Giving Deforestation the Chop

Today marks International Day of Forests, a day to celebrate our forests but also to shine a light on the urgency with which the private sector and investors must support the end of deforestation in supply chains. GAM Investments’ Stephanie Maier, Global Head of Sustainable and Impact Investment, explains why action is so imperative and what GAM is doing to help tackle deforestation.

21 March 2022

The lungs of the earth

Trees suck carbon dioxide out of the atmosphere, and provide a home for around 80% of the planet’s land animals and plants. That is why at the COP26 climate summit in Glasgow last year more than 100 world leaders pledged to halt and reverse deforestation by 2030 – backed by 30 of the world’s largest financial institutions who promised to end investments in activities linked to deforestation.

In particular, the expansion of ‘forest risk’ commodity crops like palm oil, soy, beef and pulp and paper is by far the largest cause of deforestation, hence it makes sense to address these crops in investors’ portfolios first.

And it is not only the natural world facing repercussions from cutting down trees. There are considerable consequences for companies who contribute to the demise of Earth’s rainforests. Deforestation-related legislation is either in force or potentially incoming across the UK, EU and US, and companies face significant legal and reputational risks if they fail to limit deforestation across supply chains.

At GAM, we are signatories to CDP and support better disclosure through its forest work and actively use CDP’s forest data in our analysis and engagement. Its recent analysis of 550+ high-impact companies across seven commodities showed us the business world is acting too slowly on deforestation. Only 1% of companies are taking ‘best practice’ action, according to CDP.

Similarly Forest 500, which provides disclosure data on 300 companies and 150 financial institutions linked to the worst deforestation, found earlier this year that a third of companies and almost two thirds of financial players still have no deforestation policies or commitments.

Connecting promise with progress

That’s why we at GAM are striving to take action on deforestation. To commemorate International Day of Forests we have today signed up to the Deforestation Pledge.

This unites with more than 30 other financial institutions managing over USD 8 trillion in assets and commits GAM to using best efforts to eliminate deforestation among the biggest commodity culprits - palm oil, soy, beef, pulp and paper - from our investment portfolios by 2025.

This means that by the end of 2022 we aim to have fully assessed our exposure to forest risk commodities and to have begun deep engagement with any high risk holdings. We will also aim to support businesses offering solutions to deforestation risks. We also commit to publicly report on our deforestation risk and mitigation activities by 2023.

As humanity’s effects on the climate become inescapable and we shift to an increasingly transparent corporate world, deforestation is continuing to rise up the ESG agenda. However, with the possibility that the crucial biodiversity COP15 is delayed for the fourth time and companies still lagging far behind on targets, there is a long way to go. We believe investors cannot take a backseat and must positively influence companies to drive forward the cessation and reversal of deforestation.

Important legal information
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not a reliable indicator of future results or current or future trends. The mentioned financial instruments and case studies are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented and are not necessarily held by any portfolio or represent any recommendations by the portfolio managers. There is no guarantee that forecasts will be realised.

Stephanie Maier

Global Head of Sustainable and Impact Investment
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