RIO DE JANEIRO - Dozens of global investors representing more than $617 billion in assets under management are demanding that companies adopt "zero deforestation" policies in Latin America to combat the effects of climate change, a firm advising the investors said.
Thirty-nine investors have joined forces to urge companies to adopt a similar policy to the region's soy moratorium, which helped reduce deforestation rates in the Amazon by two thirds, Green Century Capital Management said.
Kate Kroll, who coordinates the Boston-based firm's forest protection campaign, said corporations that source food from areas where large tracts of land have been cleared of forests to make way for agriculture, face reputational risks.
"Companies are increasingly concerned about this issues. They're looking to decouple their supply chains from deforestation," Kroll told the Thomson Reuters Foundation in an interview.
"The market has punished non-compliant actors," she said, citing a Malaysian palm oil producer which was dropped by corporate customers after investors learned the firm was cutting down tropical forests in Asia.
"If companies fail to protect themselves (from exposure to deforestation) than their brand may be damaged significantly," Kroll said.
Forest destruction accounts for nearly the same amount of global greenhouse gas emissions as the entire global transportation sector, Green Century said.
Food companies can reap returns for investors while preserving forests if they increase production on previously deforested land rather than cutting down more trees to expand agriculture, Kroll said.
Commercial farming was responsible for more than 70 percent of tropical deforestation between 2000 and 2012 and half of this was illegal, Green Century and other investors wrote in a letter to suppliers.
In Brazil, the country with the world's largest tropical forests, deforestation rates have increased since 2015 after falling for nearly a decade increasing pressure on farm companies to improve their practices.
South America's biggest country lost almost two million acres of forest between August 2015 and July 2016, according to data from Brazil's National Institute for Space Research (INPE).
Between 2003 and 2015, however, the rate of deforestation had fallen by about 70 percent.
Experts credit some of this improvement to the soy moratorium, a policy which had the support of large companies.
Expanding this moratorium into savanna lands in northeastern Brazil, known as the MATOPIBA, where deforestation has increased recently, could be an effective tool to prevent further forest losses, Kroll said.
Brazil's goal of reducing net forest loss to zero by 2030 will be impossible to achieve unless companies take a harder look at their supply chains to stop products produced as a result of deforestation from being sold around the world, Kroll said.