Pension providers accused of undermining net-zero commitments by bankrolling deforestation

The Make My Money Matter campaign has this week published new research analysing the deforestation-related policies and commitments of  77 pension funds and providers that participate in the UN-backed Race to Zero campaign and/or the Glasgow Financial Alliance on Net-Zero (GFANZ).

The conclusion is that just 19% of these funds have comprehensive plans to tackle deforestation, both at a top-line level and in regards to specific forest risk commodities such as soy, palm oil, leather, beef and timber.

Given that deforestation accounts for a tenth of annual global greenhouse gas emissions, Make My Money Matter is warning that these pension funds and providers are undermining their own net-zero commitments and potentially sending greenwashed messages to their customers. The campaign group is being supported in its calls for stronger deforestation polices from pensions by Global Canopy.

Global Canopy’s executive director Niki Mardas said: “Finance is key to driving change and pension funds – as the largest group of asset owners in the world – have real power to take a lead. Currently our data shows too many are ignoring the deforestation their investments cause.

“Inaction on deforestation is a risk to the planet, a risk to life, and a risk to business. We know that net-zero policies without action on deforestation will not work and regulations and global demand for action will intensify. The best time for pension funds to take deforestation seriously was yesterday, the second best time is now.”

The information from Make My Money Matter and Global Canopy has been published in the same week that Global Witness accused banking giants Santander and HSBC of continuing financial services to the beef company Minerva, which is accused of contributing to the destructions of forests, as well as land-grabbing, in Paraguay.

Changing policy

The UK has introduced a ‘comply or explain’ requirement aimed at tackling deforestation in international supply chains. But the requirement does not apply to the financial sector – only to companies involved in physically supplying materials and products. Moreover, it only covers deforestation that is deemed illegal in the country of origin. The EU introduced similar measures in late 2022.

Through an updated Green Finance Strategy published on Thursday (30 March), the UK Government made several updated commitments to stem financial flows to activities that harm nature and increase finance for nature conservation and restoration.

Included in the strategy is a commitment for the Government to convene a series of roundtables with financial institutions on deforestation this year, in line with its commitments to halt and reverse forest loss and degradation made at COP26 in 2021.

Global Witness’s forests campaign leader Veronica Oakeshott said: “A promise from the Government that they will convene discussions to address this problem is welcome, but it will take more than a talking shop to end the role of British banks in financing deforestation.”

“The Government has an obvious opportunity to prove it is serious in tackling deforestation by supporting an amendment to the Financial Services and Markets Bill that explicitly seeks to hold British financial institutions responsible for deforestation investments – until it does so it will be impossible to see announcements like this as anything other than hot air.”

The Financial Markets and Services Bill is currently in the Lords and peers will soon vote on an amendment brought by Lord Randall that seeks to end investments by UK based financiers in businesses clearly linked to forest degradation and destruction domestically and abroad.

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