Move demonstrates finance sector clout in pushing for greener practices
David Fogarty Straits Times 28 Mar 16;
Norway's Government Pension Fund Global (GPFG), the world's largest sovereign wealth fund, has dropped 11 companies because of connections to deforestation, the fund said in its 2015 annual report.
The fund's decision shows the growing clout of the finance sector in pushing firms to improve their environmental practices by setting higher standards for investment.
Four firms were formally excluded by the fund's council on ethics after investigations showed that their oil palm plantations caused serious environmental damage in Indonesia, including fires in at least one case. The excluded companies are South Korea's Posco and its subsidiary, Daewoo International Corp, and Malaysia's Genting Berhad and IJM Corp. The fund held nearly US$200 million (about S$270 million) of Posco shares at end-2014.
The fund formally excluded the four because of deforestation in rainforest areas, including primary forest areas critical to wildlife. The council used satellite imagery, government maps and information on company websites, as well as research that it commissioned.
IJM did not respond to repeated requests for comment. Spokesmen for Posco-Daewoo and Genting said they were unable to comment on the council's findings.
Stakes in another seven firms were divested by the fund, the GPFG said in its annual report on March 9, citing deforestation and lack of environmental safeguards. It did not name these firms, which included two palm oil firms, four pulp and paper firms and an Indian coal miner.
Green group Rainforest Foundation Norway (RFN), which monitors the fund's investments, identified the two palm oil firms as Kulim Malaysia and Hong Kong-listed First Pacific, the majority owner of Indonesian food giant PT Indofood that owns Singapore-listed Indofood Agri Resources.
"Our approach to responsible investment management may in some cases lead to divestments from companies where we see elevated long-term risks," a spokesman for GPFG told The Straits Times in an e-mail. "We divested from 73 companies last year. Of these, seven... were related to deforestation and 42 were related to greenhouse gas emissions."
First Pacific and Kulim did not reply to requests for comment. Indofood Agri Resources also did not reply, but it has been the focus of non-governmental organisations critical of its environmental practices, labelling it a laggard.
With assets of about US$830 billion, the fund's actions are closely monitored by investors and environmental groups. It invests in over 9,000 firms, but in recent years has taken a tougher approach to those involved in environmental destruction, labour rights abuses, corruption and driving climate change.
Since 2012, the fund has divested 50 firms for their deforestation practices and formally excluded eight for severe environmental damage in rainforest areas, RFN said. Among palm oil firms dropped are Singapore-listed Wilmar and Golden Agri-Resources.
Firms linked to bad environmental practices
Last year, Norway's sovereign wealth fund formally excluded two South Korean and two Malaysian companies after investigations by its ethics council showed the firms' oil palm plantations had caused serious environmental damage in Indonesia. The council publicly released its detailed findings and presented them to each of the companies.
POSCO AND DAEWOO INTERNATIONAL CORP
Posco, a South Korean steel-maker, holds a majority stake in Daewoo International Corp, a South Korean conglomerate with interests in forestry and food production. Daewoo's majority-owned Indonesian subsidiary, PT Bio Inti Agrindo, has been developing oil palm plantations totalling 32,500ha in Papua province, in a remote area with virgin rainforest.
Investigations by the council showed widespread forest clearance and a large number of fires within one of the two concessions, according to satellite imagery. This suggests the land was being illegally cleared by burning, the council said. The firm denied this in a reply to the council.
The council criticised Daewoo for failing to provide sufficient information about the environmental impact of its plantation development, and its lack of detailed surveys of the area's plant and animal species.
GENTING BERHAD
The council first recommended excluding Genting Berhad and its subsidiary, Genting Plantations, in 2014 over forest loss in Genting's oil palm concessions in Kalimantan. The 10 concessions cover more than 150,000ha, or slightly more than twice the size of Singapore.
The council's investigations showed clearance of dense rainforest, and conversion of deep peatlands and areas mapped as potential orang utan habitat.
It criticised Genting for its lack of transparency, saying the company did not respond to requests for information on the condition of the forests and peatlands or the levels of biodiversity in its concessions.
