“In line with our ethical investment policy and our principle of ‘first do no harm’, Trust Management has lent its voice to a call to identify and remove deforestation from the supply line of commodities.” said Trust Management’s CEO Grant Hope this week.
Trust Management has joined 254 institutional investors representing US $17.7 trillion in assets under management to back three new mechanisms that will uncover deforestation practices linked to investments. The statement comes in the wake of huge forest fires in Brazil and Bolivia that are connected to intentional burn-offs used to clear areas of Amazon forest for agriculture.
Trust Management joined with signatories to the No Deforestation Statement from across 30 countries that include: The Church Commissioners for England, The Church of England Pension Board, Episcopal Church USA, Church of Sweden, Mercy Investments (USA), the Interfaith Centre on Corporate Responsibility and the New Zealand Super Fund.
“It is with deep concern that we follow the escalating crisis of deforestation and forest fires in Brazil and Bolivia,” reads the statement.
“As investors, who have a fiduciary duty to act in the best long-term interests of our beneficiaries, we recognise the crucial role that tropical forests play in tackling climate change, protecting biodiversity and ensuring ecosystem services,” they write.
The statement calls on companies to tackle the financial material deforestation risks, including market and reputational risks, within their operations and global supply chains.
It specifically asks companies to prevent investment linked to deforestation by making sure they:
• publicly disclose and implement a commodity-specific no deforestation policy with measurable outcomes within a set time period across the entire supply chain
• establish a transparent monitoring and verification system to make sure suppliers comply with the company’s no deforestation policy
• report annually on deforestation risk exposure and management, including progress towards the company’s no deforestation policy.
“We see this as an important first step in encouraging companies to understand and quantify their exposure to deforestation,” said Trust Management’s Grant Hope.
“Any business that practises deforestation cannot remain sustainable over decades, so investment in those companies contains risk that in time that will come home to roost.”
“As well as uncovering deforestation practises in supply lines so that investors can avoid exposure, the hope is that exposing this practice will drive a reduction of deforestation itself.”
The Investor’s Statement marks a shift for direct action on climate change that is usually connected to divestment from fossil fuel extraction.
“For too long, the discussion on climate change has concentrated on the energy sector.” said statement signatory Jan Erik Saugestad, CEO of Storebrand Asset Management.
“There is an urgent need to focus more on effective management of agricultural supply chains. Deforestation and loss of biodiversity are not only environmental problems. There are significant negative economic effects associated with these issues and they represent a risk that we as investors cannot ignore.”
The statement, coordinated by the nonprofit organizations PRI (Principles of Responsible Investment) and Ceres (an organisation for environmental sustainability through the economy) comes on the heels of a new Intergovernmental Panel on Climate Change special report on climate change and land, which shows 11 percent of global greenhouse gas emissions are caused by poor forestry and land-use management including commodity-driven deforestation.
Many of the investors who have signed the statement are involved in collaborative investors’ action with global companies exposed directly or indirectly to soy and cattle from South America. The Investor Initiative for Sustainable Forests (IISF), led by PRI and Ceres, aims to transform industry practices to eliminate deforestation from cattle and soy supply chains.
“In signing this statement, investors representing a significant portion of global capital are pledging their support for the Amazon region, which has been devastated by fires and deforestation,” said PRI CEO Fiona Reynolds.
“In doing so, investors are recognising the critical role they play to urgently accelerate action to help societies affected by this tragedy, and to prevent environmental disasters of this scale in the future.”