The World Business Council for Sustainable Development (WBCSD) has released practical guidance for financial institutions (FIs) on how to integrate deforestation into reporting, helping them improve transparency on material risks. Devised by the Forest Finance Risk Consortium – co-launched by the US Department of State and led by the WBCSD – the guide sets out four steps to include deforestation in organisations’ climate- and nature-related financial disclosure and climate transition plans. The document also provides an overview of the current climate- and nature-linked disclosure landscape, of ways to carry out deforestation-specific disclosure, and of how to integrate deforestation risk into voluntary and mandatory frameworks. Additionally, it discusses the role that nature-based solutions – such as avoided deforestation and restoration – can play in reducing climate-related physical risks and emissions. Deforestation and land-use changes are responsible for 30% of global biodiversity loss and are the main driver of global CO2 emissions from the agriculture, forestry and other land-use sectors, the report noted. “As both regulations and risk management expectations require increasing action to limit, FIs face a myriad of risks from exposure to companies linked to deforestation, including to their reputation and portfolio performance,” said Diane Holdorf, WBCSD’s Executive Vice President. Regulators are increasingly requiring climate-related disclosure from FIs, with nature-related disclosure expected to follow the same path. More than 130 banks and 315 asset managers have committed to net zero targets, but only few FIs disclose deforestation risks in their portfolios – just 13% did so through disclosure platform CDP in 2023. The WBCSD attributed this to scattered data and guidance on assessing and managing deforestation risks, and a lack of clarity on calculating financed emissions for land-use change. “However, this is set to change in 2025 with the Deforestation-free Finance Platform from WBCSD and Global Canopy, and the GHG Protocol’s Land and Removals Guidance from WBCSD and the World Resources Institute,” it said. Training on the guidance will be provided on 14 November.
