The loss of biodiversity due to deforestation, is one of the greatest risks to society and the economy. The Dutch Central Bank has recently calculated the magnitude of the risks of biodiversity loss for the Dutch financial sector, which showed that more than €510 billion of investments are dependent on ecosystems. Increasing regulation is expected to affect both companies and investors, with the EU Taxonomy and UK legislation on clean supply chains as some of the significant recent developments in this area. Dennis van der Putten, director Sustainability & Corporate Strategy at ACTIAM, highlights that attention for these financial and material risks, [as well as recent governmental and regulatory discussions] have brought analysis and risk management of deforestation to the foreground of investors: “Traceability and transparency of companies’ supply chains are crucial to investors in order to identify and reduce deforestation risks in their portfolios.”
Lack of transparency
Nevertheless, in practice it proves difficult for companies to determine areas of deforestation within agricultural supply chains, due to a lack of transparency. Consequently, investors find it hard to detect risks of deforestation across their investments. ACTIAM’s initiative ‘Satellite-based engagements towards No-deforestation’ is launched to support ACTIAM’s ambition on land use: no more deforestation by 2030. Van der Putten: “In the first stage, we focus on a group of companies, split into two groups: a group that either does not perform traceability checks or does not disclose supplier lists [for soft commodities sourced]. We ask these companies to formulate measurable objectives, together with their suppliers, to counteract deforestation and to report on the steps they undertake to provide more transparency in the chain. The remaining companies are linked to the palm oil sector of Malaysia through their supply chain and are connected to cases of deforestation over the past year, as shown by our satellite information. The latter group is requested to act on it and mitigate the effects.” In the future this scope will be further expanded to the supply chains of other soft commodities and regions.
Radar and optical satellite imagery
An important aspect of the engagement program is to monitor the companies against the established objectives. In this area, ACTIAM has been working with geodata analytics firm Satelligence. Radar and optical satellite images enable ACTIAM to detect, validate and quantify changes in the vegetation cover of nature areas, which are then connected to companies through public data on supply chains. The images provide investors with an overview of progress made by these companies.
ACTIAM is inviting investors to participate in this engagement program, joining efforts in discussions with companies towards halting and mitigating deforestation. Timelines and targets will be defined by the investor group, together with knowledge partners. ACTIAM will coordinate the program, contacts and calls with the targeted companies, which will include supervision of their progress in the set objectives, including reporting to relevant stakeholders in a timely manner.