Investors focus on deforestation disclosure
London, 18 June: Investors are to call on companies to examine and disclose their role in tropical deforestation, via the Forest Footprint Disclosure Project (FFDP).

The initiative – launched on Monday, with the backing of 12 institutional investors managing $1.3 trillion of assets – is seeking to emulate the success of the Carbon Disclosure Project (CDP), to which 475 investors managing $55 trillion have lent their name, in order to encourage companies to disclose investment-relevant information about climate change.

“Investors are walking into a financial bear-trap, as businesses are increasingly called to account about their growing impact on the world's forests,” said Andrew Mitchell, chair of the FFDP steering committee and executive director of the Global Canopy Programme, an alliance of scientific organisations.

The FFDP will send some 200 companies a questionnaire covering their use, and the use by their supply chains, of agricultural commodities from deforested land, and their policies and processes for managing their procurement. These commodities include soy, beef, palm oil, timber and biofuels.

The FFDP defines forest footprint as “the total amount of deforestation caused directly or indirectly by an organisation or product.”

“The questionnaire will,” the project says, “enable companies to identify how and where deforestation can be reduced and driven out of their operations.”

The results of the questionnaire will be made available to endorsing investors, and summarised in a report, due to be published next January.

“This will enable investors to pick winners and losers,” Mitchell said. The project warns that companies involved in deforestation are exposed to: regulatory risk, from new regulations threatening supplies of commodities; environmental risks, where the loss of natural forest services, such as rainfall or soil conservation, impacts commodity yields; and reputational risks.

However, one investor who has looked at the initiative questioned the extent that it would produce quantifiable and investment-relevant information.

Liz Crosbie, the technical advisor to FFDP, noted that, while “you can reduce the complexity of climate change to carbon dioxide equivalent, you can't with [deforestation]. The questionnaire is about process” rather than quantified indicators.

The CDP sits on the steering committee of the FFDP “in order to maintain coherency between the two projects,” the FFDP says.

Investors backing the initiative include Aviva, Credit Agricole Asset Management, F&C Investments, Climate Change Capital and Hermes Equity Ownership Services.