Institutional investors call on EU Parliament to reject delay of deforestation regulation

Written by Natalie Tuck

14/11/2024

A group of institutional investors is calling on the European Parliament to reject a proposed delay of the European Union Deforestation Regulation (EUDR).

The Investor Policy Dialogue on Deforestation (IPDD), an initiative led by institutional investors, has given its support to the deforestation regulation and would like to see the European Commission’s proposal for a one-year delay rejected.

In a statement, the IPDD said that as investors the group recognises that “deforestation poses substantial risks to many companies and countries, their related securities, and therefore the instruments in which we invest”.

It highlighted its fiduciary responsibility to address these financial, reputational, operational, legal and regulatory risks.

“We support the case for and the passage of effective regulation to combat the supply and demand forces that contribute to deforestation, and have previously expressed support for the EUDR. While recognising that new legislation is always disruptive and can have some unintended consequences, we believe the EUDR is an important development whose introduction should not be delayed,” the IPDD said in a statement.

“We would like to see the European Parliament reject the European Commission’s proposal for a 1-year delay.”

Furthermore, the group said it was “particularly concerned” by recent suggested amendments that would extend the delay in the EUDR’s introduction and undermine the content of the legislation.

It sees no “justification for a delay of more than a year,” as it believes this would disadvantage countries and companies that have moved promptly to prepare for the new requirements.

“The final broad group of proposed amendments seeks to introduce a new category of ‘no risk’ countries, which we consider to be unnecessary and potentially counter-productive since the ‘low risk’ category already allows for light-touch monitoring but keeps supply chains under scrutiny. In the event that the European Commission’s proposal for a 12-month delay is approved, we urge EU policymakers to ensure that this period is used to improve traceability, implementation and compliance regimes.”

In addition, IPDD co-chair and Storebrand Asset Management CEO, Jan-Erik Saugestad, said: “We are particularly concerned by recent suggested amendments that would extend the delay in the EUDR’s introduction and undermine the content of the legislation, in particular traders exempted from the EUDR’s requirements, since they are key participants in the supply chains that need to be monitored."

The IPDD was launched in 2020 and currently has the support of 82 financial institutions from 21 countries, representing approximately US$1trn in assets under management.

It seeks to collectively engage with governments to take action to curb deforestation.

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