The Case for Deforestation Free Investing

February 21, 2020

Things aren’t looking good for the world’s forests.

In its 2019 end-of-year retrospective, the hard-hitting conservation news platform Mongabay declared that “2019 closed out a ‘lost decade’ for the world’s tropical forests, with surging deforestation from Brazil to the Congo Basin, environmental policy roll-backs, assaults on environmental defenders, abandoned conservation commitments, and fires burning through rainforests on four continents.”

Big business’s race to destroy the world’s rainforests is having an existential toll on our environment. The burning of the rainforests adds to our atmospheric carbon overload, while at the same time destroying the best means we have for sequestering future carbon emissions — making the tragedy of our forests also a disaster for the climate.

As a character in Richard Powers’ Pulitzer Prize winning novel The Overstory put it, “We’re cashing in a billion dollars of planetary savings bonds and blowing it on assorted bling.”

In fact, Powers’ financial metaphor gets us to one of the things we can do to address the problem — follow the money.

The pileup of climate disasters last year did have an ever-so-slight silver lining, in that it sparked a surge in climate commitments from big finance. Thirty-three of the world’s largest banks announced a collective commitment to align their business with international climate goals; a wave of major financial institutions, including Goldman Sachs, divested from coal; and with the Amazon fires raging, investors managing $162 trillion dollars demanded stronger corporate action on deforestation. And just a few weeks into 2020, after an 18-month public pressure campaign, BlackRock, the world’s largest asset manager, committed to ending its active investments in coal and making climate central to its investment strategy.

Shutdown of BlackRock offices in San Francisco to pressure the company to divest from deforestation and fossil fuels, Jan. 2020.

While these trends affirm that financial institutions are coming around to BlackRock CEO Larry Fink’s recent acknowledgement that “climate risk is investment risk,” they are not coming to this without a lot of pressure.

Fink attributed BlackRock’s recent acceptance of climate risk to the demands of “clients and the market.” But given that the announcement was preceded by 18 months of relentless campaigning by progressive enviros, shareholder activists and grassroots groups like Extinction Rebellion and Mothers Out Front, it’s not a big stretch to suggest that Fink’s nod to “clients and the market,” is in fact veiled reference to the global climate movement — which is quickly growing to encompass even corporate actors.

And that’s where personal finance comes into the picture. While pressure from big environmental groups and social movements hammers on financial institutions, individual financial decisions, in aggregate, can also move things from the bottom up. An effort to “defund deforestation” has been quietly growing for some time.

Who wants to retire into a world blazing with wildfires, raging with floods, and boiling over with mass discontent?

In 2018, CalPERS, the largest public pension fund in the U.S., adopted a deforestation-risk approach. This was shortly followed by TIAA/Nuveen which released a policy covering some (not all) of its holdings in the soy-rich Brazilian Cerrado, and another by the trillion-dollar investment firm Northern Trust. And then comes BlackRock: about six months before agreeing to start shedding its active coal stocks, the company put out a rare statement disclosing its approach to the palm oil sector — the most notorious of the forest-risk commodities, and responsible for massive fires almost annually in Indonesia. Earlier this month, the Wall Street titan issued a broader statement on the climate risks that stem from agribusiness.

These companies and firms were forced to make disclosures and change their policies after ordinary people mobilized to defend our planet from oblivion. (I know this because Friends of the Earth is running these campaigns, now in tandem with BlackRock’s Big Problem and the Stop The Money Pipeline.)

To step up the pressure, Friends of the Earth U.S. and the shareholder advocacy group As You Sow, have expanded and released a web-based tool to help ordinary investors — those who may have an IRA or 401k but don’t necessarily know what their money is funding — take on the global deforestation crisis. Called DeforestationFreeFunds.org, the site uses real-time data provided by the financial data firm Morningstar to show how over 3000 US mutual funds may be linked to public companies that produce, trade and finance palm oil, cattle, timber, pulp and paper, soy and rubber — the six commodities that drive up to two-thirds of global deforestation.

The site is part of a suite of “Invest Your Values,” sites, including Fossil-Free Funds, Weapon-Free Funds, and Gender Equality Funds, that allow people to “vote with their dollars.” By using the data on the site, ordinary investors can take their money out of climate-destroying companies or encourage their fund managers to adopt deforestation-free policies, as others have done, in order to make them better stewards.

The financial case for deforestation-free investment is growing. After all, who wants to retire into a world blazing with wildfires, raging with floods, and boiling over with mass discontent? With tools like DeforestationFreeFunds.org, it’s getting easier to remove our money from the problems. Coupled with the kinds of public pressure strategies that have led the finance titans to start defunding coal, we just may find ways to start investing in a planet our children can live on.