World's largest sovereign wealth fund takes stand against deforestation

tropical rainforest thailand
Norway's sovereign wealth fund will set up guidelines, which apply to companies with direct or indirect impacts of tropical forests, and ask firms to disclose climate change risks associated with their operations. Image: Shutterstock

Norway’s Government Pension Fund Global — the world’s largest sovereign wealth fund — is adopting standards to avoid investing in companies linked to tropical deforestation, sending a strong signal that forest destruction is not an acceptable practice for responsible businesses, reports Rainforest Foundation Norway.

Conducting an analysis of the Norway’s Government Pension Fund Global’s (GPFG) annual report, Rainforest Foundation Norway finds that while the fund still invests 137 billion Norwegian kroner ($19.7 billion) in sectors tied to deforestation, it has strengthened its policies to reduce exposure to companies that destroy forests.

The guidelines, which apply to companies with direct or indirect impacts of tropical forests, ask firms to disclose climate change risks associated with their operations.

Norway expects these companies to have in place strategies for reducing deforestation, protecting forests, adhering to “industry standards and best practices in the sustainable management of forests”, monitoring their supply chains, and disclosing their climate impact and tropical forest footprint.

It is a huge step forward that one of the world’s biggest investors demands that companies must stop contributing to deforestation.

Lars Løvold, Director of Rainforest Foundation Norway

Rainforest Foundation Norway said the policy sends an important message to the business world.

“We are very happy that NBIM clearly states that its expectations are not only addressed to companies with a direct impact on tropical forests, but also to companies that may cause deforestation indirectly, through their supply chains or their clients,” said Lars Løvold, Director of Rainforest Foundation Norway, in a statement.

“Retailers, producers of consumer goods, traders, banks and transportation services all contribute indirectly to tropical deforestation, and the GPFG sends a strong signal by stating that it expects them to identify their forest footprint, reduce it and report on it to their shareholders.”

“It is a huge step forward that one of the world’s biggest investors demands that companies must stop contributing to deforestation.”

Rainforest Foundation Norway added that while the fund has divested from some of the worst forest destroyers over the past three years, its remaining stakes in the energy, mining, timber and pulp, palm oil, soy, and beef sectors gives it leverage to push those companies toward greener practices.

“The GPFG still invests huge sums in sectors where forest destruction is widespread,” said Løvold. “This gives the Fund a significant liability, but also a great opportunity to influence companies to stop destroying rainforests.”

Beyond divestment in a number of deforesters and its guidelines on forests, the Norwegian government has in recent years emerged as a major funder of tropical forest conservation. Since 2008, the Norwegian Agency for Development Cooperation (Norad) has committed upward of $3 billion to forest programs in Brazil, Indonesia, Guyana, Tanzania, Mexico, and Congo Basin countries as well as civil society and intergovernmental initiatives.

Did you find this article useful? Help us keep our journalism free to read.

We have a team of journalists dedicated to providing independent, well-researched stories from around the region on the topics that matter to you. Consider supporting our brand of purposeful journalism with a donation and keep Eco-Business free for all to read. Thank you.

Most popular

Featured Events

Publish your event
leaf background pattern

Transforming Innovation for Sustainability Join the Ecosystem →

Strategic Organisations

Reneum
Danfoss
Trucost
ESG Book
Olam
City Developments Ltd