IFD presents a panorama of practices in the Paris financial center to combat deforestation
The Institut de la Finance Durable is continuing its work on biodiversity with the publication of its panorama of the Paris financial center’s strategies to combat deforestation.
The report presents the practices of 15 financial sector players (insurance companies, asset managers and banks) in the Paris financial center, tools and actions to combat deforestation, and a list of the main databases and instruments available.
Forests play a major environmental role, helping to mitigate climate change by storing half of the planet’s greenhouse gas (GHG) emissions , and representing immense reservoirs of biodiversity. However, between 1990 and 2020, the equivalent of 10% of the world’s forests disappeared – or 420 million hectares, an area larger than the European Union. Their protection and the fight against deforestation are therefore essential, not least to maintain the ecosystem services they provide.
It’s against this backdrop that, since 2018, France has had a National Strategy to Combat Imported Deforestation (SDNI) to halt the import of forest or agricultural products contributing to deforestation abroad by 2030, reinforced more recently by the adoption of a European Regulation against Deforestation and Forest Degradation.
Aware of the climatic, environmental and economic risks associated with deforestation, the players on the Paris financial market are mobilizing the available levers for action. The French financial sector thus remains one of the most advanced in taking these issues into account on the international stage. Four main levers for action have been identified:
1. Mobilize classic financial portfolio management tools, such as sectoral policies with commitment and exclusion strategies targeting producers and distributors of the main commodities at risk of deforestation
More than 90% of the players cited in the report have defined policies to combat deforestation on commodities at risk. The main commodities at risk are palm oil, soy, livestock and wood.
2. Being supported by players specialized in the fight against deforestation can help strengthen your strategy in this area, and accelerate the transformation of your business.
3. Use tools to track exposure to the risk of deforestation
More than three-quarters of the players presented in this panorama use databases to track the exposure of their portfolios to deforestation and reinforce their commitments. They also use certifications to reinforce their commitments against deforestation and condition their exclusion strategies.
4. Join international initiatives and coalitions that support financial players in implementing zero-deforestation objectives and, more broadly, in taking biodiversity issues into account.
Initiatives involving dialogue and commitment with issuers, transparency, traceability, more robust databases and the definition of methodologies enabling the comparability of these data, are all levers enabling strengthened strategies.
These levers will feed into the efforts to be made to progress towards a framework enabling a common language, transparency and comparability of actions in favor of the fight against deforestation. These efforts must be pursued with a view to better integrating this issue into financing and investment decisions.