Phase 4

Disclosing

Phase 4 focuses on transparency related to your policy. Publicly disclosing exposure, actions, and progress toward the implementation of your policy will ensure your organisation can be recognised for progress towards goals and commitments and will provide necessary assurances that due diligence requirements are being met.

 

Recommendations for timings to eliminate commodity-driven deforestation, conversion, and associated human rights abuses by 2025:

When following this Roadmap, it is expected that the first public reporting of progress on monitoring and engagement is published by 2023, or within 2.5 years of committing to the roadmap, alongside publishing the results of your in-depth deforestation risk assessment. To be in line with best practice, progress towards your policy would then be reported at least annually after that.

At the end of Phase 4, you will have:

  • published the first annual progress report of your monitoring and engagement activities
  • transparently disclosed the results of your in-depth assessment of deforestation risk.

This step focuses on transparency about the implementation of your policy. Making this information publicly available allows financial institutions to be held accountable by rights-holders and civil society organisations for their exposure to deforestation, while encouraging other financial institutions to act. It is also a clear signal of expectation to companies that they should be publicly disclosing their progress towards eliminating risks from deforestation, conversion, and human rights abuse.

Publishing the results of the in-depth assessment of your exposure to deforestation risk will enable external stakeholders to better engage with your organisation and to hold your clients/holdings to account for their deforestation risk.

Recommended action 1: Disclose results of in-depth risk assessment

Publishing the results of the in-depth assessment of your exposure to deforestation risk will enable external stakeholders to better engage with your organisation and to hold your clients/holdings to account for their deforestation risk.

This disclosure can include:

  • the number and names of clients/holdings defined as having a high deforestation risk (based on both their exposure to deforestation and conversion, associated human rights abuse risk, and the efforts taken to mitigate those risks, as identified in Phase 2)
  • the volumes of forest-risk agricultural commodities produced, processed, procured or financed by clients/holdings in/from high risk regions/countries
    • This can also be disaggregated by asset class, sector, geography
  • the amount of finance provided to clients/holdings which operate at all stages of the supply chain that produce, process, procure, or finance forest-risk commodities, and at least the high-risk commodities defined above (palm oil, soy, beef, leather, timber, pulp and paper)

By publishing this on your website, you demonstrate the progress you are making to achieve portfolios that are free from deforestation, conversion, and associated human rights abuses, and this can support other organisations to follow your progress. This disclosure can also include information on data quality, availability, and gaps.

Recommended action 2: Annually report on progress towards your policy

To be aligned with best practice, you should report on progress towards the policy at least annually for each commodity/industry covered by the policy.

This reporting could be completed as part of your existing reporting processes, for example existing TCFD or CDP disclosures. This reporting be done for each commodity/industry covered by your policy, and it is recommended that this reporting includes:

  • How many clients/holdings were screened and monitored for compliance with the policy in the past year
    • Including what percentage of the total number of clients/holdings this represents
  • Metrics of risk and performance across your entire portfolio, based on the most recent data from the annual screening/monitoring including:
    • How many clients/holdings were within each category of high, medium, and low risk
      • Broken down by segment, sector, and commodity
      • Including detail as to how these categories are defined and determined
    •  The number or proportion of clients/holdings in the portfolio which are compliant with your organisation’s requirements for clients/holdings:
      • Preferably, this should be reported in terms of both number of clients/holdings and proportion of the total portfolio value
      • Information should be disaggregated according to the specific elements of the requirements for clients/holdings to the extent useful for disclosing progress across the portfolio
    • The number or proportion of clients/holdings that are working towards compliance through time-bound plans
    • The number or proportion of clients/holdings and proportion of the total portfolio value which are compliant with the policy
    • The number and names of clients/holdings which have a deforestation policy/commitment in place, but have had stakeholder disputes or investigations from other forums which dispute the implementation of this policy through their supply chains

Having independent verification of the progress your financial institution has made towards your policy to have financing that is free from commodity-driven deforestation, conversion, and associated human rights abuses can send a clear message to external stakeholders, as well as your clients/holdings, that you are committed to addressing this issue effectively.

This can be done as part of pre-existing auditing and verification processes you may already have in place for annual reporting.

This can include details of grievances raised against clients/holdings in your portfolios or raised against your organisation, and can enable knowledge-sharing between your organisation and others on which clients/holdings may not be operating in compliance with deforestation, conversion, and human rights abuse free standards.

This can also be done in your pre-existing annual reports or through disclosure frameworks.

As deforestation accounts for more than 10% of global emissions, it is a vital component of reporting on climate change and especially in achieving net-zero commitments.

Including clients/holdings which have been identified as having an exposure to deforestation, conversion, and associated human rights abuse risks in reporting frameworks (such as GRI or TCFD reports) would enable greater understanding of which clients/holdings are most exposed to these risks. This will better enable other financial institutions to identify their exposure to these risks if they are invested in the same clients/holdings.

Recommended action 3: Annually report on engagement activities

Annually reporting on your engagement activities is a critical way of showing that your financial institution is effectively implementing its policy and meeting its stewardship obligations. It also opens up opportunities for you to collaborate with other financial institutions who are engaging the same clients/holdings and places increased pressure on your clients/holdings to make progress towards being deforestation-free.

This can include:

  • The names and number or proportion of clients/holdings who were engaged with on the topic of deforestation within the last year to bring them into compliance with the policy or their time-bound plan
  • The agreed implementation plan set in Phase 3 Step A and/or outcomes of that engagement
  • The number, and summary, of contributions to, or participation in initiatives to address deforestation risk in partnership with clients/holdings
  • The number and brief content of any interactions or engagements with external stakeholders, e.g. NGOs, in high-risk jurisdictions relevant to your financing activities
  • The number, and the names of any clients/holdings removed from the portfolio and the reason for their removal

The Roadmap

Phase 1: Understanding and mapping risk Phase 1

Phase 2: Setting an effective policy and managing risk Phase 2

Phase 3: Monitoring and engagement Phase 3

Phase 4: Disclosing Phase 4

Phase 5: Eliminating deforestation Phase 5

Going above and beyond: Nature and people positive Going above and beyond