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Food companies risk value slide from deforestation exposure

Some of the world’s most valuable food and agricultural companies could lose up to a quarter of their value by 2030 because of their exposure to nature and climate risks.

Analysis published by the UN-backed Race to Zero campaign argued that markets are failing to adequately price in companies’ exposure to commodity-driven deforestation.

The report modelled the financial impact of realistic nature and climate transition risks for 40 systemically significant food, land and agriculture companies worth $2trn. It concluded that incoming policy and demand shifts could drive permanent value loss across the food and agriculture sector equivalent in scale to the 2008 financial crisis.

Agricultural input firms could lose up to 26% of their value by 2030 while restaurants and foodservice companies could face up to a 7% fall.

The analysis showed that quick and effective action by companies, including the development of more sustainable products and ensuring suppliers source inputs from deforestation-free markets, can enable them to protect value and mitigate all potential losses.

The report urged investors to eliminate commodity-driven deforestation from their portfolios by 2025 and invest in high-integrity carbon credits that support nature-based solutions.

More than 35 leading financial institutions with almost $9trn in assets under management have already signed the financial sector commitment on eliminating agricultural commodity-driven deforestation. The commitment has a target date of 2025 for ending deforestation in connection with the highest impact commodities: beef, soya, palm oil, pulp, and paper.