Disclosing

This disclosure can include:

• the number and names of clients/holdings defined as having a high 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, and 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 as a minimum, the high-risk commodities (defined above;palm oil, soy, beef, leather, timber, pulp and paper, cocoa, coffee and rubber)

In addition to the above, you may also disclose specific metrics for cattle supply chains. This disclosure can include:

• The number and names of clients/holdings involved in the beef and leather supply chains that are identified as having a high risk (based on their exposure to deforestation and land conversion, associated human rights abuse risks, and the measures they have taken to mitigate these risks, as determined in Phase 2).
• The volumes of beef and leather produced, processed or financed by clients/holdings operating in or sourcing from high-risk regions or countries.
  • This information can also be disaggregated by asset class, supply chain position (upstream and downstream) and Brazilian biomes.
• The amount of finance provided to clients/holdings engaged by the financial institution in any stage of the beef and leather supply chains, including production, processing, procurement, or financing.

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 take action. This disclosure can also include information on data quality, availability, and gaps.

• Ceres: Investor Guide to Deforestation and Climate Change provides some detail on this
• The International Sustainability Standards Board’s IFRS S2 Climate-related Disclosures incorporates the recommendations of the Taskforce on Climate-related Financial Disclosures and includes accompanying industry guidance on disclosures related to deforestation
• Taskforce on Nature-related Financial Disclosures
• The World Business Council for Sustainable Development has published its Deforestation Disclosure Guide for Financial Institutions, which incorporates disclosure recommendations from this Roadmap and other disclosure frameworks, including the CDP, IFRS S2, TNFD, and relevant EU regulations.

This reporting could be completed as part of your existing reporting processes, for example existing TCFD/IFRS S2, TNFD, or CDP disclosures. This reporting can be done for each commodity/industry covered by your policy, and can include:

• 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 were compliant with your organisation’s requirements:
    • 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 were determined 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
  • The number and names of clients/holdings which have missed their deforestation targets and have not updated them or have removed deforestation targets entirely.

This reporting may be incorporated into existing disclosure processes, such as TCFD/IFRS S2, TNFD, CDP Forests, or other voluntary or mandatory ESG reporting frameworks. In Brazil, you can also include these details in the Social, Environmental and Climate Responsibility (PRSAC) Report. This reporting for cattle supply chain financing recommends to include:

• How many clients/holdings in the cattle supply chain 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 in comparison to the cattle portfolio
• Metrics of risk and performance based on the most recent data from the annual screening/monitoring for cattle supply chains being financed:
  • How many clients/holdings were within each category of high, medium, and low risk
    • Broken down by supply chain segment (upstream and downstream) and for type of commodity (beef and/or leather)
    • Broken down by biome, especially the Amazon and Cerrado
    • Including detail as to how these categories were defined and determined
• The number or proportion of clients/holdings in the cattle supply chain within your portfolio which were compliant with your organisation’s requirements:
  • This should be reported in terms of both number of clients/holdings and proportion of the total portfolio value
  • Preferably, information should be disaggregated according to the specific elements of the requirements for clients/holdings of the cattle supply chain:
    • Compliance with cut-off dates and target dates
    • Monitoring systems to identify deforestation, conversion and human rights abuses in place and coverage of direct and indirect suppliers
    • Deforestation and conversion-free policies and human rights policies
    • Traceability commitments, protocols and systems and coverage of these systems in proportion to their operations
    • Availability and accessibility of grievance mechanisms
• The number or proportion of clients/holdings and proportion of the total cattle portfolio value which are compliant with the policy
• The number or proportion of non-compliant clients/holdings identified 
  • Number and format of engagement with non-compliant clients
  • Including the proportion that are working towards compliance through time-bound plans
• The number of clients or the proportion of the portfolio which have missed their deforestation targets and have not updated them or have removed deforestation targets entirely.

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 that you are committed to addressing this issue effectively to external stakeholders, as well as your clients/holdings.

Third party verification can be done as part of pre-existing auditing and verification processes you 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 about which clients/holdings may not be operating in compliance with deforestation, conversion, and human rights abuse free standards and expectations.

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

Financial institutions can also publish information about any remediation processes they or their clients/holdings are participating in and the status of these.

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.

Land use change emissions should be fully integrated within any climate targets and wider climate transition plans. The Accountability Framework, Science-Based Targets Initiative, and GHG Protocol have published guidance on taking integrated action to manage deforestation, ecosystem conversion, and greenhouse gas emissions from land use change.

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/TNFD reports) offers the chance to support the establishment of common key performance indicators (KPIs) for risk assessment and disclosure. It would also 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.

In Brazil, financial institutions can participate in collective initiatives (such as the Brazilian Roundtable of Sustainable Livestock, Indirect Suppliers Working Group or a Sustainability Committee within regulatory agencies as ANBIMA and FEBRABAN) aimed at promoting best practices, transparency and developing standards, whether mandatory or self-regulatory. This context presents an opportunity for these institutions to advocate for the inclusion of clients/holdings identified as exposed to deforestation, conversion, and risks associated with human rights violations in existing reporting frameworks such as GRI, PRSAC reports, TCFD/IFRS S2 or TNFD disclosures. 

It also offers the chance to support the establishment of common key performance indicators (KPIs) for risk assessment and disclosure. Such practices can enhance transparency and enable benchmarking to have a clearer understanding of which sectors, regions, or clients/holdings are most exposed to these risks for all the financial institutions. Moreover, they foster benchmarking across the financial sector, allowing institutions to evaluate and compare their own exposure when investing in the same sectors, companies or projects.

• The Sustainable Finance Initiative’s report ‘A guideline on the use of deforestation risk mitigation solution for financial institutions’ provides additional potential metrics to report
• IFRS S2 Climate-related Disclosures, incorporating the recommendations of the TCFD, provides a framework for reporting on progress towards climate commitments. The IFRS Sustainability Knowledge Hub provides additional resources for report preparers.
  
• Operational Guidance on Reporting, Disclosure, and Claims from Accountability Framework, provides guidance on good practice for company reporting against DCF commitments, including regular public reporting, information disclosure, and claims about performance.
• The World Business Council for Sustainable Development has published its Deforestation Disclosure Guide for Financial Institutions, which recommends and provides guidance on integrating deforestation into climate-and nature-related financial disclosures and working towards holistic disclosures.

• How to adhere to TNFD recommendations in Portuguese, a framework for reporting on progress towards nature and biodiversity commitments.
• Nature Disclosure in a Mega-Diverse Country: A Case Study of the Finance and Development Sector by BCSD Brazil (CEBDS), provides lessons learned from the CEBDS’s collective TNFD’s exercise followed by impact statements from companies that participated in the pilot.
• The Brazil National Policy on Social, Environmental, and Climate Responsibility (PRSAC) outlines the actions aimed at financial organizations that must assess and manage their exposure to social, environmental, and climate-related risks to ensure sustainable and responsible operations.

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, conversion and human rights abuse risk in partnership with clients/holdings
• The number and brief detail 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(s) and the reason for their removal.

This can include:

• The names and number of these initiatives 
• The nature of your participation in collaborative initiatives 
• The name of any relevant jurisdictional, state/federal government or NGO partners 
• Any outcomes that these initiatives have achieved, with numerical reporting where relevant 
• Any legislation that you have engaged in, in relation to deforestation, conversion and associated human rights abuses and proposed changes.