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As we approach the conclusion of COP26, a word on deforestation from the head of our Environment and Climate Change Research team, Will Nichols, who notes that delivering on the one of the few tangible Glasgow summit declarations - to halt deforestation by 2030 - will need countries, investors and corporates to take a broad view of risk.
More than 100 nations coming together to end deforestation by 2030 appears to be a huge good-news story coming from an otherwise underwhelming summit. The agreement has been signed by countries home to 85% of the world’s forests and includes those presiding over some of the most rampant forest loss on the planet, including Brazil, Indonesia and Nigeria. Indeed, there are 17 extreme risk countries in our Deforestation Index, 11 of which are part of this accord.
At the same time, 28 governments have promised to tackle deforestation in the value chains of key food products such as soy, palm oil and cocoa, while 30 financial companies are pledging to cease funding activities that drive deforestation.
As we detailed in our Human Rights Outlook 2021, forest loss is also inextricably linked to human rights abuses, such as land grabs – particularly in poorer countries, where there is a significant financial reward to chasing people off their land and destroying the forest that remains. These incursions can easily be smoothed away by corrupt officials.
So, halting deforestation needs a broad approach that addresses each of the environmental, social, and governance pillars simultaneously. On the face of it, the Glasgow declaration contains fewer details than the 2014 New York Declaration on Forests, which abjectly failed its goal of halving deforestation by 2020 and halting it by 2030. The absence of strong wording on governance might explain why countries which ignored the New York accord, like Brazil and Russia, have signed up to Glasgow. (Even so, days after the agreement, Indonesia backtracked, saying it was unfair and that it would not try to meet the 2030 target, considerably undermining the deal).
It will also be key to look beyond those commodities that get the headlines. We are all aware of how soy and beef are driving forest loss in certain countries, but deforestation is a global issue and our data shows that there are many other commodities also driving forest loss.
Palm oil is primarily produced by Indonesia and Malaysia, both of which are extreme risk in our Deforestation Index. The cocoa value chain in Côte d'Ivoire and Ghana poses a similar level of risk, while coffee is highly associated with the practice in Brazil, Vietnam, Colombia and Central America.
Investors and corporates can play a key role in ensuring Glasgow succeeds where New York failed.
We have already seen sovereign investors seek to shape ESG improvements as part of debt negotiations, and that needs to step up a gear if those companies are truly aligned with this global goal. While singular investors may not have sufficiently significant sway, a global investors’ group formed to drive change could start to move the needle.
Equally, corporations must work with suppliers who will adhere to strict codes of conduct and operate transparently. Laws in motion in the UK and EU around preventing deforestation along supply chains will necessitate regular and accurate disclosures and accurate, granular data.
Ultimately, Nichols counsels, business and policymakers need to recognise that pulling the handbrake on deforestation is a key element of the global climate challenge. It must be incorporated within global heating goals, and not be seen as a supplementary option.