The Net Zero Asset Owner Alliance (NZAOA), a UN-convened investor coalition, today set out an action plan aimed at helping investors to tackle deforestation exposures across their portfolios.
The coalition, which collectively manages some $9.5trn highlighted the need for greater collaboration between investors, policy makers, companies and data providers to tackle nature loss.
Investor members of the group are encouraged to assess their portfolios for exposure to deforestation and phase out any exposures by 2030. This would involve active engagement with the companies in question, as well as asset managers and policy makers.
Deforestation is expected to become a key agenda item for COP30, which due to be held in Brazil in November. The country is home of the world’s largest tropical rainforest, which acts as one of the world’s major carbon sinks.
At the same time, deforestation remains the world’s second largest source of greenhouse gas emissions after fossil fuels, a trend which is accelerated by climate-related weather events such as wildfires.
Policy makers have made first attempts to tackle deforestation, The EU introduced a Deforestation Regulation (EUDR) two years ago, aimed at minimising deforestation exposure for products traded in the EU.
Meanwhile, disclosure standards such as ISSB and TNFD have played an important role in moving nature risks up the agenda for corporations and investors.
“Members of the Net-Zero Asset Owner Alliance are committed to reducing deforestation-linked risks by aligning their portfolios with net-zero targets. We aim to pursue action alongside other stakeholders to phase out deforestation and forest conversion from supply chains by 2030, protecting the planet’s ecosystems while boosting financial returns for our beneficiaries” said Pedro Guazo, CEO of the Office of Investment Management for the United Nations Joint Staff Pension Fund, a NZAOA member.
Unlike other Net Zero Alliances which have faced an exodus of members, the NZAOA continues to enjoy strong backing from its members and has so far only seen a few exits and several major new joiners.
However, its guidelines are recommendations and ultimately not a binding requirement for membership. And while some of the of the world’s largest institutional markets have introduced mandatory TCFD reporting for large institutional investors, so far no single country has embraced mandatory TNFD disclosures.
