Nature

Deforestation as a systemic risk: An opportunity for investors collective action

2021-05-20T08:00:00+01:00

We all know climate change is happening. But do investors understand the role that deforestation plays, and the impact on their portfolios?

While net zero announcements are accelerating, investors often do not address the destruction of our forests, and the systemic and reputational risks that come with it.

Biodiversity loss and climate change are two of the most pressing sustainability challenges for investors, with deforestation being the most tangible and critical element of these twin threats. Agriculture is responsible for 23% of greenhouse gas emissions globally and its expansion accounts for 73% of deforestation worldwide. Forests are not only the source of livelihoods for 22% of humanity, but they also absorb 40% of greenhouse emissions.

Deforestation is a very material risk for investors. It drives reputational risks related to consumers and environmental organisations as well as legal risks as new legislation for climate-related financial disclosure is expected. Traceability technology can identify investors and companies along the supply chain connected to deforestation and expose them to liability and rapid loss of market share.