In a 2015 follow-up, the council further assessed the risk from Genting's conversion of forests into oil palm plantations.
The company did not respond to requests for information. The council later found that it might have underestimated the scale of deforestation in some of Genting's concessions.
IJM CORP
In 2014, the ethics council investigated four Indonesian oil palm concessions in East Kalimantan province being developed by IJM Plantations, a subsidiary of IJM Corp. The concessions cover about 35,000ha.
The council found large areas of rainforest had been cleared and that, in one of the areas investigated, forest in buffer zones outside the concession boundary had been cleared, in violation of the IJM Corp standards stated on its website.
The council said it contacted the company several times with questions about its operations, including steps the firm was taking to reduce environmental damage, but received no answers.
In a 2015 follow-up, the council maintained its recommendation to exclude IJM Corp from any investments, saying it had not detected any major changes in the company's operations.
David Fogarty
Norway drops Asian palm oil firms in show of green credentials
* Fund sells out of 23 Asian firms to slow deforestation
* Environmentalists welcome shift, urge more action
Joachim Dagenborg and Alister Doyle Reuters 8 Mar 16;
OSLO, March 8 Norway's $710 billion sovereign wealth fund has pulled out of 23 Asian palm oil companies after accusing them of causing deforestation, winning praise from environmentalists.
It said it sold stakes in the firms after a review of companies that have cleared forests for palm oil plantations in Malaysia and Indonesia. Palm oil is used in many foods and consumer goods such as soaps, lipstick and peanut butter.
The fund is one of the world's biggest investors, underpinned by Norway's oil and gas assets. Last year it expanded its investment guidelines to include deforestation as a threat to future growth.
Stakes in firms including Wilmar, KL Kepong and Golden Agri-Resources Ltd were sold during 2012, according to the fund's annual report released on Friday.
Of these, the biggest holding had been in Singapore-listed Wilmar, worth 382 million crowns ($67.29 million).
"In the first quarter of 2012 we sold our stakes in 23 companies that by our reckoning produced palm oil unsustainably," the fund said, without naming any firms.
Norway has given more than any other developed nation to help slow deforestation, partly as a way to avert climate change. Indonesia is home to the world's third-largest expanse of tropical forests and is the top prodicer of palm oil. Malaysia is the world's second largest producer.
The companies deny that they are a threat to forests.
Golden Agri's website, for instance, says: "we aim to be the leader in sustainable palm oil production." Wilmar and KL Kepong similarly say that they support best practices and standards to protect the environment.
DOUBLE STANDARDS
The Rainforest Foundation environmental group has long accused Norway of double standards by investing billions of dollars in palm oil or soya farmers while also giving cash to nations from Brazil to Indonesia to slow deforestation.
"We are very happy with this development in the palm oil sector," said Nils Hermann Ranum, of Norway's branch of the Foundation.
Still, he said that Norway should do more to pull out of other sectors that cause deforestation, such as logging companies, oil and gas firms, soya and meat producers.
By the Foundation's estimates, Norway had investments totalling $13.2 billion in companies damaging rainforests at the end of 2012, against $14.4 billion a year earlier. "They need a more coherent policy," he said.
Norway has programmes to slow deforestation worth $1 billion each for Brazil and Indonesia, as well as smaller projects in nations from Guyana to Tanzania.
Many companies, including Anglo-Dutch consumer group Unilever Plc and Swiss food group Nestle, have cracked down on palm oil suppliers in recent years because of worries about deforestation.
Deforestation accounts for up to about a fifth of greenhouse gases from human sources. Forests soak up carbon dioxide as they grow and release it when they burn or rot.
Yngve Slyngstad, head of Norway's fund, told Reuters that Oslo was trying to investmore in palm oil producers whose policies did not damage forests that are home to endangered animals such as orang-utans and absorb greenhouse gases.
"We have sold many of the small companies and concentrated investment in larger companies who often have a better practice," he said.
Among palm oil firms, the fund more than quadrupled its holdings in Malaysia's Sime Darby to a value of 688.8 million crowns at the end of 2012 from 150.7 million crowns a year earlier.
