Chain Reaction Research organizes well-attended Side Event at the PRI in Person Conference

Chain Reaction Research convened a discussion on the financial materiality of deforestation risks in the palm oil, soy and beef supply chains at a side event during the PRI in Person conference in Paris on 12 September 2019. PRI in Person, organized by the Principles for Responsible Investment (PRI), is the world’s largest gathering of responsible investors. Chain Reaction Research (CRR) is the Aidenvironment-coordinated consortium project that conducts sustainability and financial risk analysis in soft commodity supply chains.

The event was attended by about 50 responsible investors and civil society organizations. Aidenvironment senior consultant Tim Steinweg presented two recent studies on stranded assets in Indonesia’s palm oil sector and on the financial consequences of deforestation-driven supply chain suspensions. These two studies, published earlier this year, provide evidence that deforestation is a financially material business risk. Companies that fail to meet the zero-deforestation demands from their business partners are increasingly likely to be blocked from selling to their clients, with subsequent negative impacts on profitability and market value. In view of this, forest and peatland that has been designated as oil palm concessions should be considered stranded assets, as they cannot be viably cleared and planted.

There is a growing consensus among mainstream investors that deforestation and other climate risks will have an impact on the value of their investment portfolios. Shortly after the PRI in Person conference, a group of 230 institutional investors, managing approximately 5% of the world’s wealth, issued a statement calling for corporate action to tackle Amazon deforestation in Brazil. The statement said:

We are concerned about the financial impact deforestation may have on investee companies, by potentially increasing reputational, operational and regulatory risks. Considering increasing deforestation rates and recent fires in the Amazon, we are concerned that companies exposed to potential deforestation in their Brazilian operations and supply chains will face increasing difficulty accessing international markets.

For more information about Chain Reaction Research, please contact Tim Steinweg.