Should money grow on dead trees?

Blackrock’s letters to CEOs and clients are long on sustainability but say nothing about deforestation

Planet Tracker highlighted the lack of disclosure regarding deforestation risk in a recent report on Exchange Traded Funds (ETFs) and flagged three financial institutions that are responsible for around 70 per cent of the total ETF market (Blackrock, Vanguard, and State Street).

ETF Wheel

Last week, Larry Fink, founder and CEO of Blackrock, wrote a letter to CEOs of the companies in which Blackrock invests and another to the company’s clients. Both these letters discuss in detail the various approaches that Blackrock intends to take to climate risk, sustainable reporting and a variety of other related issues.

The client letter mentions ‘sustainable’ 17 times and ‘sustainability’ 25 times and his letter to CEOs mentions these words 11 times and 17 times respectively.

But the number of times deforestation gets a mention in either letter? Zero.

Addressing deforestation is an essential part of addressing climate risk

This omission is surprising. Deforestation is a crucial factor in climate change. It accounts for nearly 15% of all greenhouse gas emissions — similar to the world’s entire transport sector.[i]

In 2014, the IPCC noted that ‘Reducing deforestation and forest degradation rates represents one of the most effective and robust options for climate change mitigation, with large mitigation benefits globally.’[ii]

Reforestation may be one of the key ‘natural climate solutions’ in achieving the Paris Agreement target of holding global warming below 2%. In the same 2014 report, the IPCC estimated the overall potential for ‘reforestation and forest restoration’, particularly in ‘tropical and subtropical climates’, as ‘large, reaching about 10 GtCO2 per year[iii] – nearly 20% of current total emissions.[iv]

Given these simple facts it seems odd that deforestation does not get a single mention.

63% of financial institutions do not have a published deforestation policy

However, the recent Forest 500 report by Global Canopy highlights why deforestation may have been missed. It seems that Blackrock does not have a policy on deforestation.

Unfortunately, Blackrock is not alone. 63% of the 150 financial institutions assessed in the Forest 500 report do not have any deforestation policies and 81% (122/150) have not published an overarching deforestation policy covering all four high deforestation risk commodity groups (beef, soy, palm oil, and timber).

In fact, policies relating to deforestation risk arising from beef and soy are the least common – only 20% of financial institutions have a policy covering cattle, and only 24% have one covering soy.

It is worth pausing at this point to let those statistics sink in. Deforestation has been known as a climate risk for decades (e.g., headlined in Time magazine in 1989) but two-thirds of the financial institutions surveyed have chosen not to publish a policy regarding deforestation.

No published policy implies no risk management

Financial institutions run on policies. They have policies to prevent money laundering, policies for onboarding clients, policies on ethical behaviour, policies for travel and expenses. If senior management thinks something is important there will be a policy about it and, if it is something that matters to their reputation, they will publicise the policy’s existence.

So it is reasonable to presume that these financial institutions haven’t published a deforestation policy because they don’t have one, and it is not a big stretch to assume this means that the management of these companies does not regard deforestation as something worth managing (at any level of the business).

Financial institutions are funding deforestation

This policy gap matters. The Forest 500 report shows that financial institutions with no deforestation policy have provided $2.7 trillion of financing into the most influential high deforestation-risk companies, and Blackrock, Vanguard, and State Street are responsible for nearly 40% of the total.

Top 10 Table


Non-financial companies are still failing to manage a risk to which they are directly exposed

Non-financial institutions are doing better – only 34% of the 350 non-financial companies assessed have failed to publish any deforestation policies (vs 63% of financial institutions). That said, only 25% have published a deforestation commitment for all of the high deforestation risk commodities to which they are exposed (beef, soy, palm oil, and timber) and 34% of companies with at least one deforestation commitment have not reported on their progress towards that commitment in the last two years.

These are the companies that Global Canopy has identified as most exposed to deforestation risk. From a funding perspective it is perhaps understandable that 44% of these companies do not consider a deforestation policy worth the effort – it is clear from the fact that 63% of financial institutions lack a deforestation policy that non-financial companies seeking funding have a two-thirds chance of finding a financial institution who will not have a policy to ask their potential clients about deforestation risk. But given that deforestation is a risk to which these companies are directly exposed, one would hope they would want to manage it for their own benefit (and for the benefit of the planet).

Policy promises have not been delivered by 2020

It is particularly ironic to note that Blackrock’s letters were published just after the close of 2020 –set as the year in which a number of ‘net zero deforestation’ commitments would be achieved:

  • The New York Declaration on Forests (NYDF) signed by over 200 governments, companies, financial institutions and NGOs includes ten goals. The aim of Goal 2 was to “eliminat[e] deforestation from the production of agricultural commodities such as palm oil, soy, paper and beef products by no later than 2020”. Launched in Sept 2014.
  • The Consumer Goods Forum (CGF) deforestation resolution, made on behalf of their 400 members, aimed to “achieve zero net deforestation by 2020 in key commodity sectors (soy, palm oil, paper & pulp/timber and beef)”. Passed in 2010.
  • The Banking Environment Initiative’s Soft Commodities Compact signed by 12 global banks aimed to “help transform soft commodity supply chains and help the banks’ clients (companies) achieve zero net deforestation by 2020”. Launched in 2014.

Financial institutions should be driving change – deforestation policies are a key part of this

Blackrock is far from alone in missing the (deforestation) wood for the (climate) trees. Deforestation is a fundamental driver of climate change and is also responsible for much of the biodiversity loss occurring worldwide. This is particularly the case in Latin America, and the beef and soy production industries in Brazil and Argentina lie at the heart of that process.

Until all financial institutions make preventing deforestation an explicit policy focus, the environmental damage caused by the beef and soy industries, and the supply chains they underpin, will continue.


[i] IPCC estimates Transport causes 14% of direct GhG emissions (average for 2007-2016). Forestry and Other Land Use causes 15% net
[iii] Ibid.
[iv] – Table SPM 1

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