Investor campaigns concerning deforestation may be few and far between but rank among some of the most successful engagements in recent proxy seasons. In the last two years, just two deforestation shareholder proposals have been subject to a vote at U.S.-listed companies. Both proposals, submitted by Green Century Capital Management, went on to win majority support, an impressive feat given the broader decline in support for ESG proposals this season.

The lack of deforestation proposals reaching proxy ballots is, in part, due to the significant number of withdrawal agreements made with issuers. In the past two years, Green Century reached agreements with six issuers, including Procter & Gamble, Conagra, and JPMorgan, to address deforestation risks in their supply chains, according to Insightia Voting data. Given the impressive support deforestation proposals continue to win at annual meetings, it’s reasonable to assume that the companies which reached agreements did so because the proposals would likely win the favor of investors.

This increased pressure from shareholders regarding addressing deforestation has been driven by increased collective action on a global scale. In November 2021, as part of the United Nations Framework Convention on Climate Change (UNFCCC), 33 financial institutions representing $8.7 trillion in assets committed to eliminating commodity-driven deforestation from their investment and lending portfolios by 2025. The hotly-anticipated Task Force for Nature-related Financial Disclosures (TNFD) framework will also standardize deforestation-related reporting when it is finalized next year.

Driving action

Green Century’s campaigns at Home Depot and Bunge achieved overwhelming support from shareholders, with the proposals receiving 64.7% and 98.9% support, respectively.

Even more impressive was the fact that the proposal asking Bunge to report on how it intends to eliminate deforestation in its business practices was endorsed by management. The company committed to producing said reporting and, according to a May 24 press release, has already surpassed its non-deforestation and sustainability targets related to indirect supply chains in South America.

In a September 15 press release, Home Depot similarly announced that a third-party firm had begun an independent assessment of the company’s efforts to combat deforestation, showcasing how companies are responding swiftly to investor pressure on the topic.

A similar proposal, filed by SumOfUs at Yum! Brands, won 33.3% support at the fast-food giant’s 2020 annual meeting. Speaking with Insightia, SumOfUs’ Campaign Director Fatah Sadaoui said that while its anti-deforestation activism campaign at Yum! Brands did not “dramatically transform the organization,” it changed the way that the company spoke to the activist in negotiations, and how it internally looked at deforestation in its supply chain.

A multi-faceted approach

One distinctive feature of deforestation proposals that likely contributes to their success is their unique interlinking of environmental and social (E&S) considerations. Sadaoui told Insightia that a “social, community-centered, approach to tackling climate chaos through fighting deforestation is central to any kind of true, lasting positive impact.”

The activist investor noted that, when addressing deforestation-related risks, companies should focus on both the E&S impacts of its deforestation practices in equal measure, warning that commitments are worthless if the company still “denies workers and communities their dignity and humanity.”

Nestle serves as a prime example of that fact, having faced sustained pressure from investors to improve oversight of both the E&S aspects of its palm oil supply chain. In October, the Swiss food giant agreed to cut ties with Indonesian palm oil supplier Astra Agro Lestari (AAL), following pressure from a coalition of 55 Indigenous people and investors over alleged environmental damage and human rights violations.

With ESG becoming increasingly more nuanced, shareholder proposals linking E&S considerations are likely to make their way onto more proxy ballots.

Actionable steps

Key to addressing biodiversity risk is ensuring that issuers make good on their commitments and establish increasingly stringent targets and goals. Investors can help drive this change through consistent engagement.

While some companies have been quick to take actionable steps, not all companies are as willing. In the years following SumOfUs’ Yum! Brands campaign, Sadaoui noted that the company has taken only minimal steps to address the issues raised in the original proposal.

One investor that wished to remain anonymous similarly told Insightia that many companies’ “actions do not yet commensurate with the size of said risk.” Inaction of this sort will not go unnoticed by investors, with the investor warning that firms will become “uninvestible” for certain asset managers if they continue to resist addressing deforestation risks.