Ceres and the PRI join forces to tackle tropical deforestation
New Global Investor Collaboration to Target Global Beef, Soy, Timber and Palm Oil Companies
MARRAKECH/LONDON/BOSTON (November 11, 2016)
Ceres and the PRI announced today a new partnership to tackle widespread, global deforestation driven by escalating production of beef, soy and timber, focusing initially on South America. Through a new, joint investor group, the two organisations will support global institutional investors pressing food and timber companies to eliminate deforestation and other related concerns, including forced labor and land rights disputes from their supply chains.
The announcement was made at an investor event at the United Nations climate negotiations in Morocco, formally called the Conference of the Parties, or COP22. Deforestation is a key topic at COP22, with an estimated 12 million hectares of forest being destroyed annually from human activity, or the equivalent to 36 U.S. football fields every minute. Cutting down forests releases carbon into the atmosphere, and an estimated 10 to 15 percent of global carbon emissions are produced annually from global deforestation, largely for agricultural and timber production.
“Beyond the enormous environmental impacts of biodiversity loss, climate change and eroded landscapes that are less climate-resilient, deforestation poses real financial risks to investors with agribusinesses in their portfolios,” said Dawn M. Martin, who spoke at the event and is the chief operating officer of Ceres, which coordinates the $15 trillion Investor Network on Climate Risk. “Working collaboratively will enable Ceres and PRI to achieve far greater impact at stemming deforestation than each of our organizations could achieve alone.”
Beef is the single largest driver of deforestation globally. Converting forests to pasture for beef cattle, primarily in Latin America, destroys 2.7 million hectares of tropical forests each year (an area the size of Massachusetts). While the Soybean Moratorium has dramatically reduced soy-driven deforestation in the Brazilian Amazon, cultivation of the legume remains a leading cause of deforestation in other parts of the word, as rising global demand for meat and dairy have led to a doubling in soy production over the past 20 years. Land clearing for commodities production is often associated with enforced labor and land rights violations.
“Robeco shares the concerns of many investors worldwide regarding the social and environmental risks of palm oil production and engages collectively within the PRI sustainable palm oil working group to mitigate these risks,” said Peter van der Werf, engagement specialist at Robeco, a Netherlands-based firm with EUR 276 billion of assets under management. “With this new Ceres-PRI collaboration we can expand the scope of the working group to other soft commodities at risk such as soy and beef. PRI and Ceres are important partners for research and collaboration that enhance the engagement efforts on behalf of Robeco’s clients.”
Agribusinesses that source from companies engaged in deforestation and related unlawful activities such as forced labor face potential risks such as impacts on brand equity from consumer campaigns, loss of contracts or market access, disruptions to operations from social disputes with local communities and workers over labor and land rights, legal sanctions, seizure of goods and reduced financing. These business risks can in turn impact investor portfolios.
“Investors have increasingly been making their voices heard regarding the material risks around climate change,” said Fiona Reynolds, managing director, Principles for Responsible Investment (PRI). “We saw this very strongly at COP21 last year. Deforestation and climate change are inextricably linked so investors need to keep using their financial muscle and engage with policymakers and other stakeholders to ensure these issues stay on top of the climate agenda.”
Among the activities planned by the new global investor group over the next two years:
- Map and develop a set of indicators for evaluating beef, soy and timber companies’ sourcing policies and their impact on deforestation (e.g., traceability, sustainability goals and policies, transparency, adherence to certification schemes)
- Benchmark 50 to 60 companies in the beef, soy, and timber industries against the indicators.
- Based on benchmarking results, engage with low-scoring companies (including through shareholder resolutions) to press them to adopt sustainable sourcing policies.
- Engage in public policy advocacy at the national and international levels.
“Climate risk is one of the greatest threats to our investments across the board, which is why we continue to use our strength as a major investor to call on companies in our portfolio to address climate change now,” said New York State Comptroller Thomas P. DiNapoli, trustee of the New York State Common Retirement Fund, with $184.5 billion in AUM. “Palm oil harvesting results in large-scale deforestation and is a significant contributor to climate risk. We want the many food companies that use palm oil to ensure that what they use is sustainably harvested and free from deforestation.”
In response to DiNapoli’s request to its portfolio companies, Dunkin’ Donuts, ConAgra, Archer Daniels Midland and other companies have agreed to adopt policies ensuring sustainably-sourced palm oil. When Domino’s Pizza declined to adopt a deforestation policy, DiNapoli filed a shareholder proposal which received support from 26.2% of shareholders when it went to a vote.
A new report by World Wildlife Fund (WWF), Living Planet Report 2016, recently outlined the enormous risks to biodiversity from deforestation and other unsustainable practices in our global food supply which have profound implications for the natural systems that sustain life and economic activity on the planet.
The support for this partnership is provided by Ceres as part of a conservation and financial markets collaboration among Ceres, World Business Council for Sustainable Development, World Wildlife Fund and the Gordon and Betty Moore Foundation and is funded by the Gordon and Betty Moore Foundation.
Ceres is a non-profit organization that is mobilizing many of the world’s largest companies and investors to take stronger action on climate change, water scarcity and other global sustainability challenges. Ceres directs the Investor Network on Climate Risk, a group of 120 institutional investors managing about $15 trillion assets focused on the business risks and opportunities of climate change and water scarcity. Ceres also engages with 100-plus companies, many of them Fortune 500 businesses, committed to sustainable business practices and the urgency for strong climate and clean energy policies. For more information, visit www.ceres.org or follow on Twitter @CeresNews.
The United Nations-supported Principles for Responsible Investment (PRI) Initiative is an international network of investors working together to put the six Principles for Responsible Investment into practice. Its goal is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. In implementing the Principles, signatories contribute to the development of a more sustainable global financial system.