• Natural Capital Declaration
  • Natural Capital Declaration
  • Natural Capital Declaration
  • Natural Capital Declaration
  • Natural Capital Declaration
  • Natural Capital Declaration

Soft Commodity Forest Risk Tool


Full report: Soft Commodity Forest-Risk Assessment Tool and report for Banks and Asset Managers

Summary version

Access the tool.
 
Banks and investors can use the tool to evaluate their policies to address exposure to deforestation risk in soft commodity value chains (palm oil, cattle, soy)
 
The Natural Capital Declaration (NCD) has developed a lending and investment policy tool for financial institutions to reduce the deforestation risk caused by the unsustainable production, trade, processing and retail of soft commodities, especially soy, palm oil and beef. The production of these commodities drives deforestation and forest degradation in tropical forest. Financial institutions can be exposed to risks from deforestation by financing companies whose activities contribute to deforestation and forest degradation through their operations or soft commodity supply chains.

 

To help banks and asset managers manage these risks, the Natural Capital Declaration (NCD) has developed the Soft Commodity Forest-risk Assessment (SCFA) tool with Sustainalytics. The self-assessment tool enables banks, investors and other financial institutions to take action by using the tool to inform, develop or update their soft commodity risk policies. Financial institutions are encouraged to identify how they can improve their own lending and investment risk policies to systematically consider natural capital in the credit policies of specific sectors, including commodities, that may have a major impact on natural capital either directly or through the supply chain.

 

Guidance on the using the tool is included in a related report – Bank and Investor Risk Policies for Soft Commodities – that examines the types of risk policies on soft commodities banks and investors have developed in order to reduce or limit the chance of clients significantly impacting on tropical forests. The study and the tool help financial institutions gain insight into criteria to address risks and opportunities linked to soft commodity value chains, such as the potential to support sustainable production through financial products and services.

 

This NCD study and tool provides:

    • Greater clarity on criteria that banks and investors can adopt to strengthen policies and address exposure to deforestation and forest degradation risks from the production of palm oil, soy and beef.

 

    • An analytical framework with criteria to assess the scope, strength and implementation, reporting and monitoring of policies.

 

  • The Excel-based tool is free to download, allowing financial institutions to assess their own lending and investment policies and explore how changes would affect their score. Financial institutions can benchmark their policies against those of 30 financial institutions.

 

Please click here to access the tool, full report with guidance on using the tool, and a summary report.

This link takes you to a registration page, which will email you the link once you have filled in your details. Financial institutions using the tool are encouraged to send the results to the NCD, so we can add them to our database to update the tool. Results will be presented anonymously. We would welcome any feedback on the analytical framework and tool, and whether your institution uses them to inform new or updated risk policies for loans and investments.

 

To send your results, if you have any difficulties accessing the tool or would like to provide feedback, please contact secretariat@naturalcapitaldeclaration.org
 
The full and summary reports are also available below:
 
Full version
 
Summary version

 

The study and tool were commissioned by the UN-REDD Programme.
 
Report highlights

FIGURE 2

 

    • The financial sector is exposed to risks from deforestation and degradation linked to the production and processing of soft commodities
    •  

    • The best performing financial institutions in terms of managing this risk are the African Development Bank, FMO Development Bank, the International Finance Corporation, Standard Chartered Bank and Sumitomo Mitsui Trust Bank.

 

    • Almost half of the 30 financial institutions evaluated have policies in place to identify, manage and control or mitigate risks linked to loans or investments in companies involved in soft commodities.

 

    • Despite the recent deforestation commitments in the New York Declaration on Forests, Country commitments under the UNFCCC, and other leading initiatives such as the Consumer Goods Forum and Tropical Forest Alliance, few financial institutions were systematically quantifying their exposure to risks or creating opportunities related to the production of soft commodities at a portfolio level

 

  • Only 13 per cent of the financial institutions assessed have developed financial products and services specifically aimed at promoting the production and trade of sustainable commodities.

 
Financial institutions evaluated in the benchmark:

African Development Bank (AfDB)

ASN Bank NV

Banco Bilbao Vizcaya Argentaria, S.A.

Banco Sudameris SAECA

Bank of America Corporation

Banorte – Ixe

BlackRock, Inc.

BNP Paribas SA

Calvert Group, Ltd.

Credit Suisse Group AG

Ecobank

Financiera Rural

FMO

HSBC Holdings plc

Industrial and Commercial Bank of China Ltd.

International Finance Corporation

JPMorgan Chase & Co.

MN Services NV

National Australia Bank Limited

Norges Bank Investment Management (NBIM)

PAX World Management Corporation

PT Bank Mandiri (Persero) Tbk

PT Bank Negara Indonesia (Persero) Tbk (BNI)

Rabobank Group

Standard Chartered PLC

State Street Corporation

Sumitomo Mitsui Trust Bank

The Goldman Sachs Group, Inc.

UBS AG

Wells Fargo & Company