SUPPLY CHANGE

 

Dear colleagues,

Now that hundreds of companies have made deforestation commitments, pressure from campaign organizations has been moving to the financial institutions that lend to companies with agricultural assets linked to deforestation and land grabs. A recent report on palm oil by the environmental watchdog Friends of the Earth (FOE), finds that the top ten U.S. financers of palm oil have invested $14 billion in palm oil companies through 2015. According to FOE, these firms have no policies to address documented risks of deforestation and land grabs associated with these assets. In response, FOE has recommended a four step solution for financial institutions: 1) disclose all investments in palm oil, 2) commit to deforestation and exploitation-free investment policies, 3) exclude investments in bad actors and advocate for palm oil company reforms, and 4) repair the environmental and social damage caused by investments through support for restoration and justice for communities.

"Investments in palm oil are embedded in our pension funds, IRAs and 401(k)s but most of us are not even aware of it," says Andrew Behar, the CEO of the environmental group As You Sow (AYS) in an FOE press release. This lack of transparency about exposure to palm oil compelled AYS and FOE to create a free Deforestation Free Funds database including 6,500 global mutual funds "to empower investors to check their financial exposure to deforestation and land grabs" says Behar.

Grappling with similar issues, the green group, Fern, recently assessed the sources of credit and how capital was raised by 23 agribusinesses between 2010 and 2015. All of these companies had documented incidents of deforestation and land grabbing around the world. European investment firms played a surprisingly large role globally in lending to and investing in companies reviewed by the report. For example, European banks loaned $18.4 billion to these companies, over five times as much as did their American counterparts who lent $3.6 billion. However, not surprisingly, because most of the agribusiness assets were located in Asia, the largest lenders, investors and underwriters for these risky assets were from Asia. The authors similarly concluded a need for greater transparency in financial exposure to these risks.

With most of the financial sector apparently unaware of the financial risks posed by deforestation, Green Century Capital Management, an environmentally focused investment advisor to the Green Century Funds announced plans to lead a five year worldwide campaign to inform investors of these risks. Two European environmental non-profits, Aidenvironment and Profundo, along with the US-based policy group Climate Advisers will help lead this work as part of the new RISC (Risk In Supply Chains) project funded under Norway's International Climate and Forest Initiative. "When the finance and investment community has been informed of these risks through credible analysis, they have acted as a powerful force for ending deforestation—and we hope that this continues," explained Lesli Samuelrich, the Green Century's president.

A number of financial institutions have already taken the lead addressing deforestation among their lending practices. In 2015, BNP Paribas became the first financial institution committed to removing deforestation from its investments. Dozens of other financial institutions are working toward similar goals through initiatives such as the Banking Environment Initiative and the Natural Capital Declaration. One of the most active financial institutions removing deforestation from its investments is also the largest fund in the world. The Norwegian Sovereign Wealth Fund has divested from 50 companies since 2012 because of their deforestation practices, around half being palm oil companies that did not meet its zero tolerance policy on deforestation and social conflict.

More stories about changing supply chains are summarized below, so keep reading!

-The Supply Change team

 

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Your questions answered

In case you weren't able to participate in last month's webinar on corporate deforestation commodity commitments, the Supply Change team recorded the session and put together a comprehensive Q&A to answer over 30 questions that we didn't have time to answer.

You can access the recording, view the presentation slide deck, read our blog with some highlights from the Supply Change team, and download the full Q&A document.

 

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Recent News

Second chances

After four months of exile, the Round Table on Sustainable Palm Oil (RSPO) reinstated one of its founding members --IOI Group-- after finding that the palm oil producer had complied with the requirements set by the RSPO Grievance complaints panel. IOI's board approved an action plan for addressing environmental and social mitigation. Environmental watchdogs denounced this decision, pointing to the company's history of broken promises to clean up deforestation and peatland destruction from its plantations. The five percent rise in share price after the IOI's reinstatement is dwarfed by the 17 percent fall right after their suspension four months ago. The big question is what will the 27 companies that suspended or ended business relationships with IOI do?
Read more at the Guardian


Myanmar's ban: a grandstand or a log jam?

After months of speculation, Myanmar announced a nation-wide logging ban effective until the end of March 2017. With losses of more than five percent of the country's tree cover between 2001 and 2014, environmental groups cautiously welcomed this as a step in the right direction. Yet previous corruption, mismanagement and illegal trade within the forestry sector, has tempered reactions by environmental experts. "The moratorium must be tied to key reforms in the sector... before the resumption of logging" for benefits to be shared by all communities across the country, says Kerstin Canby, Director of Forest Trends' Forest Policy, Trade, and Finance Program in a recent statement.
Read more at Mongabay.com


Case Closed

Local authorities in Riau (Sumatra, Indonesia) have officially closed the cases of 15 companies suspected of burning peatlands during the 2015 haze crisis. A statement from the police's intelligence bureau reported that "according to review there was no evidence of intent or negligence." The environmental watchdog Greenpeace counters that the law is sufficiently clear to take companies to court for failing to prevent fires on their concessions, and that prosecutors don't need to demonstrate direct culpability. Ongoing fires and poor inter agency communications on the issue raise challenges for how Indonesia's President Jokowi Widodo will meet his promise to avoid a repeat of last year's fires and to sack any military and police chiefs who do not control their spread.
Read more from Mongabay


Superteam, Assemble!

CDP announced that with the help of the South Pole Group, it will begin rating companies based on their reported detection of deforestation risks within commodity supply chains and on whether these are factored into business planning. Ratings will be based on commodity-related progress metrics including the total and certified commodity usage, traceability and material risk identification information. CDP collects this information annually from over 100 companies on behalf of investors with $22 trillion in assets. Katie McCoy, head of forests at CDP, says "the ability to keep score is fundamental to ensuring that business is on the right track, and South Pole Group brings the right expertise to enable the companies CDP works with to raise the bar on efforts to preserve forests."
Read the press release


Stocking up

Brazil only has 16 years' worth of timber stocks from primary forest left and many other large timber exporters to the United Kingdom (UK) are not far behind, warns the World Wildlife Fund in their recent report. The environmental group makes the business case for "UK businesses to shift 100% of their trade in timber and timber products to legal, sustainable sources by 2020" by forecasting the number of years remaining for different types of timber stocks among major timber exporters to the UK. Becky Coffin, sustainability lead at the retailer Kingfisher expressed support for the call to action and acknowledged the challenges, saying that "timber is an essential element in around a third of our products, so security of supply is hugely important for us."
Read more at Edie.net


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