Frequently asked questions

We know that two thirds of tropical deforestation is driven by the global trade in key commodities. But the capital that makes this global trade flow comes from financial institutions. Through loans and shareholdings, banks, pension funds, and asset managers finance companies that produce or trade in forest risk commodities. That means the finance sector can play a pivotal role in stopping deforestation.

Deforestation is damaging some of the world’s most important ecosystems, and is responsible for 8% anthropogenic greenhouse gas emissions. Therefore eliminating deforestation and conversion from financial portfolios is an essential component of achieving any biodiversity targets and climate goals such as net-zero.

Deforestation also poses a systemic risk to the finance sector. Transition, regulatory and market access risks can result in lower profitability, reduced cash flow, increased liabilities and stranded assets for companies, which in turn create risks for the financial institutions that finance them. Being linked to deforestation can also pose a reputational risk for companies and financial institutions alike.

The Roadmap provides practical guidance for financial institutions on how to address deforestation risk in their portfolios. Global Canopy’s assessments of the 150 financial institutions that provide the most finance to the companies most exposed to deforestation risks found that few financial institutions are currently reporting on clear actions to address deforestation risks.

Starting with an initial understanding of risk in portfolios, through to setting and implementing effective policies, the guidance has been informed by consultation with financial institutions, and other key stakeholders. It guides users through five phases, broken down into steps and smaller recommended actions, to achieve deforestation-free portfolios.

The Roadmap is designed to be integrated within existing financing processes; it makes recommendations on key metrics and timings but can be adapted to meet each institution’s circumstances.

The Finance Sector Roadmap for Eliminating Commodity-Driven Deforestation is intended as a guide for all types of financial institutions, including asset owners, pension funds, asset managers, insurers and banks at any stage of the process.

It covers all asset classes, including equity, fixed income, project finance, and real assets.

The Finance Sector Roadmap is a tool that can be used by financial institutions that have recently set commitments to achieve their ambitions.

It is designed to help financial institutions to deliver on new and existing commitments – and to support those who are yet to make a commitment to achieve deforestation-free financing.

The Roadmap is designed to guide financial institutions through the process, but is not a commitment that institutions can sign on to.

This website is hosted by Global Canopy. We are working with a broad range of partners to develop guidance for the finance sector on how to eliminate deforestation in their clients/holdings operations and supply chains.

The Roadmap was created by the Finance & Deforestation Advisory Group, a collaborative effort of leading organisations working at the intersection of finance and conservation. The advisory group includes: Conservation International, Global Canopy, Global Climate Action High-Level Champions team, Nature4Climate Coalition, and WEF Tropical Forest Alliance.

Make My Money Matter and SYSTEMIQ are also working alongside Global Canopy to develop practical guidance for pension funds, and also a guide for beneficiaries to understand how their pension may be exposed to deforestation.

The guidance for financial institutions builds on the best practice for companies operating in forest-risk commodity supply chains, as defined by the Accountability Framework. The Finance Sector Roadmap has been endorsed by the Accountability Framework initiative as aligning with the Framework’s expectations for companies exposed to deforestation.

Deforestation and forest-risk commodity supply chains are often linked to human rights violations and abuses, in particular the land rights of Indigenous peoples and local communities who are frequently harmed or displaced or even relocated against their wishes, and the threats and attacks to human rights defenders. Further, forest-risk commodity supply chains are also linked to labour rights abuse – with agribusiness being one of the sectors with the highest human-rights risk.

Protecting the rights of Indigenous peoples, and their lands, are vital in halting deforestation. Thirty six percent of intact forest landscapes are within Indigenous land, and the rate of loss of intact forest landscapes within Indigenous land is lower than outside them.

The Roadmap provides guidance for financial institutions to achieve financing that is free from deforestation, conversion, and associated human rights risks – specifically:

  • The Free, Prior, and Informed Consent (FPIC) of local and indigenous communities.
  • The customary and legal land rights of local and indigenous communities.
  • Labour rights of those working within relevant supply chains, industries, and projects, specifically the right to have freedom of association, and to be free from forced labour, child labour, and discrimination in line with the ILO.
  • Zero Tolerance for Threats and Attacks against Forest, Land and Human Rights Defenders.

The Finance Sector Roadmap prioritises engagement, with withdrawal of financing as a last resort for those who are really making no progress to reduce/mitigate their risks. Through engagement, financial institutions can use their leverage with clients or holdings to drive change.

It is also not feasible for all financial institutions to withdraw financing by 2025, even with strong progress, because some existing arrangements extend beyond 2025. But these financial institutions need to look to adjust their financing at the earliest possible date.

The Roadmap recommends a number of key datasets and tools which financial institutions may find useful at specific Phases and Steps in the Roadmap. These datasets and tools can be found here. As new data and tools become available, the recommended tools and datasets will be updated within each piece of guidance.

Note that although these datasets and tools are helpful in understanding deforestation, conversion, and associated human rights risks, none provide all of the relevant data and information on their own. They are best used in combination with each other.