Last Updated on October 20, 2020 by admin
Lauren Compere is managing director and director of shareholder engagement at Boston Widespread Asset Administration, a administration agency specializing in accountable investing with $2.eight billion in property beneath administration.
We talked with Lauren about deforestation and local weather change and the way her agency is partaking banks and different corporations on these systemic monetary dangers. It comes as deforestation — and related greenhouse fuel emissions and local weather impacts — are skyrocketing in lots of areas of the world.
What follows is a evenly edited Q&A.
Julie Nash: Boston Widespread Asset Administration has been partaking with corporations on deforestation dangers for about 15 years. Are you able to focus on your technique over time?
Lauren Compere: As a sustainable funding agency, we don’t put money into corporations with egregious environmental practices. We search corporations that wish to combine sustainable practices and reduce their environmental impacts into their core enterprise mannequin.
Our first foray nearly 15 years in the past into deforestation was centered on palm oil manufacturing and engagements with the banking sector, starting with a dialogue with the European funding banking agency HSBC on the promotion of the Roundtable on Sustainable Palm Oil (RSPO) certification with palm oil producers and their downstream shoppers.
Our engagements have expanded to incorporate different corporations like Japanese client staples and private care product producers Koa and Shiseido, which use palm oil in addition to cardboard of their packaging.
Since then, we even have engaged with meals and beverage corporations, totally on palm oil, but in addition on different tender commodities similar to cattle, the place we’re seeing important deforestation and related greenhouse fuel emissions. Along with our particular person engagements, we additionally take part in collaborative initiatives, together with the Cerrado Manifesto, which focuses on Brazil, and the Investor Initiative for Sustainable Forests, a joint Ceres/PRI initiative that’s increasing investor efforts to deal with deforestation in soy, timber and cattle provide chains.
In these methods, we glance to interact throughout the worth chain, but in addition throughout sectors and markets. Via the years, our engagements have expanded to incorporate different corporations similar to Japanese client staples and private care product producers Koa and Shiseido, which use palm oil in addition to cardboard of their packaging.
Nash: What’s driving your concentrate on deforestation?
Compere: Deforestation has an infinite influence on the local weather, however if you happen to map out the dangers from deforestation and environmental degradation in opposition to human rights dangers, you possibly can see that there’s nearly a direct correlation. These environmental points are intently linked to among the worst human rights abuses. That is one thing extra traders are taking a look at.
Nash: Ceres’ new useful resource, the Investor Information to Deforestation and Local weather Change, is targeted on traders who will not be but partaking on deforestation. As an investor with an extended historical past of labor on this house, what actions do you search for from corporations concerning their response to deforestation?
Compere: We have a look at how corporations are assessing their deforestation dangers throughout areas and worth chains. Whereas many corporations are centered on the 4 key commodities — palm oil, timber merchandise, cattle and soy — we’re asking them to concentrate on all agricultural commodities they supply that could be produced with deforestation.
We additionally have a look at how corporations are managing these dangers of their provide chains and whether or not they’re adhering to their business’s finest practices, similar to requirements set by means of certification packages just like the RSPO or the Forest Stewardship Council (FSC). Past certification, we search for commitments to realize net-zero deforestation, with practices that assist the corporate obtain No Peat, no Deforestation, no Exploitation (NDPE).
Are corporations taking a look at methods to not simply cease deforestation, but in addition to put money into carbon sinks by way of regenerative agriculture and reforestation efforts?
There has additionally been a current shift the place extra traders are wanting past simply danger mitigation to how corporations are capitalizing on alternatives on this house. For instance, are corporations taking a look at methods to not simply cease deforestation, but in addition to put money into carbon sinks by way of regenerative agriculture and reforestation efforts?
Additionally it is necessary to grasp that deforestation is normally taking place on the finish of a provide chain, so we’ve got to have a look at the leverage factors. What sort of provider contracts does an organization have? Are they immediately sourcing palm oil? Most certainly not, so how do they have interaction intermediaries of their provide chain to lift expectations and finest practices? In the end, it’s about full provide chain accountability and traceability. If an organization is demanding palm oil provider be RSPO, how is that provider pushing that message and that expectation down the availability chain? And what steps are they taking if there’s non-conformance with the RSPO?
In abstract, we search for firm participation in certification schemes with provide chain audits, and their becoming a member of with different business gamers to stage set or standardize the expectation concerning deforestation relying on the commodity.
Nash: Are you able to spotlight particular examples of progress you have got seen from corporations?
Compere: We’ve got a long-term systematic engagement with Financial institution Rakyat in Indonesia on palm oil producers and the financing of palm oil manufacturing. We’ve got seen a step-up within the financial institution’s willingness to interact its palm oil shoppers to transcend the expectations of the Indonesian Sustainable Palm Oil (ISPO) necessary regulatory requirement, and transfer in the direction of increased expectations beneath RSPO certification. They haven’t required RSPO certification, however seeing them ramp up their consumer engagement on it has been promising.
