We recognize the vital role forests play in climate change mitigation, biodiversity protection and in supporting livelihoods. Global deforestation accounts for nearly 20 per cent of all CO2 emissions, and deforestation driven by commodities such as palm oil, soy, cattle and timber is a major source of emissions in this sector. While we recognize the important role of agriculture and forestry production to economic development and the livelihoods of farmers and local communities, we are also concerned that the environmental and social issues associated with unsustainable production could have a material impact on companies that source such commodities.

We expect companies to address deforestation in a manner meaningful to their operations and wish to support their efforts to manage the risks and pursue the opportunities. Our expectations are directed at all companies in our portfolio. We are however mindful that deforestation risk may be especially relevant to companies engaged in activities related to the production of soy, palm oil, cattle and timber, which may not be areas of major impact to the companies in our portfolio.

Scope

This policy applies to all relevant companies in our portfolio, that are involved in production, trade, use or financing of forest-risk commodities, particularly palm oil, soy, timber and cattle products. The policy covers both upstream and downstream companies linked to forest-risk commodities through their operations and supply chains.

Members of HF's Board of Directors are a signatory to the Financial Sector Commitment Letter on Eliminating Commodity-Driven Deforestation, launched at COP26 in Glasgow in November 2021. As signatories, HF commits to seek to eliminate forest-risk agricultural commodity-driven deforestation activities at companies in our investment portfolios by 2025. These forest-risk commodities are: palm oil, soy, cattle and wood products.

We expect companies procuring these commodities to:

  • set a policy to eliminate deforestation from their supply chains by 2025;
  • institute a process of assessment and disclosure, including transparency on suppliers;
  • conduct ongoing due diligence; and
  • adopt a jurisdictional approach to avoid displacement of deforestation.