(Bloomberg) -- A group of more than 30 investment managers has teamed up to put pressure on the banks they hold, in an effort to get them to purge their books of deforestation risk.
Institutions including Aviva Plc, Robeco Institutional Asset Management and Fidelity International laid out their expectations in a report on Tuesday. Banks in their investment portfolios are being asked to halt financing that supports commodity-driven deforestation and human-rights abuses.
The announcement, published by the Institutional Investors Group on Climate Change and the Finance Sector Deforestation Action, represents investment firms that manage a combined $8 trillion in assets.
Deforestation accounts for about 11% of global carbon emissions and is a key driver of widespread species loss. Despite warnings from scientists of the catastrophic impact on the climate of relentless deforestation, the proliferation of agriculture, infrastructure and mining means vast areas of forest are still being razed to the ground.
Banks that provide loans or underwrite bonds to businesses involved in deforestation face a range of risks, including physical, transition and systemic risk, according to the IIGCC. Asset managers therefore have a fiduciary duty to ensure banks consider and manage these risks, it said.
The paper outlines five key engagement expectations for banks. These include risk assessment, public target-setting, clear expectations for clients, due diligence and transparent reporting.
“Deforestation is a critical issue at the center of the nature and climate nexus,” Stephanie Pfeifer, chief executive of IIGCC, said in a statement. “Banks have an outsized role to play in the global economy, and have the potential to effect real change.”
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