ESG: the shifting deforestation challenge

• Positive sustainable fund flows – Morningstar data shows flows into sustainable funds were up in Q2 2026 - led by European ESG mandates which received $3.5bn in net inflows. US sustainable funds also saw positive net flows for the first time since 2022, with around $3bn in new funds. The energy transition and electrification were key drivers of this trend.
  
  
• World’s oceans hit record July temperatures – although partly due to the current El Niño phenomenon, the oceans’ average surface temperature hit a record 20.96°C in July. Hotter oceans can lead to rising sea levels, more extreme weather and depleting biodiversity. Alongside this summer’s heatwaves and wildfires, this is yet another reminder of climate change and the need for further (and more urgent) sustainability action. 
  
  
• Amazon deforestation crosses frontier – while Brazil has cracked down on deforestation with great success, its next-door neighbour, Bolivia has gone the other way – ramping up. This highlights a larger problem of international coordination.
  
  
• How green bonds can help – green bonds issued by supranationals such as the International Bank for Reconstruction and Development (IBRD), part of the World Bank, are helping to reforest large areas of the Amazon rainforest. Part of the bond’s proceeds are used by Brazilian based carbon project developer Mombak to develop the rainforest, with the associated carbon credits purchased by companies such as Microsoft and Google. Mombak recently delivered its first carbon removal credits two years ahead of schedule.

Amazon deforestation shifts borders

This is a useful reminder that sustainability challenges don’t stop at national borders. Brazil has made real progress on deforestation, but the rise of it in Bolivia shows how quickly the problem can shift elsewhere.

It also highlights the role investment can play in tackling these issues. Green bonds and other forms of sustainable finance can help put capital behind projects with a real-world impact, such as reforestation and carbon removal.

For advisers and planners, the takeaway is that it’s worth looking beyond the ESG label and considering where clients’ money is actually going and what it’s helping to achieve.

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