Pension investors should pay greater attention to the risks of deforestation and encourage companies to look at the associated business risks, as a new report showed inconsistent disclosure policies across timber, palm oil and biofuel supply chains.

Paul Simpson, chief executive at the CDP, the NGO behind the report, said some investors were beginning to see the risks posed by deforestation, and cited last year’s divestment by Norway’s Storebrand from certain palm oil companies as an example.

Freddie Woolfe, associate director of corporate engagement at Hermes Investment Management, added that forests should be viewed as important in capturing excess carbon emissions and ensuring water risks are kept low.

“For a heavily diversified universal asset owner such as a pension fund, which is focused on long-term wealth creation, destruction of such a valuable ecosystem with no comparable alternative makes no sense,” he said.

The CDP’s ‘Global Forests 2014’ report, backed by pension investors including the Environment Agency Pension Fund, Sweden’s KPA, Finland’s Keva and the Netherlands’ APG, urged companies to address commodity-linked deforestation, which often forms part of a company’s work with soy beans, palm oil, biofuels and cattle products.

The report found that only half of manufacturers and retailers using soy had specific policies in place to monitor the risks associated with deforestation, compared with all of the producers approached and active in the soy market.

The discrepancy was significantly lower in the timber and biofuel industries, whereas cattle products and palm oil had around 20 percentage points’ difference between manufacturers and producers.

Norway’s Storebrand excluded more than 20 companies from its investment universe earlier this year, including 11 involved in the palm oil industry.

Its move followed the Government Pension Fund Global’s divestment from Wilmar International that was used to raise questions as to whether several large Dutch funds should remain invested in the company.

A group of investors last year called on companies to ensure palm oil production did not lead to deforestation.

The report comes shortly after the CDP released a report on water management that urged pension funds to be “proactive” over the management of water risks.