Financial Institutions in Guinea Urged to Enhance Deforestation Due Diligence Amid Growing Concerns
Introduction
As the world faces escalating concerns over deforestation, financial institutions operating in Guinea are being called upon to step up their due diligence efforts to prevent and mitigate related human rights abuses. New guidance released by Global Canopy, Neural Alpha, and SEI provides a roadmap for banks and investors to identify, prevent, and manage the risks associated with deforestation and forest conversion.
The Critical Juncture
Guinea is home to some of the world’s most critical ecosystems, including the Upper Guinea Forest, which is under increasing threat from logging, agriculture, and other human activities. Deforestation not only has devastating environmental consequences but also poses significant reputational and financial risks for financial institutions that fail to address it.
The New Guidance
The new guidance aims to help financial institutions in Guinea identify gaps in their supply chain policies and practices and decide on appropriate mitigating actions to propose when engaging clients or holdings during pre- or post-financing phases. By prioritizing deforestation-free finance, these institutions can reduce their exposure to reputational and financial risks while contributing to a more sustainable future.
Key Recommendations
- Identify gaps in supply chain policies and practices
- Develop mitigating actions for engaging clients or holdings
- Prioritize deforestation-free finance
- Exercise ownership rights or contractual requirements to promote sustainable practices
The Importance of Engagement
According to the Forest 500 report, over US$6 trillion has been invested in companies most at risk of driving deforestation. This staggering figure underscores the significant leverage that financial institutions have in driving change through engagement with clients and holdings.
Challenges Ahead
A review by the Deforestation Action Tracker found that only 41% of financial institutions with a deforestation policy also had an engagement process in place for non-compliant clients/holdings. The new guidance provides a critical tool for the finance sector in Guinea to work individually and collectively towards deforestation-free portfolios.
Conclusion
As Guinea continues to grapple with the challenges posed by deforestation, it is essential that financial institutions take proactive steps to address this issue head-on. By following the best practice recommendations outlined in the new guidance, they can reduce their exposure to reputational and financial risks while contributing to a more sustainable future.