Trillion-Dollar Investor Alliance Presses for Swift Action on Deforestation Risk

A coalition of heavyweight investors, backed by the United Nations and representing more than $9.5 trillion in assets, has issued an urgent call to tackle deforestation linked to the financial system. The Net Zero Asset Owner Alliance (NZAOA) has released new guidance designed to help financial institutions assess their portfolios for exposure to deforestation risks and manage them effectively by 2030. The message is clear: financed deforestation is no longer a blind spot the sector can afford to ignore.

Recent research paints a concerning picture. An analysis of 500 major companies with supply chains tied to forest-risk commodities revealed that a full third still lack public commitments to prevent deforestation. Even among those that do, many are excluding critical commodities or regions from their policies. According to analysts at Global Canopy, most firms are collecting minimal data—if any—on their actual progress for investors, resulting in significant blind spots across environmental, reputational, and financial risk.

The NZAOA guidance is designed to complement existing reporting standards, such as the Taskforce on Nature-Related Financial Disclosures (TNFD) and the International Sustainability Standards Board (ISSB). But it doesn’t stop at disclosure.

“Asset owners are uniquely positioned to drive systemic change by aligning portfolios to net-zero targets and phasing out deforestation… due to their longer-term investment horizons,” the Alliance stated.

The UN Joint Staff Pension Fund’s CEO of the office of investment management, Pedro Guazo, added: “We aim to pursue action alongside other stakeholders to phase out deforestation and forest conversion from supply chains by 2030, protecting the planet’s ecosystems while boosting financial returns for our beneficiaries.”

The document stresses that deforestation is not just an isolated issue. It's interconnected, feeding into broader systemic threats such as climate change, biodiversity loss, and weakened resilience to flooding. The guidance encourages investors to act as part of a wider ecosystem, working in tandem with businesses, regulators, policymakers, civil society, and academia.

All Eyes on the EU’s Incoming Deforestation Rule

One primary regulatory driver of action is the European Union’s Deforestation Regulation (EUDR), set to take effect on 30 December 2025 for large companies and on 30 June 2026 for smaller firms. The new law will require that products made from high-risk materials—including beef, soy, cocoa, palm oil, coffee, wood, and natural rubber—must be both legally sourced and “deforestation-free” to be sold in the EU.

The rules will apply not only to importers but also to upstream businesses such as manufacturers and retailers. A ‘comply or explain’ model will be enforced, putting additional pressure on businesses to understand and map their supply chains down to the forest floor.

In parallel, the TNFD is moving quickly to close another significant gap: access to decision-useful data. The task force is finalising recommendations to improve the availability and quality of nature-related data—covering baselines, risks, and opportunities—that businesses need to comply with emerging standards and regulations.

First announced at COP16 in Colombia, the TNFD’s initiative includes a new Nature Data Public Facility and a set of draft principles that are currently undergoing global pilot testing. Over 40 data providers and 20 data users are participating, with support from partners such as the UN Environment Programme, Global Canopy, and WWF.

To accelerate innovation, TNFD has launched a “grand challenge” to develop new tech tools that make nature-related assessments and reporting faster and more effective. AI-powered solutions are expected to feature heavily in the final shortlist. Funding is being provided by the UN Development Programme and Germany’s International Climate Initiative, with Conservation X Labs managing the project.

Finalists will be unveiled this November at COP30 in Brazil, where nature will be at the forefront of global climate negotiations. Conservation X Labs’ president and co-founder Paul Bunje said: “The TNFD has already embraced the power of open innovation to develop its LEAP assessment approach, and we look forward to partnering with them to make those assessment tools accessible for SMEs around the world – for the good of their own business and for the good of the planet.”