The discussion on climate change has evolved over the years to become broader and more comprehensive. Climate change adaptation, resilience, and mitigation techniques play a crucial role in risk management and fossil fuels are often center stage for scrutiny and debate. As conversations around climate broaden, we have seen biodiversity take on a larger role as a risk that investors cannot ignore. Biodiversity encompasses a wide range of underlying issues including sustainable forestry, sustainable agriculture, and indigenous people’s rights. In this first in a series of
blogs exploring this multi-faceted issue, we will focus on Boston Common’s approach to engaging portfolio companies on combatting deforestation.
Our History and Approach
Protecting, restoring, and enhancing biodiversity, while essential to climate change mitigation and adaptation, provides social, economic, and environmental benefits to communities and ecosystems. Our investment guidelines inform our long-standing approach to the issue, evaluating how companies avoid risks across regions and supply chains. We seek to invest in companies whose products, processes, systems, and value chains promote earth preservation and regeneration, guarding against deforestation while also supporting indigenous communities and local ecosystems.
Assessing deforestation risk across a company’s value chain is an essential
component of our engagement strategy. We avoid investing in industries that have severe impacts on biodiversity and local ecosystems through egregious activities such as clear cutting. Instead, we favor companies with strong land management practices and policies in place that support sustainable forestry. Within our portfolios, we address deforestation-driven risks across the value chain – from agricultural producers to the banks that finance them. Acting in the best interest of our clients, the environment, and impacted communities, we engage companies on managing deforestation risk and we advocate for industry best practices such as deforestation-free commitments, certification schemes, and supply chain audits.
Our engagement reach on deforestation has expanded across sectors and regions. We ask companies to look beyond the main drivers of deforestation (e.g., palm oil, timber, cattle, and soy) and to broaden their focus to include all agricultural commodities.
Engagement Spotlight: Bank Rakyat
Palm oil producers and the financing of palm oil production
2018: Engaged Bank Rakyat (BRI) on taking initial steps towards implementing TCFD1 including assessment, policy adoption, and climate-related disclosure. BRI committed to issue its first TCFD aligned report in 2021.
2019: Engaged BRI on addressing deforestation risk related to lending to palm oil producers and expanding borrower certification from ISPO2 – the minimum legal requirement – to RSPO3, a more comprehensive certification standard for sustainable palm oil
1Task Force on Climate-related Financial Disclosures, 2Indonesian Sustainable Palm Oil (ISPO) Certification, 3Roundtable on Sustainable Palm Oil
Boston Common has made several commitments in the past year to align its investing, stewardship, and engagement approach with a Net Zero by 2050 and Paris-aligned 1.5°C pathway.
- Net Zero Asset Managers Initiative
- Support the goal of net-zero GHG emissions by 2050 or sooner
- Deforestation-Free Forest-Risk Agricultural Commodities
- Eliminate commodity-driven deforestation activities from investment portfolios
- Finance for Biodiversity Pledge
- Protect and restore biodiversity through investment activities
In 2022, we will prioritize initial steps to comply with these commitments including setting an interim 2030 financed emissions target aligned with the Net Zero Asset Managers Initiative framework and adopting a TCFD-aligned climate action plan supporting integration across our investment and engagement activities.
These commitments provide guidance and clarity to our firm’s commitment to climate and sustainability leadership. Moving forward, we will continue to collaborate with investors across the globe to support public policy engagement, advocating for strong corporate climate disclosure, accelerated decarbonization, investment in climate solutions, and expanding biodiversity efforts.