Swedish national pensions buffer fund AP2 and German sustainable finance think tank Climate & Company have launched a guide to help financial institutions exercise due diligence regarding the environmental problem of deforestation.

The organisations announced back in September 2023 that they were working on the tool, and said on Tuesday that the 45-page document is now available and contains clear guidelines and a practical step-by-step approach to help financial institutions “make deforestation-related data actionable and due diligence more efficient”.

While various open-source providers have already made extensive data on companies’ actions on deforestation available, the parties said, financial institutions still said it was challenging and resource-intensive for them to identify and mitigate deforestation risks in investment portfolios.

“The new practical guide responds to this challenge, as the financial sector is increasingly committed to addressing its role in deforestation, a major driver of biodiversity loss and climate change,” AP2 and Climate & Company said.

Asa Mossberg, head of sustainability and communication at AP2, said financial institutions such as the Gothenburg-based buffer fund faced significant financial risks from deforestation.

“As investors and owners in companies that have an impact on these risks, we have the responsibility and leverage to support a sustainable transition for climate and nature,” she said.

Back in 2021 at COP26 in Glasgow, 35 financial institutions with over $8trn (€7.7trn) under management committed to eliminating deforestation from portfolios and driving the sustainable transition of the agricultural sector, launching the Finance Sector Deforestation Action, the parties said.

But they said more than 22% of the total global credit received by companies linked to ecosystem risks came from EU financial institutions, which also held €60bn in equity in those sectors, accounting for about 9.4% of the global total.

The UN Biodiversity Conference COP16 is scheduled to take place in Cali, Colombia, from 21 October to 1 November this year.

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Rachel is IPE's Nordic correspondent. She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere. In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile

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