Geneva, 18 June: As deforestation rises rapidly up the global agenda, the USD 9.5 trillion Net-Zero Asset Owner Alliance (NZAOA) today releases Guidelines and Recommendations for Halting Deforestation. Highlighting the necessity for action and collaboration between investors, policymakers, companies, and data providers to tackle this issue effectively, the paper provides specific recommendations for each group.
Investors are encouraged to evaluate their portfolio exposure to deforestation and linked human rights abuses, phase out deforestation and forest conversion risks by 2030, actively engage with companies, asset managers, and policymakers, and disclose their actions, risks, and progress using measurable data.
Among other recommendations, the issues targeted calls for companies to eliminate deforestation from supply chains; for policymakers to implement mandatory reporting and phase out environmentally harmful subsidies; and for data providers to enhance transparency and translate data into metrics aligned with reporting frameworks.
“Members of the Net-Zero Asset Owner Alliance are committed to reducing deforestation-linked risks by aligning their portfolios with net-zero targets. We aim to pursue action alongside other stakeholders to phase out deforestation and forest conversion from supply chains by 2030, protecting the planet’s ecosystems while boosting financial returns for our beneficiaries.” – Pedro Guazo, CEO of the Office of Investment Management for the United Nations Joint Staff Pension Fund, a NZAOA member.
The issue is rapidly becoming a key policy focus of 2025 – with the COP30 presidency reiterating the COP28 consensus to call for enhanced efforts towards halting and reversing deforestation and forest degradation by 2030, and growing regulatory momentum including from the European Union’s (EU) Regulation on Deforestation-free products (EUDR). Greater emphasis on deforestation in disclosure standards from the ISSB and TNFD further heightens attention on the topic amongst companies and investors.
Representing the second-largest source of annual greenhouse gas emissions, after fossil fuels, deforestation drives climate-related risks such as droughts, wildfires, and supply chain disruptions. It also poses further systemic economic risks, threatening to trigger irreversible ecological tipping points, disrupt value chains, and diminish carbon sinks – with forests currently absorbing one-third of global carbon emissions annually. Further, deforestation puts investors with portfolio exposure to forest-linked commodities – such as cocoa, beef, soy and palm oil – at financial risk from regulatory, market, and reputation-related shifts.
Due to their longer-term investment horizons, asset owners – such as pension funds and insurers – are reliant on the long-term health and stability of economies and financial markets. Deforestation threatens both – and, with it, people’s access to insurance and retirement income. Asset owners are uniquely positioned to drive systemic change by aligning portfolios to net-zero targets and phasing out deforestation – with NZAOA members committed to reducing deforestation-linked risks by aligning their portfolios with net-zero targets.
“Forests have an outsized positive influence on respecting our planetary boundaries and securing economic prosperity. Conversely, failing to safeguard these ecosystems is highly destructive – not only to our forests, biodiversity, local communities and indigenous peoples, but to our financial markets. Investor action alongside that from companies, policymakers and data providers is essential for phasing out deforestation and forest conversion from supply chains, and ultimately, ensuring planetary, societal and economic resilience.” – Jan Kæraa Rasmussen, Head of ESG & Sustainability, at PensionDanmark.
NZAOA provides a four-step pathway for Investors to phase out deforestation and forest conversion:
- Assessment: Evaluate portfolio exposure to deforestation and linked human rights abuses.
- Commitments: Phase out deforestation and forest conversion risks for relevant commodities by 2030.
- Stewardship: Actively engage with companies, asset managers, and policymakers.
- Transparency: Disclose actions, risks, and progress with measurable data.
The NZAOA offers accompanying recommendations for companies, policymakers and data providers to take corresponding action to phase out deforestation risk exposures
Companies:
- Commit and take action to eliminate deforestation from supply chains and to respect human rights, combined with robust due diligence and transparent reporting.
- Align political engagement with phasing out deforestation, forest conversion and associated human rights abuses.
Policymakers:
- Adopt policies to implement international commitments, including halting and reversing deforestation in line with the Global Stocktake and phasing out environmentally harmful subsidies to foster investments in sustainable deforestation-free practices.
- Support traceability, transparency, and mandatory reporting to enable the phase-out of deforestation and forest conversion across sectors.
Data providers:
- Provide actionable intelligence to enable investors and companies to measure, disclose, and act on deforestation risks.
- Enhance collaboration to address the complexity of integrating data into deforestation risk assessments.
About the UN-convened Net-Zero Asset Owner Alliance
The UN-convened Net-Zero Asset Owner Alliance is a member-led initiative comprising 86 institutional investors with US$9.5 trillion in assets under management. These investors are individually committed to aligning their investment portfolios with the Paris Agreement’s goal of achieving net-zero GHG emissions by 2050. The Alliance, convened by UNEP FI and PRI, with support from WWF and Global Optimism, was the first in the financial industry to define intermediate targets and provide annual progress reports.