Wildfires devastated the Amazon basin in 2024

Wildfires in Latin America destroyed 51,000 square kilometers of mature tropical forest in 2024, an area the size of Costa Rica, with wildfires accounting for a record 60% of the destruction. This represents a 142% increase in deforestation compared to 2023, effectively reversing progress made by the Brazilian and Colombian governments in curbing deforestation efforts.

Analysis

Wildfires in Latin America during 2024 resulted in the destruction of 51,000 square kilometers of mature tropical forest, an area comparable to Costa Rica. Wildfires were responsible for a record 60% of this devastation. This level of destruction represents a significant escalation, being 142% larger than the area affected in 2023, and has effectively nullified recent advancements made by the Brazilian and Colombian governments in their efforts to curb deforestation. The negative sentiment and pessimistic tone associated with this event underscore the severity of the environmental setback, with implications for climate policy, the frequency of natural disasters, and investment considerations within emerging markets, particularly those in Latin America.

Key Decisions for Investors

• Investors should re-evaluate portfolio exposure to assets in Brazil and Colombia, factoring in the heightened environmental risks and the demonstrated policy ineffectiveness in controlling deforestation, which could impact sovereign risk and specific sectors.
• ESG-focused investors must intensify due diligence on companies with operations or supply chains in Latin America, particularly within agriculture, forestry, and resource extraction, for their exposure and response to escalating deforestation and wildfire risks.
• Monitor for potential shifts in environmental regulations and enforcement in Brazil and Colombia, as these record deforestation levels may trigger new policy responses impacting businesses, and assess the credibility of governmental commitments to addressing the crisis.