How CDP data is leading to action on deforestation

Sumitomo Mitsui Banking Corporation (SMBC)

Sumitomo Mitsui Banking Corporation (SMBC) is a Japanese multinational bank with roots going back to 1876. It is one of the largest banks in the world, known for its extensive global network and diverse range of financial services.  

In March 2023, Sumitomo Mitsui Banking Corporation (SMBC) and KAO Corporation entered into a four-year sustainability-linked loan (SLL) agreement [1]. This ground-breaking partnership exemplifies the growing trend of aligning financial incentives with environmental and social performance.  

The loan's interest rate is contingent upon KAO's achieving specific sustainability performance targets (SPT) [2]. These targets, aligned with KAO's broader sustainability strategy, primarily focus on environmental impact. A crucial element of the agreement involves KAO's performance on the CDP climate change, forests, and water security scores, whereby achieving an "A" score in at least two of the three categories entitles KAO to a preferential loan rate [3]. 

In 2023, KAO received a triple-A score from CDP for its sustainability performance across three categories [4].  To further amplify its sustainability initiatives, KAO has invested significantly in pulp technology. This technology, which promotes forest conservation and efficient pulp utilization, has led to a 97% volume of FSC-certified products, according to its disclosure through CDP. In 2022, KAO supported 390 farms in achieving RSPO certification and purchased all associated certification credits, based on CDP disclosure. This mechanism directly benefits farmers by providing a stable income through premium pricing. 

Another company entering into agreements with SMBC includes Nippon Yusen Kaisha (NYK), with a US$600 million loan agreement associated with its environmental performance through CDP’s score [5]. By linking financial incentives to environmental performance, such agreements encourage real economy to prioritize sustainability in their operations and value chain. 

Etica Funds was founded in 2000 on the conviction that analyzing issues from an ESG viewpoint can deliver greater value in terms of risk-adjusted performance. Offering exclusively sustainable and responsible mutual funds, Etica can effectively manage risk and play an active part in shareholder advocacy to support the transition towards sustainable and nature positive corporate action.  

As a signatory of the Finance for Biodiversity Pledge, deforestation and land-use change has been a focus of Etica-led investee engagement actions. Since the launch of the Pledge, Etica Funds has worked closely with CDP – particularly the CDP Forests Champions program – to leverage the CDP forests dataset to identify priority companies for engagement, focusing primarily on corporate forest-related target setting performance. In 2024, work has been done to further understand and engage corporates on landscape approaches that have been shown to deliver a range of environmental and economic benefits at scale.  

New resources are being allocated towards company engagement, with the aim of expanding the current engagement strategy to increase the scale of Etica forest-related corporate stewardship.  

Etica recognizes that there are still significant forest-related data gaps that impede effective engagement and action. As such, several companies with a large potential impact on forests have been identified and requested by Etica respond through CDP's questionnaire via the CDP Non-Disclosure Campaign.  

Etica will continue to leverage CDP forests data to engage investees with the goal of responsibly managing financed deforestation and land-use change.  

Green Century is one of the first fossil free mutual funds in the United States. The firm deploys a sustainable investment strategy and in-house shareholder advocacy program to champion a range of environmental topics – these include reducing deforestation driven by agricultural production, expanding renewable energy, and protecting ocean life from the harmful effects of plastic pollution.

As part of its shareholder advocacy work to reduce deforestation, Green Century worked closely with CDP, in particular the CDP – in particular the CDP Forests Champions program – to leverage CDP corporate forests data to understand the forest-related footprint of investees. Over the past several years, numerous engagements were conducted to improve the quality of corporate forest protection policies with a focus on establishing a timebound deforestation-free date of 2025 in line with the Accountability Framework initiative guidance. Recently, Green Century has focused engagement on beef and soy commodities and the data captured by CDP has allowed the FI to both scale and enrich corporate engagements.

Green Century has successfully won multiple no-deforestation commitments through the withdrawal of shareholder resolutions informed by data provided by CDP.

CDP’s forests data directly supports Green Century as a participating member of Nature Action 100, the Ceres Investor Network on Climate Risk and Sustainability, and a signatory of the Finance for Biodiversity Pledge and PRI Working Group.

Founded in 1998, JGP is an independent asset management company with extensive investment experience in Brazil and abroad. JGP strives to achieve excellence in funds management to combine consistent returns with active risk management and has integrated ESG concepts into analysis and management processes since 2020.  

JGP has worked closely with CDP, leveraging the CDP's forests dataset to fill key forest and nature-related data gaps and, as a signatory of investor groups such as Finance Sector Deforestation Action, Finance for Biodiversity Pledge, Investor Policy Dialogue on Deforestation, and FAIRR, to fulfill key corporate engagement activities. These engagements are aimed at improving corporate transparency on forest-related practices and policies, with a particular focus on traceability and certification of forest risk commodities such as cattle. Successful engagements have been recorded, particularly with a large multinational producer of fresh and frozen protein foods, with the company demonstrating progress in its traceability of indirect suppliers over two separate JGP engagements.  

As a member of the TNFD's LEAP pilot project led by UNEP FI and Global Canopy, JGP recently worked with the CDP Forest Champions program to understand how to leverage CDP forests data to support a LEAP assessment. As the CDP questionnaire continues to develop and provide TNFD-aligned datapoints, JGP looks forward to working with CDP to improve TNFD LEAP assessments.  

In the future, JGP will increase both the scale and scope of ESG engagements, with the aim of not only developing institutional knowledge on forest and biodiversity-related issues, but also to disseminate good practices already used in the market for evaluating implementation of those engaged.

Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. It draws on more than a century of financial stewardship and the full resources of its parent company to serve individuals, institutions, and retirement plan members worldwide. Manulife Investment Management oversees more than CAD$ 657 billion in assets under management across multiple asset classes [6]. Capabilities in public and private markets are strengthened by an investment footprint that spans 18 geographies, including 10 markets and 120 years of on-the-ground experience in Asia.

Manulife Investment Management supports the ongoing work of CDP as the data platform provides investors with climate, water and forest/biodiversity data that enables comparison of issuers in these areas around the globe. Manulife Investment Management believes the importance of CDP reporting will likely grow as the reporting platform is incorporating new standards from the ISSB and the TNFD. 

In particular, Manulife Investment Management used Forests Champions program's tools and resources across several streams of work. The CDP team conducted an in-depth analysis of CDP responses of nine issuers and identified engagement points. Findings and analysis provided by CDP were leveraged in conversations with companies to discuss deforestation exposure and risk management across their supply chains. These conversations covered specifics on certification schemes, grievance reporting, commodities volumes, revenue dependencies, and traceability.

In addition, Manulife Investment Management reviewed a subset of holdings through a forest risk assessment using CDP’s data and assessment framework. The exercise provided a high-level view into potential portfolio exposure to deforestation risks and opportunities. This type of assessment will be increasingly important as Manulife Investment Management works to meet the needs of clients who may want to remove deforestation risks from their investment portfolios. 

Manulife Investment Management looks forward to continuing to partner with CDP to leverage their comprehensive and global data sets on nature risks and opportunities [7].