A coalition of 86 institutional investors managing a combined $9.5 trillion in assets has urged the financial industry to take concrete steps to eliminate deforestation from global investment portfolios by the end of this decade.
The UN-convened Net-Zero Asset Owner Alliance (NZAOA) — whose members include Allianz SE and the California Public Employees’ Retirement System — released new guidelines on halting deforestation, calling on investors to evaluate and reduce their exposure to forest-risk commodities such as beef, cocoa, soy, palm oil, timber, and rubber.
“Members of the Net-Zero Asset Owner Alliance are committed to reducing deforestation-linked risks by aligning their portfolios with net-zero targets,” said Pedro Guazo, CEO of the Office of Investment Management for the United Nations Joint Staff Pension Fund. “We aim to pursue action alongside other stakeholders to phase out deforestation and forest conversion from supply chains by 2030, protecting the planet’s ecosystems while boosting financial returns for our beneficiaries.”
The group cited escalating environmental, social, and financial risks from ongoing deforestation — which remains the second-largest driver of global greenhouse gas emissions after fossil fuels. Forests, which absorb roughly a third of global carbon emissions annually, are under increasing pressure from commodity-driven land conversion.
The report also highlights the systemic financial risk posed by ecosystem degradation, noting that unchecked deforestation can “disrupt value chains, diminish carbon sinks, and trigger irreversible ecological tipping points.”
“Forests have an outsized positive influence on respecting our planetary boundaries and securing economic prosperity,” said Jan Kæraa Rasmussen, Head of ESG & Sustainability at PensionDanmark. “Conversely, failing to safeguard these ecosystems is highly destructive – not only to our forests, biodiversity, local communities and Indigenous peoples, but to our financial markets.”
The NZAOA’s recommendations follow growing momentum in international policy. Deforestation is expected to be a central theme at the upcoming COP30 summit in Brazil, and new regulations such as the EU Deforestation Regulation (EUDR) are raising the bar on investor accountability.
The Alliance laid out a four-step pathway for investors:
- Assessment: Evaluate portfolio exposure to deforestation and associated human rights abuses.
- Commitments: Set 2030 targets to phase out deforestation risks linked to forest-risk commodities.
- Stewardship: Engage companies, asset managers, and policymakers to drive change.
- Transparency: Disclose actions, risks, and progress using measurable indicators.
“It’s drawing the pieces together to say, ‘hey, come on, investors can act, there’s enough on the table to be working on this,’” said Tamsin Ballard, Chief Investor Initiatives Officer at the Principles for Responsible Investment, which co-convened the NZAOA. “Let’s not forget the costs and implications if we don’t address this.”
In addition to investors, the guidelines include detailed actions for companies, policymakers, and data providers:
- Companies should commit to eliminating deforestation from supply chains and align public affairs strategies accordingly.
- Policymakers are urged to phase out harmful subsidies and implement mandatory reporting systems aligned with global climate goals.
- Data providers are encouraged to offer high-quality, actionable data to track and manage deforestation-related risks.
The call for action aligns with the broader push to integrate nature and biodiversity into financial risk frameworks. “Forests have an outsize positive influence on protecting our planetary boundaries and securing economic prosperity,” Rasmussen said. “Failing to safeguard these ecosystems will be highly destructive, not only to our forests, but to our financial markets.”
The NZAOA, co-convened by UNEP FI and PRI with support from WWF and Global Optimism, was the first financial coalition to set intermediate targets toward net-zero alignment and report annually on progress.
