Companies with the greatest exposure to deforestation have been given $2.6 trillion of financing that is not covered by a deforestation policy, according to the Global Canopy's annual Forest 500 report.

In total, 350 companies and 150 financial institutions with the most influence over deforestation in commodity supply chains were assessed on their deforestation policies. The majority were found to be doing little or nothing to address the problem of deforestation in their supply chains or portfolios.

The environmental non-profit found nearly two thirds of financial institutions (93 out of the 150 it investigated) have no commodity-specific policies to address deforestation risks in their portfolios. These include the world's three biggest asset managers: BlackRock, Vanguard and State Street.

These 93 financial institutions without policies have provided $2.6 trillion in financing to the 350 companies with highest deforestation risk.

The report found that 22 of the 150 biggest banks, institutional investors and pension funds had made net zero climate pledges, but all continued to finance companies with no commitments to end deforestation, supporting them with a total $66.9 billion.

Just two financial institutions, Safra Group and Rabobank, have a policy to ensure at least one of the forest-risk commodities they are exposed to is free from 'conversion'.

Only 23 of the financial institutions with a deforestation policy reported on their progress towards implementing their policy.

Global Canopy said that to effectively implement their deforestation and human rights policies, "financial institutions need to actively monitor the companies for compliance".

Turning to corporates, 72% of the 350 companies do not have a deforestation commitment for all of the forest-risk commodities in their supply chains.

Deforestation accounts for 15% of global carbon emissions, and the biggest driver is demand for palm oil, soy, beef, leather, timber, and pulp and paper. At COP26, 141 leaders signed a declaration committing to "halt and reverse forest loss and land degradation by 2030".

Nigel Topping, the high-level champion for climate action at COP26, said: "Governments are now introducing a requirement for companies to carry out checks to ensure there is no illegal deforestation in their supply chains. In November 2021, the Environment Act made this law in the UK, and the government is consulting on the full scope of the measures. Similar due diligence legislation is in the pipeline in the European Union and the US."

Niki Mardas, executive director of Global Canopy, said: "Last year saw unprecedented political action as more than 140 governments recognised the urgent need to protect forests, yet most companies and financial institutions with the greatest ability to halt deforestation are doing little or nothing."

Global Canopy said it defines a strong deforestation policy as including conversion of natural ecosystems and associated human rights, specifically land rights, labour rights, and free prior and informed consent. None of the financial institutions with the greatest exposure to tropical deforestation had such a policy for any of the commodities to which they are exposed.

From: Environmental Finance | Global Canopy