Sustainable finance is key to promoting deforestation-free supply chains for two crucial reasons. Firstly, it facilitates access to financial resources essential for sustainable land use practices and technologies (e.g. monitoring, traceability systems, etc.), vital for small farmers reliant on borrowed or external capital. Secondly, financial institutions actively assess their support’s potential deforestation impact, choosing to withdraw funding or refraining from commitment if there’s a risk, thus redirecting capital to sustainable economic activities. Access to finance for producers who would like to produce sustainably is one dimension. The other dimension is financial institutions actively assessing if their financial support could lead to deforestation and either withdraw funding or to not commit to it in the first place.
