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New initiative to bring transparency to $1tn in deforestation financing

Jordan Major

The Global Canopy and Stockholm Environment Institute has launched Trase Finance, an initiative aimed at improving accountability among financial institutions. The initiative also seeks to help institutions clean up their portfolios. 

In a press statement, the proprietors said that the initiative will be officially launched on October 28, in a forum that involves leading figures from the finance sector and the civil society. 

Trase Finance is established on Trace’s supply chain mapping capabilities that. The chain links trade of commodities that drive deforestation to financial markets.

Upon launching, Trase Finance will cover the financing of commodity traders exporting Brazilian beef, Brazilian soy, and Indonesian palm oil.  By 2021, the initiative is set to expand and cover more than half of the volume of globally traded soft commodities.

For example, Trase estimates that exports of Brazilian soy are associated with 50,000 hectares of deforestation risk. The exports are traced to $379 billion of equity investments, $250 billion held in bonds, and $160 billion of loans.

According to Toby Gardner, Director of Trase and Senior Research Fellow at SEI: 

“Data is the foundation for robust risk management. We are extremely pleased to have launched Trase Finance which allows financial institutions to now take more concrete steps towards tackling the risk in their portfolios, while also continuing to push companies and investors to improve disclosure to close remaining data gaps.”

Through the initiative, financial institutions are able to systematically identify their exposure to deforestation-risk through their financing of commodity traders. 

On the other hand, civil society, governments, and regulators will be able to strengthen the accountability of financial institutions. It will be enabled through assessing their exposure to deforestation risks and monitoring progress against policy commitments.

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