More than 40 asset managers highlight wide ranging business risks and climate impacts from deforestation exacerbated by beef production
More than 40 investors with around $6.4tr of assets under management have called on companies sourcing beef and related cattle products to mitigate and eliminate deforestation from their supply chains in a joint statement issued late last week.
Citing wide-ranging risks that arise from deforestation, including the fact it is one of the fastest-growing contributors to global greenhouse gases, the statement issued in California on Thursday highlights how beef production has been responsible for 65 per cent of gross tropical deforestation between 2001 and 2009, largely in Brazil and other areas of South America.
The statement points to the knock on financial risks posed by deforestation to food and agribusiness companies and their investors, warning these risks are likely to grow as global demand for cattle and soy continues to rise and countries take stronger action to stem forest losses.
Orchestrated by US non-profit Ceres alongside the Principles for Responsible Investment (PRI) initiative, the 44 investors signing the statement include global financial giants such as Aberdeen Standard Investments, Aviva Investors, Legal & General Investment Management, Aegon Asset Management, HSBC Global AM, and BNP Paribas AM.
The statement stresses that investors are prepared to step up pressure on companies with links to deforestation. "Cattle production has been identified as a leading driver of tropical deforestation, primarily through the conversion of forest to pasture and through the cattle industry's demand for soy-based feed products," it states. "With a view toward protecting long-term value and mitigating risks, we will seek to engage relevant investee companies on deforestation risk within their supply chains, particularly those with direct or supply chain exposure to cattle and related products."
The statement also sets out investor expectations for companies regarding disclosure and management of deforestation risks. It calls on them to: boost awareness and governance of these risks; publicly-disclose commodity specific deforestation policy covering their entire supply chains; ensure traceability across cattle supply chains; develop monitoring and verification processes to ensure supplier compliance.
Danielle Carreira, senior manager of environmental issues at PRI, said eliminating deforestation in cattle, soy and other key agriculture commodities was crucial for curbing emissions and meeting the goals of the Paris Agreement.
"There is growing awareness amongst institutional investors of the material risks that deforestation poses to investee companies, in particular the link between tropical deforestation and greenhouse gas emissions, as such many investors are increasingly looking to engage with companies to discuss this issue," she added.
A coalition of global green groups also issued an open letter to UN Secretary General António Guterres on Friday calling on world leaders to "not forget" the importance of forests, food and land in the climate change fight. It urged leaders to "do everything necessary to secure, by 2030, achievement of 30 per cent of the Paris Agreement goals from natural climate solutions in the forests, food and land sector".
It comes alongside news that food giant Nestlé has committed to 100 per cent monitoring of its palm oil supply chain by the end of 2018 through the use of Starling, an independent satellite verification system which provides near-real time monitoring to help companies verify deforestation commitments.
The system combines eight different satellite constellations to produce land cover maps with over 90 per cent accuracy, using a mixture of radar and optical monitoring, according to Starling, a joint collaboration between non-profit The Forest Trust, satellite specialists Airbus and radar experts SarVision.
Nestlé will also implement Starling over 200 million hectares in key pulp and paper producing regions globally and work with suppliers to achieve responsible sourcing requirements in both natural and plantation forests, The Forest Trust explained.
Magdi Batato, executive vice president and head of operations at Nestlé, said 63 per cent of the firm's global supply chain was deforestation-free in 2017, as it aims to reach 100 per cent by 2020.
"Nestlé has always been committed to source the raw materials we need to make our products in a responsible manner. In 2010, we made a No Deforestation commitment stating that all our products globally will not be associated with deforestation by 2020," he said.
Environmental campaigners have long called for multinational consumer goods giants to take more responsibility for tackling deforestation in tropical countries. It is now clearer than ever that they have influential allies amongst the world's most influential investors, not to mention developers of cutting edge satellite technologies.
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