For financial institutions

Establish responsible lending and investment policies

Use the Accountability Framework to develop sound policies and practices, in line with international norms, to avoid deforestation, ecosystem conversion, and human rights impacts linked to your loans and investments. Several Accountability Framework-aligned tools support this process:

• The Deforestation-Free Finance Sector Roadmap provides step-by-step recommendations to assess risk, set policies, engage clients/holdings, and disclose progress to eliminate financing of commodity-driven deforestation, ecosystem conversion, and associated human rights abuses. Building from this Roadmap, tailored guidance for pension funds, detailed guidance on due diligence, and an investment mandate for private investors are now also available.
• WWF offers a practical step-by-step guide for financial institutions to address deforestation and ecosystem conversion risks in alignment with the Accountability Framework. The guide provides details on the risks financial institutions face. It also presents case studies and nature-positive finance opportunities to drive positive environmental impact. In addition, WWF gives guidance on deforestation and conversion for central banks and financial regulators.

Assess environmental and social risk and performance in your portfolio

Whether or not a financial institution has established policies and criteria related to deforestation, conversion, and human rights, it is essential to understand exposure and risk related to these topics. The AFi Finance Tool, Global Canopy's Deforestation-Free Finance Sector Roadmap and other Accountability Framework-aligned tools and data sources can help financial institutions assess and manage such risks across their portfolios. This includes the following resources:

• The AFi Finance Tool helps financial institutions assess company performance on deforestation, ecosystem conversion, and related human rights risks in agricultural and forestry supply chains. It provides detailed criteria alongside relevant data sources, enabling investors to evaluate progress and gaps against each criterion using credible data sources.
• The ForestIQ data platform can support an initial portfolio assessment process through its data on deforestation risk exposure and financial materiality for more than 2,000 companies. The Forest IQ metrics are included in the AFi Finance Tool.
• Many widely used reporting standards and platforms that address environmental and human rights issues linked to soft commodities are well aligned with the Accountability Framework. These include the Forests module of the CDP questionnaire, the Forest 500 assessment, and the GRI Agriculture, Fishing, and Aquaculture Sector Standard. The CDP, Forest 500, and GRI criteria are included in the AFi Finance Tool.
• Ceres' Investor Guide to Deforestation and Climate Change explains how investors might be exposed to deforestation and related climate risks in their portfolios. It guides investors on how to analyse their own risk exposure and engage companies in their portfolios to mitigate these risks.
• Ceres' Deforestation Scorecard: Assessing Corporate Action on Deforestation Amid Growing Regulatory Risk assesses the efforts of companies to eliminate deforestation from their supply chains. It provides financial institutions insight into where companies stand on mitigating deforestation-related risks, including from new global regulations.
• CDP, Ceres, and other founding partners of the Investor Agenda offer guidance for establishing an Investor Climate Action Plan. In 2023, specific deforestation actions were added throughout the tiers of the Expectations Ladder, which provides a single, comprehensive framework that draws upon existing initiatives and guidance.

Engage portfolio companies

To effectively address deforestation and related risks, financial institutions need to engage companies in forest-risk commodity sectors across their portfolio. The AFi and its partners offer several resources to do so in alignment with the Accountability Framework:

• The AFi Finance Tool Stewardship Guide gives financial institutions a clear three-step approach to engaging with their portfolio companies to drive progress.
• Several investor and financial institution networks use Accountability Framework-aligned tools, criteria, or resources to help support investors in engaging companies on deforestation and related risks. These include the IIGCC Deforestation Investor Group, the Investor Policy Dialogue on Deforestation (IPDD) supported by the Tropical Forest Alliance, Nature Action 100, and PRI Spring.
• Developed by Global Canopy, Deforestation-free Transition (DEFT) Pathway is a data-driven tool to facilitate engagement on deforestation risk between financial institutions and companies. Powered by the Forest IQ data platform, DEFT Pathway presents profiles for the 500 companies most exposed to deforestation risk. These profiles categorise companies according to their stage of progress and provide priority actions for each company to progress to the next pathway stage towards deforestation-free supply chains.
• The ADCFP stakeholder briefings are designed to support effective engagement with the most influential soy traders and meatpackers operating in South America, offering company-specific information and analysis. Each briefing summarises the focal company’s current market position and deforestation- and conversion-free (DCF) supply chain commitments and performance and recommends specific priorities for action. The content is based on a combination of publicly available information and expert input.

By using these Framework-aligned tools and data sources, financial institutions can prioritise and strengthen their approach to addressing deforestation and associated risks in their portfolios.