Meeting the goals of the Paris Agreement will require transformations in every sector of the global economy. Commodity producers and traders are in the spotlight due to their direct links to activities causing deforestation which drives climate-changing emissions.
High-profile investors are increasingly pushing for action on deforestation from both companies and governments. However, deforestation risk is far from limited to direct investments in upstream agricultural producers and midstream traders. Despite this and the fact that climate-related risks affect almost all capital providers to a greater or lesser extent, agricultural sectors are often overlooked by investors working to mitigate climate risks. In order to better understand the exposure of the German financial sector to unmitigated deforestation risk, this report quantifies German loans to and holdings in two categories of companies that operate within forest risk commodity sectors, those with weak deforestation policies and those with outsized stranded asset risk.