The Investors Policy Dialogue (IPDD)
In July 2020, Storebrand Asset Management initiated and established The Investors Policy Dialogue (IPDD), a collaborative investor led initiative to engage with public agencies and industry associations in selected countries on the issue of deforestation. The first sovereign engagement initiated by the IPDD was in June 2020 with Brazil, and since October 2020 has expanded to Indonesia.
IPDD has in December 2022 released its first-ever progress report, detailing objectives, legislative priorities, and progress across its Brazil, Indonesia and Consumer Countries working groups.
The objective of the initiative is to mitigate the risk to investors posed by the increasing rates of deforestation around the globe. The IPDD seeks to ensure long-term financial sustainability of investments in the countries they are invested in by promoting sustainable land use and forest management and respect for human rights, with an initial focus on tropical forests and natural vegetation. Whilst engaging with companies is important, halting deforestation requires government action. Given the critical importance of foreign direct investment for governments to fulfil their commitments to their electorate, as well as for domestic companies on whose earnings governments rely on, IPDD investors use their influence to add urgency and legitimacy to their concerns.
IPDD is currently co-chaired by Storebrand Asset Management and BlueBay Asset Management. As of December 2021, IPDD is supported by 57 global institutional investors, from 18 countries. The coalition now represents approximately USD $7.2 trillion of AUM.
"Deforestation is a very material risk for investors – we are concerned with not only its financial impacts but these broader consequences on biodiversity, climate change, and the violation of the rights of indigenous people and local communities – increasing potential reputational, operational, and regulatory risks".
Jan Erik Saugestad
Co-chair of IPDD and CEO of Storebrand Asset Management
To date, investor engagements on deforestation have largely been limited to dialogues with companies. Thus, dialogues mainly focused on biodiversity hotspots, many of which are in developing countries, and were generally led by equity investors. Engaging with companies is important to halt deforestation, but there are limits to what individual firms can achieve. Given that the responsibility for oversight of forests and nature lies with governments, investors can help enable industry-solutions by engaging directly with policy makers to complement engagement with companies. By complementing company-level engagement with sovereign engagement, investors can increase the likelihood of success in addressing deforestation, a systemic risk, requiring a holistic and multi-pronged approach.