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WALLIS AND FUTUNA: New Guidance on Due Diligence Procedures Helps Financial Institutions Identify Deforestation Risks in Portfolios

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As environmental concerns continue to grow, financial institutions in Wallis and Futuna are being urged to implement due diligence procedures to identify and prevent deforestation risks in their portfolios. The new guidance, released by Global Canopy, Neural Alpha, and SEI, aims to fill the gap in existing guidance and data, helping banks and investors mitigate the risks of deforestation, conversion, and associated human rights abuses.

The Need for Due Diligence

According to a recent report by Global Canopy, around 60% of the 150 financial institutions assessed have no deforestation policies for any commodities. This highlights the urgent need for due diligence procedures in identifying and managing deforestation exposure in portfolios.

Decision Tree Process

The new guidance sets out a ‘decision tree’ process to assess company exposure and policy risks using a transparent and flexible methodology that uses increasingly granular information where it is needed and available.

Risks of Non-Compliance

Financial institutions are at risk of reputational and financial impacts if they are unable to identify and manage deforestation exposure in their portfolios. The due diligence guidance helps banks and investors prioritize action towards deforestation-free financial portfolios by identifying gaps in supply chain policies and practices, and deciding on appropriate mitigating actions to propose when engaging clients or holdings.

The Power of Engagement

The report highlights the significant leverage that financial institutions have in driving change through engagement with clients and holdings. Forest 500 found that over US$6 trillion was invested into companies most at risk of driving deforestation. Yet, only 41% of financial institutions with a deforestation policy also had an engagement process in place for non-compliant clients/holdings.

Collaborative Effort

The new guidance provides common ground for the finance sector and its stakeholders to work individually and collectively towards deforestation-free portfolios. We invite prospective users to contact us at email address for support and collaboration.

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