Home Finance Family Offices and Foundations can take the lead on stopping deforestation
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Family Offices and Foundations can take the lead on stopping deforestation

by uma

 

 

Global Canopy’s new Deforestation, Conversion and Abuse Free Investment Mandate can help private wealth change the path of investments unwittingly causing nature destruction 

By Pei Chi Wong- Global Canopy’s Senior Research Associate on the Deforestation Free Finance Programme

In the global financial sector, family offices and foundations hold real power. This is thanks to the significant amount of invested assets they hold, and through their reach and influence with banks, asset managers and investment consultants. This gives family offices and foundations the potential – and responsibility – to lead the fight against deforestation through their own investments.

In my past life I worked for a bank in Singapore. The bank’s responsible financing policy prohibited the new financing of coal fired power plants, but at the time it allowed coal mining (which has since been excluded). When I questioned this, I was told there was a significant business footprint in a Southeast Asian nation whose national energy policy remained reliant on coal. Business-as-usual took priority over sustainability, potentially setting back climate goals.

There was a disconnect between the bank’s policy and their actions, and a similar issue is at play for many family offices and foundations, who have a history of philanthropic giving, particularly to environmental causes. Organisations like the Environmental Funders Network highlight scores of examples that inspire, including supporting the restoration of land, rivers, nature-friendly farming and frontline defenders and Indigenous action. But there is a real danger that investment portfolios, designed to ensure years of future philanthropic giving, could be undermining all this good work.

Deforestation can be a hidden problem. While the destruction of rainforests and savannahs can be clearly tracked on the ground and from satellite data, the finance behind it is opaque. Global Canopy’s annual Forest 500 ranking shows that collectively 150 financial institutions provide more than $6.1 trillion in private finance to the companies most exposed to deforestation. That’s investments driving destruction. Now, for the first time, our Deforestation, Conversion and Abuse-Free Investment Mandate provides a blueprint for family offices and foundations to ensure their holdings are not part of the problem.

The mandate can be shared with asset managers, setting clear demands and expectations of what a family office or foundation wants. It expects investments that are free from deforestation of natural forests. It expects investments that are free from the conversion of other natural ecosystems to other land uses. And it expects investments that are abuse-free – eliminating the key human rights abuses that are associated with deforestation, like respecting the right to self-determination of Indigenous peoples and local communities.

Created in consultation with a wide range of family offices and foundations, asset managers and other key stakeholders, the stepwise guide is aligned with best practice and demonstrates how to set criteria, timelines and tolerance levels. It highlights key tools, data sets and a detailed case study from the perspective of an asset manager. It is designed as a supplement to existing investment mandates, which are intended to continue to be the primary, formal and legally binding documents under which investments are managed.

Ending deforestation is central to the twin climate and nature crises. Tropical forests are home to 80% of life on earth, so destroying them is a biodiversity disaster. And they also play a crucial role in the climate crisis. Deforestation is currently responsible for 11% of our global greenhouse gas emissions. Both the Race to Zero and the Glasgow Financial Alliance for Net Zero have told their member financial institutions that tackling deforestation is essential r for their net zero policies to be effective.

The regulatory landscape is changing. Laws in the UK and the EU are forcing action by companies to ensure their products are deforestation free. The net is tightening for all those who drive – and finance – deforestation. Family offices and foundations would do well to consider their portfolios and get ahead of the curve. 

At the start of the COP15 global biodiversity summit in Montreal the UN Secretary General,  António Guterres, called for an end to our “war on nature.” That war is funded by our investments, but it doesn’t have to be. Where and how money is invested matters, and family offices and foundations have a huge role to play in changing that. 

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