INSIGHT by the Global Canopy
Launched this month, Forest IQ is a powerful new data platform for financial institutions that for the first time brings together aligned, best-in-class, and actionable data on how more than 2,000 major companies are addressing their links to deforestation.
Forest IQ enables financial institutions to easily screen portfolios, engage with the most relevant companies, manage deforestation risks and achieve their climate and nature targets.
The platform has been developed by an alliance of leading not-for-profits – Global Canopy, the Stockholm Environment Institute (SEI) and ZSL – who have deep expertise in data-driven approaches to tackling deforestation.
Forest IQ is launching at a time of growing policy and compliance pressure on the finance sector to act on deforestation. The UN’s High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities (HLEG) has set a 2025 target for deforestation-free finance, and the transition guidance of the Glasgow Financial Alliance for Net Zero (GFANZ) identifies tackling deforestation as a top and immediate priority for its members.
“Forest IQ will enable us to improve and expand our screening, risk assessment and stewardship, and help us in our efforts to eliminate commodity-driven deforestation from our investment portfolios.”
-Vemund Olsen, Senior Analyst, Storebrand
There are also new regulations in the EU and other key consumer jurisdictions, setting stringent due diligence requirements for companies on deforestation, and these are under review for extension to the finance sector.
“Financial institutions that are still ignoring deforestation in their portfolios are pursuing a dangerous strategy – or perhaps are just asleep at the wheel. There is no pathway to net zero or nature goals without rapid action on deforestation, yet our analysis shows that the great majority of financial institutions are still at the starting line.
Forest IQ will make it easier than ever for financial institutions to play their vital part in a rapid market-wide transition away from deforestation. It provides a simple and practical high-level company benchmark on deforestation while retaining all the power and depth of market-leading datasets that provide over 2,400 indicators on deforestation, conversion and human rights abuses. As new datasets emerge, the platform will continue to evolve too.”
-Niki Mardas, the Executive Director of Global Canopy
Central to the platform are three new core indicators – on exposure, materiality and reported performance. These indicators map transparently to a number of best-in-class datasets, enabling banks and investors to undertake in-depth analysis and more effective engagement with high-risk companies.
Forest IQ was designed in close consultation with 10 major global financial institutions including some of the world’s largest and most exposed banks and asset management firms such as Blackrock, BNP Paribas and HSBC. To ensure it meets the needs and processes of the finance sector it has been further tested by more than 50 organisations over the past 10 months.
Storebrand is one of the financial institutions who helped design the platform. Senior Analyst Vemund Olsen said: “Storebrand has been screening our portfolios for deforestation risk since 2020, but the lack of comprehensive, high-quality data on companies’ exposure and management of deforestation risk has been a challenge. Forest IQ will enable us to improve and expand our screening, risk assessment and stewardship, and help us in our efforts to eliminate commodity-driven deforestation from our investment portfolios.”
Forest IQ’s indicators and data are open to all in order to drive better action and accountability among key companies and financial institutions on deforestation. Its work is aligned with the Accountability Framework initiative’s guidelines on deforestation, and it will support financial institutions to meet requirements of emerging global reporting frameworks, such as the Taskforce for Nature Related-Financial Disclosures.
“Forest IQ will make it easier than ever for financial institutions to play their vital part in a rapid market-wide transition away from deforestation.”
Niki Mardas, Executive Director, Global Canopy
At launch, the Forest IQ coverage includes more than 2,000 companies including: 571 highly exposed companies, 865 not exposed, but highly invested companies (to support screening) and 646 financial institutions. It has over 2,400 data points across 7 datasets: Deforestation Action Tracker, Forest 500, SEI York, Trase, ZSL SPOTT, RSPO, plus additional research by the Forest IQ team.
As the platform evolves, data from CDP Forests will be incorporated into the core metrics in Q4 2023, and new datasets that can improve the metrics further will be added on a rolling basis. Forest IQ will have as a priority to expand its coverage to include ever-more of the most widely-financed companies with the greatest exposure to deforestation, and to keep its data timely.
The Forest IQ team is also in discussion with leading ESG Service providers with a view to making the new data available on the key platforms where financial institutions already get their information.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
