A ‘forest footprint’ is the total amount of deforestation caused directly or indirectly by an organisation or product.

Many businesses unknowingly source products that contribute to deforestation in their supply chains, and their resulting forest footprint can create unexpected valuation risks and add to their climate change impacts.

Commodities and Deforestation

Global demand for agricultural commodities is the primary driver of deforestation, as land is cleared to produce biofuels, soya, palm oil and beef. Alongside timber and pulp, these commodities are the building blocks of millions of products traded globally. These in turn are wealth generators, or feature in the supply chains of countless companies across sectors.

For example, European markets buy 32% of Brazil’s soy production, where use of deforested land for the crop has grown rapidly over the last decade. This is fed to European livestock thousands of miles away, ultimately arriving on supermarket shelves or restaurant menus with no trace of its ‘forest footprint’.

As international pressure mounts to halt deforestation, increasing focus is falling on these primary commodities and the goods and services derived from them. This has direct implications for investors, who need to be aware of how their portfolios link to deforestation.

Deforestation and Climate Change

Up to 20% of all carbon emissions are caused by deforestation in the tropics and subtropics – more than from the global transport sector. This was first brought to worldwide public attention by the landmark 2006 Stern Review, ‘The Economics of Climate Change”.

Since then, tackling deforestation has risen steadily up the international climate change agenda, and is expected to be a core component of pivotal UN climate negotiations in Copenhagen this December to design the successor treaty to the Kyoto Protocol. The issue is being championed by world leaders including Nobel Laureates Al Gore and Wangari Maathai, former US president Bill Clinton, UN Secretary General Ban Ki Moon, and most recently HRH The Prince of Wales who convened Heads of State to take action on deforestation at the April 2009 G20 Meeting in London