For financial institutions

1. 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 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.

2. 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 Deforestation-Free Finance Roadmap and other Accountability Framework-aligned tools and disclosures can help your institution to assess and manage such risks across your portfolio:

• The ForestIQ tool can support an initial portfolio assessment process through its data on deforestation risk exposure and financial materiality for more than 2,000 companies.
• 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 CDP’s forests questionnaire, the Forest 500 assessment, and the GRI Agriculture, Fishing, and Aquaculture Sector Standard.
• 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.

3. Engage portfolio companies

To effectively address deforestation and related risks, financial institutions need to engage companies in forest-risk commodity sectors across their portfolio. To do so, your institution can adapt Framework-aligned approaches:

• The Accountability Framework can be used to guide companies in the creation of policies, systems, and reporting practices for ethical supply chains. The AFi outlines seven actions companies can take to improve their sustainability policies and practices, and offers a benchmarking tool they can use to identify gaps. Such gaps may be important areas for financial institutions to engage their clients and holdings to reduce deforestation-related risks.
• Ceres' Land Use and Climate Working Group supports investors with engaging companies on taking action on deforestation. As part of the Ceres Investor Network, the group works towards the goal of limiting global temperature rise to no more than 1.5 degrees Celsius and protecting, improving, and restoring forests and other key natural ecosystems.

By using these Framework-aligned data sources and approaches to assess and engage companies in your portfolio, your institution can integrate best available information and analysis on deforestation and associated risks into your decision-making on lending and investment. Additional Accountability Framework-aligned resources for financial institutions will be added here as they become available.