Our deforestation commitment: four years in review
Schroders joined the Financial Sector Deforestation Action commitment in 2021, during COP26. This updates our approach and progress since then.
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In 2021, during COP26, Schroders joined the Financial Sector Deforestation Action (FSDA) commitment to use best efforts to eliminate agricultural commodity-driven deforestation within our investment portfolios by the end of 2025. Global tree cover has been steadily falling since the turn of the century. In 2021, 25 million hectares (Mha) was lost, 3.7 Mha of this being from primary forests and despite global efforts, this trend hasn’t abated. 2024 witnessed 30 Mha of loss, 6.7 Mha of which was from primary forest.1
Deforestation is a key driver of both climate change and biodiversity loss, contributing 11% of global carbon emissions2, outstripping both aviation and cement production. Conversely, protecting, managing and restoring forests could provide over one-third of the greenhouse gas absorption needed to stabilise warming to below 2˚C.3 Forests also play a critical role in mitigating physical risks such as soil erosion, fires and flooding. Finally, on the social side, forests support the livelihoods of over 1.6 billion people worldwide, including many indigenous and local communities.4 Disruption of forest ecosystems and the services they provide can therefore have a more systemic impact on diversified global portfolios.
These trends, challenges and opportunities have stimulated increased policy focus on the topic of deforestation. For example, the EU has introduced the EU Deforestation Regulation which, although delayed until 2026, will require intensive supply chain traceability to ensure zero deforestation for agricultural commodities. Non-compliance could lead to fines of up to 4% of annual turnover for companies and supply chain disruptions. In addition, the latest COP30 negotiations in Brazil encouraged development of a voluntary deforestation roadmap to outline the actions required to meet the global climate stock take commitment made at COP28 to halt and reverse deforestation and forest degradation by 2030.
Given the physical and transition risks posed by deforestation, and efforts to abate and reverse the pace of loss, it is also one of the sustainability issues most top of mind for both investment managers and asset owners. In Responsible Investor’s 2025 Nature Survey, 74% of respondents considered deforestation the most financially material nature-related risk for investment portfolios.5
The targets we established in 2021 reflected the recognition that deforestation-related risks were becoming increasingly material, and our intent to proactively manage the effects of those changes.
Our strategy at Schroders has comprised four key elements:
- Identify at-risk companies and prioritise largest holdings with highest exposure.
- Engage portfolio companies according to their level of priority.
- Monitor progress on an annual basis.
- Escalate where companies are unable to demonstrate sufficient progress and compliance.
This article outlines how we have implemented this strategy over the last four years, reflecting on our actions and progress, as well as providing a forward-looking view of next steps.
[1] UN FAO, “Global Forest Resources Assessment" 2025.
[2] Project Drawdown, “How stopping deforestation is a powerful “emergency brake” climate solution” March 2025.
[3] IPBES, “The Global Assessment Report on Biodiversity and Ecosystem Services” 2019. [Online].
[4] WWF, “Why forests are so important” 2025.
[5] Responsible Investor, "RI Nature and Investors Survey 2025: Results" June 2025.
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