The soy deforestation problem has been a troublesome one to crack. Via our participation within the Ceres/PRI initiative, we discovered that Mondelez Worldwide, the multinational meals and beverage firm, had an motion plan for a variety of main commodities with deforestation danger however when it comes to their prioritization it was palm oil, cocoa after which soy. It is because the corporate’s publicity to soy is primarily oblique by means of the soy in feed utilized by its dairy suppliers. Because of the giant quantity of dairy they supply, Mondelez has the potential to affect this oblique provide chain, so we requested the corporate to look past its direct soy sourcing to their oblique publicity by means of its dairy suppliers. I’ve been actually happy to see the corporate considering of the way to have a look at its dairy sourcing on this regard. We’ve got seen comparable progress with another corporations as properly.
Nash: In offering suggestions on the Ceres investor information, you talked about that traders ought to be partaking not simply with corporations but in addition analysis suppliers. Are you able to elaborate on this, notably in regard to Scope three emissions?
Compere: For starters, we ask corporations with provide chain publicity to deforestation to answer the CDP Forest Survey. That has been a core ask for a few years. Though not a analysis supplier, CDP helps standardize disclosures and is a good useful resource for traders to seek out out extra about corporations’ deforestation danger.
By way of analysis suppliers, more and more we’re wanting not solely at company-specific deforestation dangers, however how we are able to map out deforestation dangers throughout the complete funding portfolio. We’ve got but to determine a manner to do that that we’re glad with. It could be fascinating to have the ability to assess a portfolio’s alignment with net-zero deforestation and see how a portfolio is tilted on this regard.
For starters, we ask corporations with provide chain publicity to deforestation to answer the CDP Forest Survey.
One other problem is Scope three emissions. It’s tough to judge an agricultural firm’s total local weather danger with out understanding what its Scope three emissions are. Whereas we’ve got extra information now, lots of it’s nonetheless estimations. A better stage of concentrate on disclosure of GHG emissions linked to deforestation could be very useful.
There has additionally been a concerted effort by U.S. and European traders to maneuver past simply deforestation to different interconnected points such because the lack of biodiversity. Elevating evaluation ranges and information constructing to an earth-system stage the place we might assess systemic danger and the way completely different points mitigate or exacerbate different issues is what we want to see extra of. Analysis suppliers providing extra related biodiversity information would definitely assist with this.
Nash: The Investor Information references your 2019 report, Banking on a Low-Carbon Future: Finance in a Time of Local weather Disaster. Are you able to communicate to the findings of the report and the significance of traders partaking banks on deforestation dangers?
Compere: Banks are a vital leverage level within the commodity provide system and it’s important that extra traders have interaction banks on deforestation. Boston Widespread has printed influence reviews on how banks are managing local weather dangers and alternatives for the previous 5 years. Within the two most up-to-date iterations, we’ve got moved past wanting simply at financial institution insurance policies to implementation and motion. This was necessary for us to deal with as a result of there’s a direct hyperlink between financing and perpetuation of practices like deforestation.
In our research, we benchmarked 58 banks and located that one of many greatest gaps was in addressing deforestation dangers as part of total local weather danger, with solely a minority (16 %) of banks requiring tender commodity shoppers (cattle, soy, palm oil, and timber) to undertake no-deforestation insurance policies. That’s actually dismal.
We benchmarked 58 banks and located that solely a minority (16 %) of banks requiring tender commodity shoppers (cattle, soy, palm oil, and timber) to undertake no-deforestation insurance policies.
If banks are offering financing to corporations which can be agricultural producers, particularly these with tender commodities linked to excessive deforestation dangers, they’re perpetuating these practices. It implies that they tolerate this as a danger. If monetary establishments come out and say that they’re going to require the next threshold or the next stage of follow, they’ve a chance to affect and alter practices. As a linchpin within the system, banks have the affect to both set increased requirements or to exacerbate these points.
Nash: Are there any takeaways from what we’re seeing at the moment with COVID-19, a world pandemic and deforestation dangers?
Compere: Two issues concern me about COVID-19:
I’m involved that lockdowns and lack of journey enhances the dangers of corporations which can be sourcing tender commodity merchandise in different areas of the world. It inhibits their skill to satisfy immediately with suppliers and for auditors to make sure that practices are being maintained round their deforestation commitments.
The opposite concern is that with the intention to meet demand for commodities like soy and palm oil, the suppliers themselves and people down the manufacturing line will take extra possibilities. They are going to ship their employees out into the fields as a result of they should meet quotas, however there gained’t be a correct concentrate on the well being and security of employees. I’m involved these sorts of pandemics will put these most weak in provide chains, together with migrant employees, in danger.
Typically checks and balances–similar to environmental protections and enforcement–exit the window throughout occasions of world crises. We’re already seeing statistics displaying that deforestation, particularly within the Amazon, has continued throughout COVID-19.
The Q&A is a part of Traders Discuss Deforestation, a sequence of interviews with influential traders and companion organizations who supported the event of the Ceres Investor Information to Deforestation and Local weather Change. The information goals to interact traders on deforestation emissions and different associated dangers throughout their portfolios and drive extra company motion on the problem.