With Amazon fires burning at an unprecedented rate, investors should analyse their holding companies for deforestation risk policies, says BMO Global Asset Management (BMO GAM).
According to Nina Roth, director of responsible investment at the firm, investors need to ensure companies have no-deforestation policies and procedures that are independently monitored.
“Forest health - and forest fires respectively - needs to be monitored and the connection of holding companies needs to be analysed. There are helpful tools like Global Forest Watch or Forest500 to support that effort,” she said.
Global Forest Watch is a data analyst firm aimed at keeping track of deforestation, and Forest500 identifies and ranks “the most influential companies and financial institutions” in forest risk commodity supply chains with a view to moving towards a deforestation-free economy.
“Forest fires can on one hand disrupt supply chains and endanger business continuity. They can also result in fines if strong environmental and social standards aren’t adhered to - be it by indirectly sourcing from, or directly producing in those areas, or reputational risk,” Roth said.
She says investors should ask holding companies to work towards transparent, traceable raw material production and sourcing chains, as well as to align themselves with sustainable business practices.
It is also important for firms to uphold strong human rights standards and protect indigenous peoples’ rights.
“Some of the fires but not all are man-made. Agricultural development and enhanced mining activity foster land clearings, which are quicker if fire is used. Enhanced lobbying by those corporations to expand their business over the years has lowered forest protection standards and at the same time minimised rights of indigenous peoples’ communities that are living in those forests,” said Roth.
A coalition of investors representing over $2.9 trillion (€2.6 trillion) is also piling pressure on global banks to respect the rights of indigenous peoples and halt infrastructure projects that affect their way of life.
Led by Boston Common Asset Management, the group is pushing for a change to the Equator Principles – a risk management framework for financial institutions to determine the environmental and social risk in project finance.
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