can get us more than a third of the way to meeting the Paris climate target. But only if we act immediately.
The window to get deforestation action right is incredibly tight – and as a tangible issue that so clearly links climate and nature related risks, investor action on deforestation has really got off the ground over the past few years.
Through Finance Sector Deforestation Action, which brings together financial institutions from across Brazil, Africa, Europe and the United States, intense work is underway to eliminate agricultural commodity-driven deforestation from portfolios by 2025 – or as soon as is feasibly possibly.
And through the Investors Policy Dialogue on Deforestation, the first ever sovereign engagement, investors are working with governments to create a more supportive policy environment for ending deforestation.
Our efforts with FSDA and IPDD have taught us a lot about what is most important and has most potential to result in positive change when addressing climate and nature-related challenges, and we must take these learning points forward as we further our work to tackle deforestation and embark on related efforts that cover multiple sectors and biomes.
From deforestation data to consistent messaging
A lack of reliable and comparable data is the single issue that has perhaps hampered investor climate-related action the most. However, we have seen through FSDA's call for issuer-level data on deforestation risk exposure and management that investors should expect more – and clear expectations on investor requests can succeed in securing enhanced and credible supply chain data.
We have also learnt how important it is to keep consistent messaging across all our deforestation work; FSDA's shared engagement asks have been successful in ensuring companies receive uniform demands from investors, which have the potential to drive significantly more change than if we were to formulate our requests in isolation.
"Clear expectations on investor requests can succeed in securing enhanced and credible supply chain data"
When it comes to engagement, working with companies is crucial, but our efforts through IPDD have taught us that this alone is not enough, and it's important we strive to encourage the kind of policy environment that will encourage the private sector to reverse and restore nature loss too.
IPDD is the world's first sovereign investor engagement, and its model is ripe for replication across a wide range of climate, nature and societal challenges.
Recently, we have witnessed the power of public policy to drive change, demonstrated in Indonesia with a year-on-year decrease in rates of deforestation over the past five years. As we broaden our efforts, it is crucial we remain alert to the transformational power of policy and regulation, which we could see expanded to encompass wider biodiversity and nature-related data – such as on water pollution and soil health.
With seven years left, we have to learn on-the-go
We have less than seven years to halve emissions and halt and reverse nature loss, and with an area of tropical forest the size of Switzerland destroyed in 2022, we have no option but to keep our noses to the grindstone.
The past few years have seen us diving in to act on deforestation – testing our approach to working on what is arguably the most crucial interlinked climate and nature issue with multiple methods and tactics.
Now, as we move forward with NA100, the TNFD, the GBF and the increasing set of data frameworks and tools at our fingertips, we need to take all our learning points from action on this most central issue forwards. Joined-up thinking, action on data, and a keen eye to the policy environment are all vital to addressing issues such as impacts on habitat loss, overexploitation of resources, and soil, water, and solid waste pollution.
Investor nature and climate efforts must both focus on – and learn from – action on deforestation. No single investor has all the answers to addressing systemic challenges, and we need to keep open minds, a can-do approach and a willingness to learn together.
Olga Hancock is head of responsible investment at Church Commissioners for England.
