Institutional Investors Press Palm Oil Industry to Stop Burning Rainforests and Driving Climate Change
Wilmar*, HSBC*, Kellogg* among companies facing pressure from investors over deforestation
December 3, 2013 — Over 40 institutional investors from across the globe are urging major stakeholders in the palm oil industry to adopt policies that would ensure palm oil development does not contribute to deforestation, development on peatlands, or human rights violations. The coalition of investors, representing approximately $270 billion in assets under management, sent letters to 40 major palm oil producers, financiers and consumers including Wilmar, Golden Agri Resources*, Unilever*, and HSBC.
The request come just weeks after the palm oil industry has faced renewed public scrutiny over continued illegal deforestation in national parks, and rampant human rights violations including child and forced labor.¹ As the world’s largest palm oil trader that provides its product to a large number of household brands, Wilmar has faced criticism from vocal forest protection groups for failing to uphold commitments to sustainable palm oil development.²
The letters, coordinated by Green Century Capital Management and signed by major institutional investors from the U.S. and Europe representing approximately $270 billion in assets under management, call for the development of transparent, traceable, deforestation-free palm oil supply chains. Current palm oil production practices have significant impacts on communities and the environment, making palm oil companies controversial business partners.
“Fueling deforestation is bad business for any company seeking to position itself as a responsible, sophisticated global player,” noted Lucia von Reusner, Shareholder Advocate for Green Century Capital Management. “As consumers become increasingly concerned about palm oil’s role in driving deforestation and climate change, the industry will continue to face escalating pressure to provide truly sustainable palm oil that does not destroy forests, displace endangered species and speed global warming.”
“The palm oil industry is at a crossroads,” said Rob Berridge, Director of Shareholder Engagement at Ceres, a nonprofit organization mobilizing business leadership on climate change. “The investors we work with are asking the industry to eschew forced labor, habitat destruction and accelerating greenhouse gas emissions in favor of developing and operating palm plantations responsibly. The more damaging path is not sustainable and puts shareholder value at risk. In the internet age, there is no place to hide these practices; and experts agree that sustainable palm oil production is highly feasible. In fact, supply of certified sustainable palm oil currently exceeds demand by about 50 percent.”
Companies that use or finance palm oil – such as Unilever, Kellogg, Dunkin Donuts*, and HSBC – are facing high-profile consumer campaigns for incentivizing deforestation and habitat destruction of endangered charismatic species such as the orangutan.³ Many of these companies have subsequently faced questions from shareholders concerned about steps being taken to reduce the brand risks associated with purchasing unsustainable palm oil by investors.
Consequently, many companies have pledged to only purchase or finance palm oil that had been certified by the Roundtable on Sustainable Palm Oil (RSPO). In past months, however, the RSPO and companies that claim to support only RSPO certified palm oil development have come under fire for failing to enforce supplier compliance and prevent deforestation.¹ Consequently, the industry is facing pressure to go beyond RSPO certification by adopting policies to only purchase, finance, and grow palm oil that is verified as not contributing to deforestation, development on peat, or exploitation of peoples and communities.
Approximately 85% of palm oil is grown in Indonesia and Malaysia, and is a leading driver of deforestation and biodiversity loss in those nations. Due to high levels of deforestation and conversion of carbon-rich peatands, Indonesia was ranked by the World Bank as the third largest greenhouse gas emitter globally.⁴ The palm oil industry is also listed as one of the most notorious for using child and forced labor, according to a recent U.S. Department of Labor report.¹
Companies receiving the letter are: Wilmar International; P.T. Musim Mas;* Golden Agri Resources;* Sime Darby;* Felda Global Venture;* Kuala Lumpur Kepong Bhd.;* Cargill;* Asian Agri;* Agropalma;* Daabon;* New Britain Palm Oil;* HSBC; Barclays;* JP Morgan Chase & Company;* UBS;* Morgan Stanley;* Credit Suisse Group;* Standard Chartered;* Rabobank;* Deutsche Bank;* and 20 major snack food companies currently being targeted by environmental groups over their palm oil policies: Dunkin Donuts; General Mills;* Grupo Bimbo;* Hillshire Brands;* H.J. Heinz;* Hormel Foods;* Kellogg Company; Kraft Foods;* Krispy Kreme;* Mars;* Mondelez International;* Nestle;* Nissin Foods;* PepsiCo;* The Hershey Company;* J.M. Smucker Company;* and Toyo Suisan Kaisha.* The full text of the letter and partial list of signatories can be found here for palm oil producers, here for palm oil financiers, and here for major snack food companies.
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Green Century Capital Management is an environmentally responsible investment advisory firm that manages two mutual funds – the fossil fuel free Balanced Fund and the Equity Fund, which invests in the companies that comprise the longest running socially responsible index. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century Capital Management provides people who care about a clean, healthy planet the opportunity to keep their money out of environmentally irresponsible companies and use the leverage of their investment dollars to encourage environmentally responsible corporate behavior.
*As of September 30, 2013, HSBC, Kellogg Company, Unilever, J.P. Morgan Chase, Morgan Stanley, Deutsche Bank, General Mills, Hillshire Brands, Kraft Foods, Mondelez International, PepsiCo, and J.M. Smucker Company comprised 0.00% and 1.53%; 0.24% and 0.00%; 0.00% and 1.33%; 0.00% and 1.69%; 0.00% and 0.59%; 0.00% and 0.58%; 0.48% and 0.02%; 0.06% and 0.00%; 0.49% and 0.00%; 0.84% and 0.00%; 1.93% and 0.00%; and 0.17% and 1.67% of the Green Century Equity Fund and the Green Century Balanced Fund, respectively. Other securities mentioned were not held in the portfolios as of September 30, 2013. The holdings of the Green Century Funds may change due to ongoing management of the Funds. References to specific investments should not be construed as a recommendation of a security by the Funds, their advisor, administrator, or distributor.
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