COP26 a chance to slow commodities-driven deforestation in Southeast Asia

highest rates, Indonesia, Malaysian Borneo, Climate change, COP26, Paris Agreement, US$100 billion annually by 2020, commodities-driven deforestation, soy, cocoa

The impact of deforestation in Southeast Asia is startling. The region continues to have among the highest rates of deforestation on the planet, having lost 14.5 per cent of forests over the past 15 years. From 2001 to 2019, the Philippines recorded 86 per cent of tree cover loss driven by deforestation.

In Indonesia, 74 million hectares of rainforest have been lost in the last 50 years, largely driven by the commodities sector. Meanwhile, Malaysian Borneo has lost forest cover twice as fast as the rest of the world’s humid tropical forests, fuelled by logging, land-clearing and conversion activities.

Southeast Asia exports 86 per cent of the world’s palm oil and 87 per cent of the world’s natural rubber and these plantations are projected to grow by over 4.3-8.5 million hectares to meet demand by 2024, further threatening forests in the region.

Nations most vulnerable to the impact of climate change have highlighted a “worrying lack of urgency”, in putting out a “Five-Point Plan for Solidarity, Fairness and Prosperity” ahead of the COP26 UN climate summit in Glasgow. The aims of the Paris Agreement have yet to be achieved and richer nations have not kept their promises on several key areas.

highest rates, Indonesia, Malaysian Borneo, Climate change, COP26, Paris Agreement, US$100 billion annually by 2020, commodities-driven deforestation, soy, cocoa

Cleared land at a palm oil plantation in Johor, Malaysia, on February 26, 2019. Photo: Reuters

COP26 is a critical juncture in the climate mission. Ahead of the meeting, over 100 developing nations, including the Philippines, have laid out their key negotiating demands, such as for rich nations to deliver on the commitment to provide at least US$100 billion annually by 2020 and through to 2025.

These highly vulnerable nations suffer disproportionately from the impact of climate change and discussions must look into the mitigation of such impact, the implementation of clear and transparent processes, and climate-related financing.

Conversations must also revolve around the issue of commodities-driven deforestation, which plagues the forests of many developing nations, threatening local biodiversity and livelihoods. Importantly, there will be no successful outcome at COP26 if it does not deliver for the most vulnerable across the full range of issues.

However, there are a few bright spots spurred on by the Covid-19 pandemic. Climate change is now high on the agenda, becoming a priority in Asia, and environment, social and corporate governance (ESG) considerations have become a major force driving business strategy. According to data company Morningstar, in the fourth quarter of 2020, ESG funds accounted for €100 billion (US$119 billion) of new money.

Meanwhile, governments have introduced plans and initiatives to combat deforestation, recognising their responsibility to break the link between trade in commodities and deforestation.

Consumer awareness of environmental issues has also been rising. What we are witnessing is the growing importance of climate change initiatives, such as deforestation agendas, for both the public and private sectors, which are aimed at meeting climate commitments and satisfying rising ESG scrutiny in financial markets.

An alternative method to combat deforestation is clearly needed. One example is the recently launched Rimba Collective, which aims to connect conservation funding with company operations.

The Rimba Collective seeks to create a self-sustaining and scalable financial mechanism that will invest in forest conservation and embed it as a cost of doing business. The initiative plans to provide US$1 billion to protect or restore 500,000 hectares of forest, supporting 32,000 individuals in forest communities in Southeast Asia over 25 years.

Disrupters like the Rimba Collective may be what the world needs to change the way that the commercially minded view forest conservation, turning the tide on those who have only seen biodiverse areas as barriers to growing farmland.

Comprised of buyers and processors of palm oil, the collective differs from other initiatives in providing a mechanism for the equitable sharing of responsibility and action by companies across the palm oil supply chain. The transparent mechanism ensures that investments and actions are linked to verified sustainable outcomes, and supports economic development and local job creation.

Importantly, the collective’s model has the potential to be replicated in other commodities sectors, such as soy, coffee and cocoa, which also affect tropical forests in developing nations.

Ultimately, to tackle the deforestation driven by the commodities sector and promote sustainable practices within the industry, we need mechanisms that directly connect the cost of doing business in tropical forest landscapes to forest protection and restoration projects that achieve a long-term impact on climate change, communities and biodiversity.

Stronger partnerships between the public and private sectors have the potential to bring positive change. Importantly, forest protection must be viewed as critical, as our failure to protect them could bring about irreversible climate change.

COP26 must move beyond the rhetoric and deliver significant progress. There must be a fundamental shift in how we view the production of commodities and the conservation of forests. Only then can change be lasting.

Michal Zrust is founder and director of Lestari Capital, a Singapore-based impact investment firm that developed the Rimba Collective

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