Our planetary health, economic success, and even the very existence of our species depend on nature’s resources – and few elements are as vital as our forests.

Yet over the past thirty years we have pushed our forests past their safe operating limit, destroying 420 million hectares – an area the size of India and Egypt combined – and degrading many more. If we continue at the current rate of loss it is estimated that within a century tropical rainforests could disappear altogether. Without effective forest management we risk being locked into large-scale, perhaps irreversible, environmental change.

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If tropical deforestation were a country, it would rank third in COemissions

 

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Forest degradation is one of the nine planetary boundaries. These are the boundaries that define the safe operating space for life on earth where humanity can continue to develop and thrive. Thus maintaining the health of our forests is key to preserving climate balance. But we have already pushed forest degradation beyond its safe zone. The world’s tropical forests have ceased to be net carbon sinks – they are now a carbon source.

a global response.
 

Responding to this urgent need, over 100 world leaders at 2021’s COP26 summit, representing countries that are home to 85% of the world’s forests, pledged to halt and even reverse deforestation by 2030. Where similar previous pledges have failed – notably the 2014 New York Declaration on Forests, which was followed by an increase in forest degradation – there are signs that it could be different this time. Crucially, the COP26 Declaration on Forests and Land Use was accompanied by funding – USD 14 billion from both the public and private spheres; a commitment from a further 28 nations to ensure that commodities trade does not contribute to deforestation; and corporate commitments from 30 major financial institutions to end their exposure to forest-risk commodities by 2025. 

listen to our podcast on tropical deforestation.

Costa Rica is a case study in reforestation success. By 1990, after 50 years of agricultural development, Costa Rica had lost close to three quarters7 of its forest cover. In response the Costa Rican government introduced a programme of Payments for Economic Services, funded by a tax on fuel, which paid farmers to restore and preserve forests, and funded forest management. Today, much of Costa Rica’s lost forest cover has been restored, with more than 1.3 million hectares protected under PES contracts. The problem of deforestation has long been linked with development in some of the world’s poorest regions. For governments and policy-makers the lesson of Costa Rica is that punitive measures alone will rarely be enough – to end and reverse deforestation financial incentives will be key.

We have learned that the pocket is the quickest way to the heart
Carlos Manuel Rodriguez, Costa Rica, Former Environment and Energy Minister

managing forests.


Better forest management will play a key role in the transition to a CLIC® economy. Forest-risk business models will transform and demand patterns will change, as value is found in protecting rather than degrading our vital forests. 

our approach. 


The transition to a CLIC® economy is one of the greatest challenges of our time. Identifying those companies that embrace this challenge by transforming their operations, supply chains, and product design, in order to preserve rather than degrade forests, is key for managing portfolios exposed to forest-risk and for driving positive change. We believe the winners will see gains in market share and risk reduction across multiple avenues, while those failing to adapt will find themselves fighting regulation and changing consumer sentiment. Despite growing momentum nearly three quarters of the world’s most influential 350 companies with links to deforestation in their supply chains and investments do not have deforestation commitments that cover all their forest-risk commodities, and one third have no deforestation commitments at all.
 

Numbers of companies that have and have not made deforestation-related commitments, by commodity, 2020
 

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Through our in-house expertise and work with the University of Oxford we evaluate the forest-risk exposure of portfolio companies to create an income-weighted forest management score. This assesses company policies both in theory and as applied in practice, evaluates exposure to forest-risk controversies, and incorporates geographical proximity to sensitive, biodiverse regions. 

In often remote and inaccessible regions the true nature of supply chains can be hard to ascertain. To eliminate the risk of inaccurate or incomplete company disclosures we apply a geospatial approach to land-use monitoring, using satellite imagery and a machine-learning model developed in collaboration with the University of Oxford, to better understand whether companies are meeting their commitments. 

We believe that sustainable investing is the way to generate long-term returns and grow our clients’ wealth in perpetuity. 

We aim to target the opportunities presented by the transition to a CLIC® economy, investing in companies whose products and services harness the regenerative power of nature, driving better forest management and helping to restore our planetary boundaries

where we are.

Our heritage is Swiss, yet our outlook and mind set are resolutely international. With over 25 offices globally, we are able to serve our clients all over the world.

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Forest area - Our World in Data
2 Quantifying Carbon Fluxes in the World’s Forests | World Resources Institute (wri.org)
3  https://www.weforum.org/agenda/2020/08/five-hidden-benefits-forests-climate-change 
Deforestation and Forest Loss - Our World in Data
5 COP26: Agricultural expansion drives almost 90 percent of global deforestation (fao.org)
6 State of the World’s Forests 2020 (fao.org)
7 Showing forest cover and loss in Costa Rica (Source: Hector, 2008) | Download Scientific Diagram (researchgate.net)
Graph 1: Source: World Resources Institute, Global Forest Watch, Seymour & Busch, 2016
Graph 2: Source: Forest Trends (2017) updated with data from Forest Trends (2020). Tropical forest loss data from Henders, Persson and Kastner (2015)

 

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