Deforestation in the Amazon. iStock.
The year 2020 was expected to be a “super year” for global action on climate change. Instead, it’s become an “extraordinary year” for a global community trying to cope with the impacts of the COVID-19 pandemic.
Amidst this backdrop, deforestation throughout the Amazon has been rising steadily, jumping 55% in the first four months of 2020 compared to the same period last year. This is no coincidence. Loggers, miners, land-grabbers and individuals clearing land for soy and livestock are taking advantage of the COVID-19 crisis to illegally clear the forest.
Enforcement of forest protection was already severely weakened across the Amazon, due in part to anti-environmental leadership and rhetoric, such as that of President Bolsonaro in Brazil. The virus has forced many of the field agents responsible for keeping forest invaders out to retreat, making it virtually impossible to enforce environmental laws and leaving these areas open to destruction. As we enter fire season, deforestation could get much worse due to warmer than average sea surface temperatures which could exacerbate the spread of fires. It all makes for a “perfect storm” that is threatening the Amazon forest and is already having disastrous impacts on the Indigenous communities who depend on forests.
Increased deforestation will jeopardize the rainforest’s rich biodiversity and extensive carbon stocks. It’s pushing the Amazon closer to the tipping point where deforestation will be irreversible. And it’s hindering global climate change mitigation efforts.
If the global community is going to achieve the goals of the Paris Agreement, Convention on Biological Diversity, the New York Declaration on Forests and other frameworks, then countries and companies need to prioritize forest protection.
Countries, and companies, should care about what’s happening to forests
This year, countries are due to present revised Nationally Determined Contributions (NDCs). This is an opportunity for countries to consider how to take more ambitious climate action and align their NDCs closer with the Paris Agreement. It is essential that countries prioritize how to safeguard the world’s tropical forests and all of the economic, social, cultural and environmental benefits they offer.
The private sector, including commodity supply chain companies and investors, must also take note of the higher rates of forest destruction and how it will impact their climate and deforestation goals, many of which have 2020 deadlines. Many companies are making significant progress on monitoring, traceability, supply chain management, producer engagement, and deforestation risk assessment. However, the risk of deforestation is still very present in their supply chains.
A recent study produced by ICV, Imaflora and Trase, for example, showed that traders operating in Mato Grosso are exporting to consumer goods manufacturers and retailers, which recently improved transparency and deforestation monitoring, but are still exposed to the risk that they are selling products linked to illegal deforestation.
Similarly, financial institutions aiming to meet climate and deforestation goals may be unknowingly investing in companies exposed to illegal deforestation. In its “The Investor Guide to Deforestation and Climate Change,” Ceres notes that investors holding equities in a wide range of industries – including food products, household products, auto components, textiles, apparel and luxury goods – face financial exposure to risks from deforestation. These risks could increase as deforestation increases, so it is essential that investors start taking action now.
Companies can drive the large-scale, meaningful changes needed to end deforestation
At such a critical moment, the private sector has the opportunity to help end deforestation. By engaging in jurisdictional approaches to forest protection, firms can bring meaningful change at scale. Jurisdictional approaches allow the private sector to work alongside local governments, communities, producers, and civil society to achieve social, economic and other environmental objectives across landscapes. At the same time, companies can contribute to their supply chain resiliency, reduce their reputational risk, build trust and transparency with consumers, and drive investor value.
In Mato Grosso, for example, companies can engage in the state’s Produce, Conserve, Include (PCI) strategy to meet their commitments while advancing the PCI’s goals to produce more agricultural commodities, conserve natural resources, and include smallholders and indigenous people in economic development. The PCI Pitchbook provides a “menu” of some of the on-the-ground programs in Mato Grosso that are ripe for corporate engagement.
Through a jurisdictional approach like the PCI, companies, governments and other key stakeholders can work together to create a low-risk region for sourcing. Six leading soy traders in the Soft Commodities Forum—a global platform for leading soft commodities companies committed to advancing collective action around sustainable supply chains and sustainable food systems—recently agreed to invest in the PCI. This will provide critical funding to assess and reduce deforestation associated with soy production in two municipalities in Mato Grosso while developing an action plan to increase agricultural productivity and conserve forests across the entire landscape.
Walmart is also making significant strides to address deforestation by encouraging its suppliers to engage in jurisdictional approaches in Malaysia, Indonesia and Brazil. Walmart recently launched its supplier resource website to help introduce its suppliers to jurisdictional approaches and provide guidance on how to engage with jurisdictional initiatives.
Additionally, the wider availability of high-quality jurisdictional REDD+ credits that companies could purchase to meet their climate and forest related goals could go a long way toward supporting forest protection. This potential has yet to be mobilized at the scale and pace needed to halt forest loss, but a number of initiatives are trying to change that.
The Emergent Forest Finance Accelerator, a not-for-profit finance facility established by EDF and other partners, aims to facilitate large-scale transactions of high-integrity jurisdictional REDD+ credits. In particular, Emergent is working with public donors to source credits from jurisdictional-level forest protection programs that meet the highest environmental and social standards and to make these available to corporates and other buyers in order to catalyze much needed finance for forest protection.
The finance sector is helping, and can do more
The finance sector is taking action to address deforestation risks in their investment portfolios. For example, last September, 230 institutional investors representing USD $16.2 trillion in assets under management called on companies to take urgent action in light of the devastating fires in the Amazon. Just last month, several European investors announced that they are considering divesting from beef producers, grains traders, and government bonds in Brazil if they do not see progress in curbing rising deforestation in the Amazon. And just last week, Nordea Asset Management dropped Brazilian meat giant JBS from all its funds after a report showed that JBS might have circumvented deforestation regulations in the Amazon.
To support this flurry of action in the finance sector, Ceres’ Guide gives investors a framework to understand and take action to address deforestation-driven climate risks across their portfolios. In addition to the concrete suggestions Ceres provides to help investors address deforestation, investors could use their influence as shareholders to engage with companies on eliminating commodity-driven deforestation through jurisdictional approaches. Investors could also consider ramping up their potential willingness to pay for high-integrity emissions reduction credits sourced from jurisdictional REDD+ programs.
Despite the current challenging circumstances caused by the pandemic, we cannot afford to delay action on eliminating deforestation. The upside is that various actors are willing and able to make an impact, and opportunities for them to do so abound. As we continue to grapple with the impacts of COVID-19, and as we brace ourselves for fire season and record levels of deforestation, proactive engagement by the private sector in jurisdictional approaches will be crucial.