Coalition of significant asset owners announces strategy to combat forest degradation, valued at a staggering $9.5 trillion.
In November, the COP30 agenda will place deforestation at the forefront of discussions, with the event scheduled to take place in Brazil, home to the world's largest tropical rainforest. This rainforest acts as one of the world's major carbon sinks, making its preservation crucial for the fight against climate change.
As of mid-2025, mandatory TNFD (Taskforce on Nature-related Financial Disclosures) disclosures addressing deforestation are not yet universally mandated by law but are increasingly being integrated into various frameworks and company practices. The TNFD is actively advancing its work on nature-related data solutions and disclosure recommendations, with some companies voluntarily adopting TNFD-aligned reporting, especially around deforestation risks and commodity sourcing.
The UK government is advancing climate-related transition plan disclosure requirements aligned with frameworks like the Transition Plan Taskforce (TPT) and the ISSB’s IFRS S2 climate disclosure standard. These frameworks emphasize sector-specific disclosures and principles such as Ambition, Action, and Accountability, but the current focus is more on climate transition plans rather than mandatory TNFD disclosures specifically on deforestation.
Regions like California have stringent climate disclosure laws but have yet to incorporate mandatory TNFD disclosures. California’s Climate Accountability Package (CCAP) mandates greenhouse gas emissions disclosures and climate-related financial risk reporting starting January 2026, but it does not specifically mandate TNFD disclosures or deforestation reporting yet. The state is still issuing regulatory guidance to clarify the rules.
Companies active in supply chains linked to deforestation are starting to align voluntarily with TNFD core indicators to meet stakeholder and market expectations. For instance, Kao is voluntarily using TNFD core disclosure indicators to address deforestation risks—for example, disclosing volumes of high-risk commodities and certified sourcing (e.g., RSPO-certified palm oil). These efforts include traceability and satellite monitoring of forest footprints and form part of broader corporate sustainability measures aiming at deforestation-free supply chains by 2025.
Investor members of the Net-Zero Asset Owner Alliance (NZAOA) are encouraged to assess their portfolios for exposure to deforestation and phase out any exposures by 2030. The NZAOA, which collectively manages $9.5 trillion, has set out an action plan to help investors tackle deforestation exposures across their portfolios. Unlike other Net Zero Alliances, the NZAOA continues to enjoy strong backing from its members and has only seen a few exits and several major new joiners.
The NZAOA aims to phase out deforestation and forest conversion from supply chains by 2030, while protecting the planet's ecosystems and boosting financial returns for beneficiaries. This phase-out process involves active engagement with companies, asset managers, and policy makers. The guidelines of the NZAOA are recommendations and not a binding requirement for membership.
The EU introduced a Deforestation Regulation (EUDR) two years ago, aimed at minimising deforestation exposure for products traded in the EU. Disclosure standards such as ISSB and TNFD have played an important role in moving nature risks up the agenda for corporations and investors.
The trend of deforestation is accelerated by climate-related weather events such as wildfires. Deforestation is the world's second largest source of greenhouse gas emissions, after fossil fuels. The NZAOA continues to push for action alongside other stakeholders to phase out deforestation.
The COP30 agenda will undoubtedly provide a platform for discussion on the global efforts to combat deforestation, with Brazil serving as a significant location for these discussions due to its vast rainforests. The NZAOA's commitment to reducing deforestation-linked risks by aligning their portfolios with net-zero targets, and the collaboration between investors, policy makers, companies, and data providers, as emphasised by the NZAOA, will be crucial in these discussions.
- The NZAOA's voluntary adoption of TNFD-aligned reporting, especially around deforestation risks and commodity sourcing, aligns with the global discussions on deforestation at the COP30 agenda.
- Companies in various supply chains, such as Kao, are voluntarily using TNFD core indicators to address deforestation risks, reflecting the increasing integration of nature-related financial disclosures into business practices, as the TNFD advances its work on data solutions and recommendations.
