Stephanie Pfeifer is CEO of the Institutional Investors Group on Climate Change (IIGCC), a European-focused investor-led membership organisation.

As world leaders meet in Belém for the so-called Amazon COP, the global financial community should seize the opportunity to declare its commitment to managing the growing investment risks posed by deforestation in the Amazon and beyond.

Besides emphasising their support for a global transition towards sustainable supply chains at the COP30 talks, investors can also help unlock the investment and financing opportunities that such a transition makes possible.

The financial impacts of deforestation-related risk are broad and growing. For long-term asset owners such as pension funds and insurers, exposure to deforestation can affect everything from investment performance to reputational resilience. For investors more broadly, addressing deforestation exposure is increasingly part of fulfilling fiduciary duty in a world with compounding climate- and nature-related risks.

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To that end, many investors are already taking meaningful steps to address deforestation risk.

Some are working directly with portfolio companies to improve traceability, strengthen supply chain policies, and support the economic inclusion of smallholder farmers. Others are using geospatial tools and satellite data to monitor deforestation in real time and inform engagement discussions. There has also been positive momentum in integrating deforestation into risk assessments, stewardship strategies, and exclusions policies.

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This work cannot be done in isolation. For investors looking to accelerate action, collaboration will remain key. Global initiatives like the Finance Sector Deforestation Action (FSDA), launched at COP26, have raised the bar of ambition for investors seeking to address agricultural commodity-driven deforestation risks in their portfolios.

EUDR should be implemented without further delays

While previous COPs highlighted the urgent need to halt and reverse deforestation by 2030, only a few countries have taken steps to drive that action through policy.

One of the few jurisdictions mounting a comprehensive approach to deforestation is the European Union, with its Deforestation Regulation (EUDR) – a prime example of ambitious policy that can transform supply chains while protecting company competitiveness.

In its current form, the regulation frames deforestation as a material business risk and safeguards companies taking proactive steps toward deforestation-free supply chains by ensuring that non-compliant companies are penalised for falling short on due diligence. Given the level of ambition, the multiple changes in direction around the implementation of the EUDR have understandably raised concern.

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Last year’s delay of the EUDR was disappointing for many investors, who view the regulation as a critical lever in mitigating deforestation risk exposure. The EU’s recent announcement that it will no longer propose a further one-year delay but instead implement a six-month transition period to ensure the legislation enters into force as planned is a more positive sign.

We’re pleased that the voices of investors and businesses calling for a timely implementation – given the importance of the law and the work done by a number of producer countries – have been taken into account.

Maintaining momentum, beyond policy

Though some provisions of the EUDR still lack certainty, public policy remains integral to redirecting financial flows towards deforestation- and conversion-free production systems.

A clear, well-designed regulatory environment provides investors with the consistency and confidence to scale solutions and make long-term decisions for financial stability and sound risk management. Continued engagement with policymakers is therefore essential, with COP30 providing a crucial platform to advance public-private dialogue on global deforestation.

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It is important to remember, however, that regulation is not the only lever for progress. The need for meaningful investor action – and for maintaining momentum – continues.

When IIGCC assumed the secretariat role for FSDA in 2024, the aim was to advance the initiative’s ambitious agenda and mainstream deforestation action across the investment community. As FSDA concludes its four-year term in December, IIGCC will continue this work through the Deforestation Investor Group (DIG) – an investor-led platform that will maintain momentum for multistakeholder action, align with global goals, and be reinforced by IIGCC’s forthcoming guidance on integrating deforestation into net-zero planning.

Ten years on from Paris, forests are firmly a climate issue The first Global Stocktake underscored the urgent need to halt and reverse deforestation and forest degradation by 2030 to keep 1.5C within reach. For the first time, countries were asked to report on forest-related progress, turning pledges into measurable benchmarks and cementing deforestation as central to climate targets.

Aerial view of a rainforest in the Colombian Pacific region, nestled within the heart of the Chocó Biogeographic Region, one of the world’s most enigmatic biodiversity hotspots. (Photo: Mateo Giraldo Amaya/Cover Images)

Aerial view of a rainforest in the Colombian Pacific region, nestled within the heart of the Chocó Biogeographic Region, one of the world’s most enigmatic biodiversity hotspots. (Photo: Mateo Giraldo Amaya/Cover Images)

The conference also built momentum around nature-based solutions, with financial commitments and policy frameworks aimed at protecting tropical forests and empowering Indigenous stewardship. The message was clear: there is no net zero without addressing deforestation.

Now, in the lead-up to COP30, attention is turning to emerging finance mechanisms – such as the Tropical Forests Forever Facility (TFFF) spearheaded by Brazil – that directly target deforestation.

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For the COP30 presidency and delegates, the “Amazon COP” is a clear opportunity to align the climate and biodiversity agendas, reaffirm their interdependence, and strengthen coordination across the Rio Conventions.

With that stage already set, it’s crucial that the financial sector continues engaging and maintaining dialogues with corporates, policymakers, and the wider range of stakeholders to support global efforts to address deforestation. This includes participation in engagement work such as through the DIG.

Progress remains possible, but the window for action is narrowing as deforestation continues unabated. The cost of inaction will far exceed the investment required to build resilience and end deforestation and land-conversion as soon as possible.

The post Investor action is crucial to maintaining progress on deforestation risk appeared first on Climate Home News.

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