This case study explores Aviva’s efforts to integrate biodiversity and deforestation considerations into its investment practices, risk assessment strategies, and corporate engagement.

Assessing risk: Corporate holdings

In 2022, Aviva conducted its first deforestation risk assessment across its investment and underwriting activities, publishing the findings in its Biodiversity Report. The assessment used data from CDP Forests, Forest 500, and SPOTT to identify companies exposed to deforestation risks through their supply chains. These datasets enabled Aviva to evaluate the strength of deforestation-related policies in place at companies.

Of the companies assessed, 26% of Aviva’s corporate holdings by value were exposed to deforestation risk, with half of this exposure tied to financial institutions and the other half to companies directly involved in commodities linked to deforestation. This insight highlights the importance of addressing both direct and indirect deforestation risks in financial portfolios.

Aviva aims to enhance this risk assessment by integrating additional data sources like Trase, which offers detailed mapping of deforestation exposure in commodity supply chains. This ongoing improvement supports Aviva’s efforts to better track its exposure to deforestation and engage effectively with impacted companies.

Assessing risk: Real assets, annuities, sovereign debt and general insurance activities

To assess the deforestation risks associated with its real assets, annuities, sovereign debt, and insurance activities, Aviva used Global Forest Watch, which provides near-real-time satellite imagery of deforestation trends. In its sovereign debt holdings, Aviva focused on countries with significant deforestation risks, such as Brazil, Indonesia, and Malaysia. However, the majority of its holdings were in countries with low deforestation exposure, accounting for just 1.2% of Aviva’s overall sovereign debt investment.

In terms of its insurance business, particularly in the UK, Ireland, and Canada, Aviva assessed its agricultural portfolio’s exposure to commodity-driven deforestation. The assessment revealed that agricultural activities accounted for less than 0.5% of Aviva UK’s commercial income, showing minimal exposure to deforestation risks.

Engaging with corporates: Working with FSDA

Engagement with companies is a key aspect of Aviva’s strategy to tackle deforestation. In 2022, Aviva conducted 304 engagements with companies on various biodiversity-related issues, including deforestation and land use. As part of its efforts, Aviva strengthened its voting policy on deforestation, voting against management at 93 companies due to weak deforestation policies.

Aviva is an active member of the Finance Sector Deforestation Action (FSDA), a collective of over 30 financial institutions committed to eliminating deforestation from their portfolios. Using the Forest 500 list, Aviva prioritises engagement with companies and financial institutions most exposed to deforestation risk. This engagement aims to encourage these entities to adopt robust deforestation policies, assess their exposure, and disclose their deforestation-related activities.

Engaging with sovereigns

As a member of the Investor Policy Dialogue on Deforestation (IPDD), Aviva collaborates with governments to address deforestation risks. Though its exposure to sovereign-related deforestation risk is low, Aviva has engaged with governments, including co-signing a letter calling on the Brazilian government to reduce deforestation rates and improve public access to data on forest monitoring.

Moving forward: Towards a finance sector that protects and restores biodiversity

Aviva acknowledges the ongoing challenges in meeting global biodiversity targets and the importance of further action from the financial services sector and governments. It continues to collaborate with the FSDA and is encouraged by recent discussions regarding EU regulations on deforestation-free products.

In addition to policy engagement, Aviva has allocated £100 million towards nature-based carbon removals by 2030, focusing on biodiversity and carbon capture projects in the UK, Ireland, and Canada. The company’s ongoing efforts include supporting native afforestation projects and restoring temperate rainforests, as evidenced by its £38 million donation to support these initiatives.