Earlier this month, the French government released a draft of its National Strategy to Fight Imported Deforestation (stratégie nationale de lutte contre la déforestation importée: SNDI) for public consultation. Importantly, the high-level document recognises that the financial sector can contribute to combating deforestation.
Overview
With a time horizon set for 2030, the strategy defines imported deforestation as ‘the importation of raw or processed materials whose production contributed, directly or indirectly, to deforestation, forest degradation or to the conversion of natural ecosystems outside of the national territory’. The strategy targets those commodities previously identified as drivers of deforestation by recent European Commission studies, namely palm oil, soy, rubber, beef, maize, cocoa and coffee.1
The set of objectives outlined by the strategy relies on scientific research and knowledge sharing as well as development policies and trade agreements. It also proposes both voluntary and mandatory approaches targeting most demand- and supply-side stakeholders.
A role for the finance sector
Crucially, the SNDI recognises the need for increased due diligence in investment practice. France is already recognised for its leadership in responsible investment (Article 173 of its Energy Transition Law namely places extra-financial reporting requirements on investors).
Along the same lines, objective 6 of the SNDI (under axis 3) aims to tackle imported deforestation through the explicit integration of deforestation issues in investment and lending strategies and policies. The strategy proposes to:
- Expand reporting requirements, both for corporations and investors
- Increase the financing of sustainable agriculture and forestry
- Encourage French institutional stakeholders to adopt commitments (including 2-degree compatible strategies)2
- Foster green finance and innovative approaches (through green bonds and labels for ‘sustainable’ financial products)3
More corporate commitments and transparency to feed decision making
Besides the SNDI proposal to foster sectoral approaches to zero-deforestation commitments at the national level (objective 14), the draft strategy also emphasises the importance of corporate transparency and extra-financial reporting (objective 11).
Further to France’s recent adoption of legislation requiring certain companies to implement due diligence with regards to environmental, social and governance (ESG) risks in 2017, the SNDI proposes to reinforce Directive 2014/95/EU (which requires large companies to include non-financial statements in their annual reporting). This may support better investment practice through increased and improved corporate reporting.
Demand for certification
Considering the extent to which commodity supply chains and investors rely on responsible sourcing and certification to gauge their investees’ or clients’ approach to deforestation commitments (and their own), it is worth highlighting a few other objectives of the strategy.
The SNDI proposes to support the uptake of procurement policies (objective 12), improve product labelling (objective 10) and push for more certification and more stringent certification requirements (objective 8).
In relation to the reinforcement of certification standards, the document raises a comprehensive range of ESG issues commonly found in soft commodities supply chains and that are part of SPOTT’s assessment frameworks for both palm oil and timber and pulp companies. These include the adoption of High Conservation Values (HCV) and High Carbon Stock (HCS) methodologies, no peat planting and no conversion criteria; adoption of Free, Prior, and Informed Consent (FPIC), labour rights and International Labour Organisation (ILO) conventions and smallholder support.
Taking it (up) and away
The strategy recognises a need to strike a balance between environmental concerns and development objectives, thus championing various approaches across different commodity sectors and producer countries. To this effect, the current draft suggests that the strategy will rely on various, more or less strict, definitions of forests depending on contexts (FAO, national/legal definitions and definitions derived from the HCV/HCS approaches). While it is important to ensure that local and regional conditions are considered, the level of protection afforded to forests depends on the definitions used.
Importantly, the document currently lacks precise, numerical targets, which may limit its impact and complicate the assessment of its effectiveness and fulfilment.
View the consultation documents and respond to the consultation here: http://www.consultations-publiques.developpement-durable.gouv.fr/spip.php?page=article&id_article=1849
The consultation on the SNDI will remain open until 24 July 2017.
Banner image credit: Gregoire Dubois on Flickr CC BY-NC-SA 2.0
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1. While timber and pulp also are commodities associated with deforestation, the strategy highlights the existence of other commodity-specific policy instruments such as FLEGT and the EU Timber Regulation (which came into force in March 2013) which aim to address deforestation.
2. Namely through the Finance for Tomorrow initiative.
3. Including through the EU action plan on sustainable finance.
