A coalition of investors with $2.1 trillion in assets under management plan have teamed up to deliver a pioneering satellite monitoring program for tropical forests that will assess retailers' and manufacturers' efforts to purge their supply chains of deforestation.
The nine investors, which include ACTIAM, Aviva Investors, Fidelity International, Nomura Asset Management and Robeco, intend to use imagery captured through a network of satellites to identify companies that are contributing to the deforestation of tropical forests through demand for products such as beef, soy, timber and palm oil.
Offending companies will be asked to publicly disclose their supplier lists for a number of "soft" commodities linked to high rates of deforestation, in a bid to improve traceability for investors and enhance manufacturers' and retailers' supply chain disclosure standards, the alliance said.
Meanwhile, companies that already disclose their supplier lists will be asked to go a step further to take steps to reduce the amount of palm-oil based deforestation in their supply chains.
Offending companies will be asked to publicly disclose their supplier lists for a number of 'soft' commodities linked to high rates of deforestation.
Companies' progress will be monitored and assessed over time through satellite technology that relies on radar imagery, machine learning and data analytics to detect changes in tropical forest cover, the investors explained, noting that both sets of companies have been given a deadline of "two to three years" to comply with the requests.
Netherlands' based asset manager ACTIAM said it would consider excluding companies that do not demonstrate progress towards the goals.
The firm's director of sustainability, Dennis van der Putten, said the finance sector had a responsibility to fight deforestation in order to help tackle the climate and biodiversity crises and reduce investors' exposure to risk. "As investors, we have a fiduciary duty to lead the transition to a more sustainable society, where financial, environmental and social returns go hand in hand," he said. "This engagement initiative is part of our growing commitment to biodiversity allowing investors to positively influence a much-needed change of behavior by companies."
Financial institutions face significant potential losses and stranded asset risks if the ecosystems upon which their portfolio companies rely are eroded.
The destruction of rainforests to make way for plantations and ranches is a major contributor to climate change and nature loss, due to the crucial role of richly biodiverse tropical forests in sequestering carbon dioxide, absorbing rainfall and releasing water into rivers. At the same time, financial institutions face significant potential losses and stranded asset risks if the ecosystems upon which their portfolio companies rely are eroded.
Deforestation was also singled out as a major driver of future pandemic risk in a stark United Nations-backed report published last week that urged policymakers to take steps to slow the current rate of nature destruction to minimize the risk of future health crises.