Deforestation Emerges as a Material Financial Risk, Forcing Investor Escalation

Prepared by Schroders’ sustainable investment team, led by Stephanie Williams and Xinxin Dong, the paper reviews four years of portfolio action under its deforestation commitment and the implications for investment risk management. 

• Global forest loss continues to accelerate, making deforestation a financially material risk tied to regulation, supply chains, and long-term asset values.

• Schroders combined data integration, targeted engagement, and escalation, voting against directors at over 20 companies and divesting where progress stalled.

• Regulatory pressure, including the EU Deforestation Regulation, is sharpening transition risks across commodities and financial institutions.

The full paper details how deforestation risk is reshaping stewardship, portfolio construction, and fiduciary expectations.