Investors warn: deforestation is a systemic financial Risk

Deforestation accelerates climate change, reduces biodiversity, and destabilises ecosystems that are essential for regulating global carbon and water cycles. Its significance is well known, however distant it can sometimes seem in Western cities and urban environments.

Seeking to raise its profile within the financial sector however, the Belém Investor Statement on Rainforests reminds us of the systemic financial risk to global markets from deforestation. This joint declaration by 51 investors representing more than USD 4.5 trillion in assets, calls for urgent, enforceable forest-protection policies and an end to tropical deforestation.

Forests are critical to climate stability, biodiversity, and the resilience of global supply chains. Their destruction disrupts valuable ecosystems, and introduces volatility into sectors ranging from agriculture to consumer goods. For investors, this can translate into material financial risks, from stranded assets and regulatory uncertainty, to long-term economic instability. The message, at least from these investors, is clear. Halting and reversing deforestation by 2030 is essential for safeguarding both planetary and financial systems.

The Oxfordshire Pension Fund, a signatory to the statement, articulates the principles driving this collaboration in a statement noting that deforestation is “a systemic financial risk. Protecting forests is essential to global economic stability and a resilient financial system”. This reflects wider industry concerns around fiduciary duty and risk management, as well environmental considerations in an era that recognises the potential impacts of environmental degradation on asset valuations and portfolio performance.

The collaborative nature of the Belém Statement emphasises that tackling deforestation requires more than voluntary and/or corporate action. These investors are calling for effective regulation, transparency, and clear policy signals that align financial flows with global climate and nature goals. This includes robust frameworks that allocate capital to activities that support rather than undermine long-term value creation.  

For asset owners and managers, the Belém Statement is a signal that engagement on deforestation risk is rising up the responsible investment agenda. This means we’re likely to see more pressure on managers to integrate nature-related risks into portfolio analysis, engage with companies on supply chain transparency, and support policy initiatives that drive systemic change.

For more information on this topic and to understand how to start thinking about integrating deforestation risk into your policies and processes, please get in touch.