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Breakfast Event: Finance, Forestry & PEFC: How Is Forest Certification Relevant?
The presentation about explains how forest certification can help in capturing opportunities and mitigating risks inherent to the financing of forest-related assets, financial products, companies and operations by providing transparent information, traceability and assurance of sustainable management practices.
PEFC Forest Certification and the Finance Sector Ben Gunneberg, Secretary General, PEFC International London, 25th October 20123
What is PEFC? § Global, not-for-profit, non-governmental organisation based in Geneva, Switzerland § Voluntary mechanism promoting sustainable forest management providing independent, third party certification of good practices § Alliance of national forest certification systems with global representation and an international chain of custody § Worlds largest forest certification system and provider of two thirds of the world’s certified sustainably managed wood § Certification system of choice for small family forest-owners4 Programme for the Endorsement of Forest Certification
Finance, Forestry & Certification Financial Significance Sustainability Significance § Global investment universe of § 17% of global CO2 emissions managed forests: ~300-500 bn § 1 in 5 people depend on forests USD (+100 bn USD by 2030) § 80% of terrestrial biodiversity § Physical assets § 10-15 bn USD assets and § Financial assets revenues lost annually from illegal § Lending, investing, banking, logging commodity trading, credit ratings Enhances the underlying asset value Reduces risk Sustainable Forest Management Standards, assurance, transparency and traceability5 Forest Certification
What is Forest Certification? Elements of Certification Certification Delivers Sustainable wood raw material is: • legal: the wood is harvested following local legislation and international agreements and the forest owner has been compensated accordingly Forest Management Certification • from well managed forests: forestry operations have been conducted maintaining forest s ecological, social Chain of Custody Certification and economic values • traceable: the raw material supply chain is controlled and verified from the harvesting site up until finished products6
PEFC Sustainable Forest Management Requirements § Requires compliance with all fundamental ILO conventions § Tailored to specific needs ranging from company to family and community owned forestry § Sets highest standards for forest certification aligned with the majority of world’s governments, including – Maintaining & enhancing biodiversity – Prohibition of forest conversions – Prohibition of most hazardous chemicals, GMOs – Protecting workers rights & welfare – Encouraging local employment – Recognizes principles of FPIC (free, prior, informed consent), UN Declaration on the Rights of Indigenous Peoples, ILO 169 § Provisions for consultation with local people and stakeholders § Exclusion of certification of plantations established by7 conversions
Relevance of Forest Certification to Finance Sector § Globally recognized mechanism to codify sustainable forest management standards & verify practices § Screening indicator for financial and ESG-related decision- making § Provides assurance throughout the entire supply chain; strengthening of traceability § Ensures long-term management of forest assets § Elimination of illegal activities; deforestation of primary forests § Improved access to markets § Better environmental risk management8
Increasing the recognition of Forest Certification § ESG issues have potential to create or diminish shareholder value so need to be managed § Over 70 leading banks signed up to the Equator Principles for project finance. Principle 3 recommends compliance with IFC’s Performance Standards, including Standard 6 - Biodiversity which requires independent certification of sustainable practices. § Following Rio+20 Earth Summit – 40 institutions have signed Natural Capital Declaration supporting development of methodologies to integrate natural capital considerations into decision making process for all financial products and services9
PEFC’s Global Presence - Non-endorsed system - Endorsed system10
Certification Globally 9% 26% 66% § Only 9% of the world’s forests are certified § Only 26% of the world’s industrial roundwood supply is certified § 66% of the total area certified is to PEFC11
Acceptance by Government Procurement Policies § PEFC is recognised by the Belgian, British, Danish, Dutch, Finnish, French, German, Japanese, and Swiss Timber Procurement Policies § Recommended by the European Commission Guidelines on Green Public Procurement § EU Ecolabel § European Retail Environmental Sustainability Code12
Acceptance by Other Procurement Policies § Green Building Councils in Australia, Italy, and Singapore, the Code for Sustainable Homes, BREEAM in the Netherlands and the UK, and SKA rating in the UK § Green Building Assessment Protocol for Commercial Buildings and the National Green Building Standard (US), and Built Green (Canada) § Comprehensive Assessment System for Built Environmental Efficiency (CASBEE) Japan § Singapore Environment Council13
UK Public Procurement CPET According to the assessment reports, the certification systems comply with the CPET criteria as follows: § FSC: 92%* § PEFC: 89% (97% for revised standard**) * for for chip and fibre products with less than 70%. certified material15 Source: CPET 2010 Review of forest certification schemes ** own assessment
Conclusions § Forest certification provides benchmark and assurance tool of SFM practices and is one of several ESG indicators § Helps to verify compliance and mitigate risk § When investing in or lending to forest related projects: – Screens for quality re selection/inclusion in funds and for projects /companies – Risk mitigation tool when dealing with smaller enterprises § When insuring forest – related activities: – Increases assurances when providing insurance to forest enterprises – esp smaller actors § When trading forest products including timber: – Traceability and risk mitigation § Should also be incorporated into financial institutions’ own procurement policies16
Why PEFC? PEFC is the world’s largest forest certification system 1. Basedon intergovernmental agreements & internationally recognized processes 2. Upholds highest SFM standards without exceptions 3. Intentioned to maintain focus on promoting Sustainable Forest Management 4. Level of stakeholder engagement equally high for all standards 5. Demands independence between the different aspects of the forest certification17 BUILDing on local action, PEFC cares for our forests globally
Further information about PEFC: www.pefc.org THANK YOU!18