Due diligence towards Deforestation-Free Finance
Our ‘how-to’ guide sets out a recommended approach for financial institutions to conduct due diligence to identify, prevent and mitigate the risks and impacts of deforestation, conversion and associated human rights abuses.
Deforestation poses a systemic risk to ecosystems, people and the global economy – and the finance sector is key to the production and trade of commodities that drive nature loss.
This guidance has been developed in partnership between Global Canopy, Neural Alpha and the Stockholm Environment Institute (SEI) and helps financial institutions:
- be aware of physical and transition risks posed by deforestation and their essential role in preventing and mitigating these risks
- be aware of incoming deforestation regulations and their potential implications for financial institutions
- identify and assess risk of exposure to deforestation, conversion and associated human rights abuses in their portfolios
- prevent and mitigate risks; monitor and remediate adverse impacts
- track, report and disclose for accountability.
The guidance is available in English, Brazilian Portuguese, Bahasa Indonesia and Mandarin Chinese.
Report: Making Deforestation Due Diligence Work in Practice
Read the report by Climate & Co, AP2 and Global Canopy on how a Swedish Pension fund Andra AP-fonden (AP2) carried out due diligence on its deforestation-related risks and impacts using Deforestation Free Finance guidance developed by Global Canopy, Neural Alpha and the Stockholm Environment Institute, Climate & Company (C&C).
Read the report here
Why institutions need to use this guidance now
The finance sector can be exposed to deforestation risk through their business relationships with clients or holdings that are directly involved in the production, processing, or procurement of forest-risk commodities, or finance these activities and commodities.
Some financial institutions have made commitments to halt deforestation, but we still need to see a significant shift from the sector. Incoming deforestation regulations will also bring greater regulatory risks.
In December 2022, the European Union agreed to implement regulations on deforestation-free products (EUDR).
This guidance shows financial institutions how to implement due diligence processes to identify, prevent and mitigate the risks of deforestation, conversion and associated human rights abuse in financial portfolios.
