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Integrating REDD+ Objectives in Investment Decisions of Institutional Investors

Our latest project is financed by Norad’s Civil Society Projects for climate and forest issues for 2016 to 2020.

There is still a lot of improvement to make in how investors and financial institutions accurately value risks inherent in unsustainable commodity supply chains. Credible analysis that speaks their language can spark pressure from these actors to help stop deforestation from palm oil, soy, beef and timber.

The problem we address:
Tropical deforestation is a major source of global carbon emissions. 71 percent of that forest destruction is driven by commodity agriculture – mostly soy, cattle, timber and palm oil. Global population growth resulting in increased demand has meant high prices for these commodities and generated large corporate profits. Commodity producers can face significant financial risks if they do not accurately incorporate sustainability risks into their business models.  Poor attention to sustainability leads to inefficient land-use and very high carbon emissions resulting in opportunity costs and carbon taxes or fines. We believe that if the finance community is informed of these risks through credible, dispassionate analysis, they can become a powerful force for ending deforestation. Chain Reaction Research is designed to make those risks clear.

How does Aidenvironment help?
In the Chain Reaction Research (CRR) consortium we bring together experience across the commodity sector, from supply chains to financial instruments, for a targeted intervention where it can have the largest impact. We are able to show the financial result of lack of sustainability.  We follow the money, and seek to disrupt and transform a finance community that makes commodity deforestation possible. On-the-ground research by Aidenvironment identifies sustainability risks such as contested land, deforestation, fires, exploitation, and inconsistencies in official corporate policies. Profundo then develops financial models analysing the financial risks inherent in such unsustainable practices Green Century Funds provides the perspective and reach of socially conscious investors, and Climate Advisers provides financial commentary, editorial guidance and outreach to global financial professionals.

Expected results
CRR will provide institutional investors with access to quality information on financial and sustainability risks inherent in tropical commodity supply chains. These actors can then properly value their investments – often for the first time – and become advocates for change. Through over 40 reports and on-going outreach to analyst and portfolio manager communities, CRR will change the state of play across the commodity finance sector.

Partners in Chain Reaction Research (CRR)
The lead organization of this project is Aidenvironment. The project will be executed with three partner organizations: Profundo, Climate Advisers, Green Century Funds.

The total budget of 38,000,000 NOK will be divided by Aidenvironment and its partner organizations:

Utilization of budget per partner (including overhead)

Country

Total period 2016-2020 (in NOK)

Aidenvironment

The Netherlands

12,825,000

Profundo

The Netherlands

10,070,000

Climate Advisers

United States

10,070,000

Green Century Capital Management

United States

5,035,000

Total (excl. co-funding)

 

38,000,000

To review the General Conditions of the Agreement with Norad please click on this link.

Focus
Norad’s 2016-2020 funding allows CRR to expand beyond its original focus on the SE Asian palm oil sector to cover commodities driving deforestation in Brazil, Ecuador, Colombia, Peru, Democratic Republic of the Congo, and Liberia.

For more information, please contact Annemieke Beekmans.

Click here to download a presentation of our work in the CRR.

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