By: Louise Heffernan (The Nature Conservancy) and Tim Steinweg (Principles for Responsible Investment)
2025 proved one thing: investors aren’t waiting for governments to solve deforestation.
Even as COP30 failed to deliver a new global deforestation roadmap, investor activity quietly surged – setting the stage for further momentum for 2026.
Bucking a trend
During a difficult year for climate investor coalitions, marked by disruption, dilution, and even dissolution, PRI Spring – a global stewardship initiative addressing systemic risks from deforestation – continued to see good momentum. In 2025, Spring grew to a total of 240 investors, managing over USD 19T in assets, of which 96 actively participate in the investee company engagements.
Investee companies are open to engage with well-informed investors on material and system-level risks such as deforestation and nature-loss. The tone of conversations are seen as positive and companies have signalled a general willingness to improve their performance.
We foresee that these engagements will become even more sophisticated in 2026. While standardized expectations across all companies function as a good starting point, Spring participants are also developing tailored approaches for each engaged company. This allows them to formulate expectations that reflect a company’s business model and the contextual intricacies of the sector and geography that a company operates in.
Compounding risks are clearer
These dialogues are increasingly more specific and decision-useful. Collaborative initiatives provide investors access to external expertise from academia, civil society and other groups that can inform their active ownership activities. Over the past two years, investors have developed a deeper understanding of how nature loss translates into business and portfolio exposure.
Deforestation does not just destroy habitats; it disrupts rainfall, constrains agricultural productivity, and undermines water and energy security. Nature Communications research estimates billions in business value at risk from rainfall disruption linked to Amazon deforestation. Other studies show how heavily major cities rely on intact forests for stable water supplies. The evidence of compounding physical, regulatory, legal and reputational risk continues to grow.
From pledges to performance
With hundreds of “zero deforestation” commitments approaching expiry, expectations have shifted from long-term pledges to demonstrable delivery.
To help financial institutions cut through uneven sectoral targets, The Nature Conservancy, PRI and partners developed a concise, decision-useful framework for the cattle, soy and palm oil supply chains – Questions for Management -centred on three fundamentals:
- Are targets clear and comprehensive? Time-bound, cross-commodity, and geographically complete.
- Are implementation plans credible? With governance, resourcing and supplier engagement that withstand scrutiny.
- Is disclosure decision-useful? Traceability data, indirect sourcing, implementation plans and grievance systems are transparently reported.
Road-tested with more than 30 financial institutions, the framework highlights both components of robust strategies and the common loopholes that weaken them. It is already informing investor–company dialogue across midstream agriculture and adjacent sectors.
This tool is built around components characterising robust strategies, and common loopholes and red-flags defining weak ones. It is supplemented by company-specific guides, designed to facilitate constructive investor dialogue with companies managing complex, multi-tiered supply chains, and new Priority Actions for deforestation and conversion-free finance: guidance for three key groups— policymakers, financial regulators, and financial institutions—who are uniquely positioned to drive economy-wide change.
A pragmatic turn in investor engagement
These tools reflect a broader shift: from exclusion to transition. Redlining high-risk geographies does not remove exposure from the system; it simply redistributes it. Sophisticated investors are instead working with companies to strengthen the systems required for deforestation- and conversion-free (DCF) operations across functions, portfolios and value chains.
Three emerging principles are shaping this approach:
- Be active in the solution – support credible transition plans, not withdrawal.
- Aim for DCF companies, not DCF products – avoid segmented supply chains.
- Focus on transparency and incentives – ensure traceability and embed sustainability in commercial terms.
The result is more grounded engagement — focused on risk reduction, operational resilience and long-term value creation.
New risk frontiers
Agricultural commodities remain responsible for almost 90% of deforestation, driving emissions and supply volatility. But new pressures are emerging.
Demand for transition minerals is reshaping the physical and industrial geography of forest-risk sectors. IEA’s 2025 Critical Mineral Outlook projects strong expectations for future demand growth of critical minerals, including those whose reserves are found in forested landscapes. For example, more than half the world’s nickel reserves — essential for many EV batteries — lie beneath tropical forests in Indonesia. These regions have not seen the same rates of agricultural expansion, but future mineral demand may pose future threats. Investors will need to rapidly extend their deforestation risk frameworks beyond food systems.
What to expect in 2026
Three developments will shape the next phase.
- Integration and consolidation across standards
TNFD adoption — now at more than 620 organisations representing $20 trillion in assets — is accelerating consistent reporting on nature-related risk. Planned ISSB guidance on TNFD alignment in 2026 will further normalise these metrics. Attention will move from commitments to comparability, data quality and evidence of reduced portfolio exposure.
- Hardwiring nature into enterprise and investment decisions
For companies, this means integrating nature and land-use considerations across procurement, R&D, product design, capital allocation and policy engagement.
For investors, it means embedding nature risk within credit and equity models and aligning capital with credible transition pathways.
- A broader, deeper pipeline of financing opportunities
New pools of catalytic capital — including the Catalytic Capital for Agricultural Transition (CCAT) fund — are improving the economics of sustainable agriculture and restoration in major producer countries such as Brazil. These structures help restore degraded pastureland, expand production on already-cleared land, and reward the protection of native ecosystems.
Similar models are emerging for mining and infrastructure, linking finance to improved land management and offering investors better risk-adjusted exposure to the transition.
A market moving from ‘if’ to ‘how’
Investors are no longer asking whether deforestation risk is material. They are asking how effectively it is being managed — and how well-positioned companies are to capture revenue growth as global demand for deforestation-free commodities accelerates.
