Deforestation Free Pensions

Home to 80% of the world’s life on land, forests are crucial to maintaining biodiversity. But some of the world’s most critical ecosystems are being lost at an alarming rate. This is mainly through the production, procurement and financing of a handful of commodities, including beef, soy, and palm oil. Although there are some positive signs of progress, an area of forest more than eleven times the size of Wales was lost in 2022.

Pension funds are exposed to deforestation, land conversion and associated human rights abuses, especially facing Indigenous peoples, through the sectors and industries they invest in. As a result, they have a unique ability to help drive change, both within their own investments and across the finance sector more broadly.

Pensions are supposed to provide for the future but, as our research reveals, their substantial level of exposure to deforestation is putting the future at risk. It does not have to be this way, deforestation is a solvable crisis. There is a wealth of information, guidance, and data available for pension funds to take practical steps today and ensure they are globally responsible.

Saving for the future: A report into Wales’ public pension exposure to global deforestation

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Key findings

Nearly £1 in every £10 of investments made by the eight pension funds are at a high risk of financing deforestation.
This is equivalent to £1.8 billion across the partnership.
For some of the pension funds in the Wales Pension Partnership, AT LEAST 15% of their investments are in clients or holdings with a high deforestation risk.
But when looking at investments that are not high risk, but are LIKELY EXPOSED TO DEFORESTATION risk, we found that 44% of the investments are financing such clients or holdings.
That means, in total, MORE THAN HALF (54%) of the WPP’s investments are in clients or holdings at risk of being exposed to deforestation – equivalent to nearly £10 billion.

Main recommendations

Pension funds, like all financial institutions, have a unique and critical role to play in working to eliminate deforestation, conversion, and associated human rights abuses from global supply chains. Pension funds like those in the Wales Pension Partnership have an incredible opportunity to use their existing partnership to share knowledge, collaborate, and eliminate deforestation, conversion, and associated human rights abuse risks and impacts from their investments, and they can do this by:

Identifying how they are exposed to deforestation risks and impacts through their investments.
Setting a strong public policy, committing to eliminate deforestation, conversion, and associated human rights abuses within an ambitious timeframe, ideally no later than 2025.
Pension funds must engage with their asset managers and the clients/holdings they invest in to drive progress, by setting clear expectations for compliance and processes in place to redirect finance if sufficient progress is not made within a specific timeframe.
Pension funds can also transparently disclose their exposure to deforestation risk through their investment activities, as well as their progress towards eliminating these risks. This can also include reporting to pension fund members on the extent of deforestation risk in their pension, plan of action, timeframes and progress made. This should form part of their reporting duties under the WFG Act.
If progress is not made, and finance needs to be redirected, this redirected finance should align with the WFG Act, and be free from deforestation, conversion of natural ecosystems, and associated human rights abuses.

Wales's Public Pension report launch event

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