More than a third of companies with links to commodities such as timber, soy, palm oil and beef fail to address deforestation at the board level. In the US two-thirds of boards are failing to tackle this increasing risk
With the world losing an area of forest the size of New Zealand last year, it is not only indigenous people whose livelihoods are at risk. Environmental disclosure platform CDP has identified a risk of stranded assets for publicly listed companies with nearly $1trn in turnover that are dependent on commodities linked to deforestation such as timber, palm oil, cattle and soy.
In a new report, “From Risk to Revenue: The investment opportunity in addressing corporate deforestation”, CDP says it received responses from fewer than a quarter of the 1,103 largest global companies it approached asking about their efforts to stop deforestation.
Of these, 87% recognised at least one risk from commodity-linked investments, and 32% are already experiencing impacts from those risks.
Fewer still are doing anything to tackle deforestation, which is responsible for up to 15% of global greenhouse gas emissions. More than one in three (36%) of the companies surveyed (and 65% of those in North America) do not assign their boards with responsibility for addressing deforestation, and only 13% have followed time-bound comprehensive zero (net) deforestation commitments.
In the CDP’s annual A-List of the companies leading on environmental performance, only six companies, Brambles, L’Oréal, SCA, Tetra Pak, Unilever, and UPM-Kymmene, achieved top scores for removing commodity-driven deforestation from their value chains.
Of these only Unilever scores across all four forest-risk commodities, as well as on water and climate change. The Anglo-Dutch company, with 21%-30% of its revenue dependent on cattle products, aims to source all its agricultural materials from 100% sustainable origins by 2020.
“With the risk of ‘stranded assets’ looming, financial institutions are increasingly concerned with deforestation,” the CDP said. “But with nearly four out of five companies (77%) failing to disclose how they are affected, investors are unable to judge the risk to their portfolios.”
CDP’s report gives investors a four-stage roadmap to engage with the companies they own to improve disclosure and performance on deforestation risk in order to protect their portfolios.
This is one of a series of articles on green finance. See also: