Investors Harness AI to Halt Deforestation
Technology is playing a “groundbreaking” role in PRI stewardship programme, which is gearing up to engage target companies across multiple sectors.
Advances in artificial intelligence (AI) have allowed global asset owners to take a novel approach to company engagement, through a campaign aimed at halting the destruction of the world’s tropical forests.
Spring, a stewardship initiative launched last year by the UN-supported Principles for Responsible Investment, uses the large language models behind revolutionary programmes like OpenAI’s ChatGPT chatbot to conduct in-depth research on companies involved in deforestation.
The technology informed a list of 40 global companies that have significant political influence over deforestation and land use in certain key jurisdictions. UN PRI’s members – investors with collective assets worth more than US$120 trillion – can now use that list to conduct targeted engagement.
This list could not have been compiled with anything like the same speed or accuracy before recent advances in AI, according to Ben Wilmot, Co-founder of Canbury, which supported the project.
“The AI technology enabled us to search, document, source, identify in any language at speed and scale the information that would have taken human-only teams a long time to do,” Wilmot told ESG Investor.
“It goes through the same process that a human would, in that it searches for relevant information, then stores, sources and interprets it. But it does that at a fraction of time [it would take humans]. And it can do it in Chinese in the Chinese regulations, and it can do it in Portuguese in the Brazilian regulations,” he said.
“So as an English-speaking consultancy based in London, it meant that we were able to go and consider some of the dynamics around policies in different languages at speed and scale that we wouldn’t have been able to do with only humans.”
Companies, countries, sectors
Deforestation is a cause of both biodiversity loss and climate change. Between 2000 and 2020, around 4.7 million hectares of forest was lost each year, predominantly in tropical regions.
At the COP26 climate conference in Glasgow in 2021, countries representing 90% of the world’s forests committed to halt and reverse deforestation by 2030. But net forest loss continues, and most investors have not taken up the cause with the enthusiasm many argue is necessary.
The Spring campaign hopes to address this. It focuses on a handful of key jurisdictions where deforestation is most rampant as a result of agriculture and mining, including Brazil, Argentina and Indonesia. It also focuses on the European Union, India and China, which have the biggest markets for commodities associated with forest loss, such as soy, palm oil, beef and critical minerals.
UN PRI’s list of 40 companies includes miners, food producers, commodity traders and financial services companies. Perhaps surprisingly, it also includes a number of major carmakers, such as Toyota, Volkswagen and Chinese electric vehicle giant BYD.
Tim Steinweg, UN PRI’s Head of Stewardship for Nature, said the presence of carmakers reflected the growing importance of critical minerals in EV batteries, particularly nickel mined in Indonesia.
“In the last two or three decades, food and agriculture has been the main driver of forest loss. But now we’re seeing a growing list from mining and minerals supply chains,” he said. “Nickel reserves in Indonesia have been found in areas that hold pristine forests. That was a starting point for us.”
He said this highlighted a paradox of the clean energy transition, whereby decarbonisation of transport could come at the cost of biodiversity loss.
“The need to decarbonise transportation is unquestionable, but if that comes at the expense of sensitive ecosystems and biomes, because those places are destroyed by mining the minerals needed for that transition, we’re worsening one problem while trying to solve another,” Steinweg said.
“It’s exactly that type of trade-offs that investors are in a good position to engage these companies on,” he said.
Steinweg said Canbury’s use of AI to compile this list was “groundbreaking”, adding: “We’re really confident that we’re on the right track, and they [Canbury] have been really helpful in that.”
Ready to engage
Steinweg said the Spring campaign had spent the last few months convening investors, and was nearly ready to begin engaging with target companies. He said it would follow a similar approach to that taken by Climate Action 100+, in which some of the world’s biggest investors engage directly with the most carbon-intensive companies on climate policy and lobbying activities.
“We’ve invited [investors] to apply to participate. As a participant you would join a smaller group of investors that would collectively engage any of those 40 focus companies. The PRI has a facilitating role, it doesn’t actually do those engagements on behalf of anyone,” he said.
Investors can choose whether to have a lead role, or a collaborating role. “For each company, we’re forming a group of one or two lead investors that are supported by four to six collaborating investors,” he said.
While the main focus of the campaign is nature and biodiversity, Steinweg said it crossed over into other ESG topics.
“Deforestation is a multi-dimensional topic,” he said. “It touches on climate, it touches on biodiversity, it touches on human rights, it touches on human health, and it touches on corporate governance and corruption. The solution to each of those concerns is the same, which is a global halt of deforestation.”
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