The Investors Policy Dialogue on Deforestation (IPDD) is a collaborative investor initiative set up in July 2020 to engage with public agencies and industry associations in selected countries on the issue of deforestation. This initiative is supported by the PRI.
The goal of the initiative is to coordinate a public policy dialogue on halting deforestation. The IPDD seeks to ensure long-term financial sustainability of investments in the countries investors are invested in by promoting sustainable land use and forest management and respect for human rights, with an initial focus on tropical forests and natural vegetation. It will work with key stakeholders to encourage adoption and implementation of regulatory frameworks that ensure protection of such natural assets and human rights.
Why is action on deforestation needed?
As financial institutions, who have a fiduciary duty to act in the best long-term interests of their beneficiaries, investors recognise the crucial role that tropical forests and other types of natural vegetation play in tackling climate change, protecting biodiversity and ensuring ecosystem services.
Most countries do have some measures in place to combat deforestation, while at the same time providing favourable conditions for business and investments. However, escalating deforestation in recent years in countries rich in such natural resources, combined with concerns about weakening environmental and human rights policies as well as lack of effective enforcement are creating widespread uncertainty about the conditions for investing in or providing financial services to these countries.
Investors are concerned about the financial impact that deforestation and the violation of the rights of indigenous peoples and local communities may have on their clients and investee companies, by potentially increasing reputational, operational and regulatory risks. Investors are concerned that companies exposed to potential deforestation in their direct operations and supply chains in these countries will face increasing difficulty accessing international markets. The sovereign bonds of these countries are also likely to be deemed high risk if deforestation continues.
