New transparency toolkit puts emphasis on investors to combat deforestation

A new online tool has been launched today (26 July) to highlight which global mutual funds and investment portfolios contain links associated to deforestation and palm oil holdings.

Currently, around 10% of the global palm oil industry is financed by equity investors, with US financial backing alone accounting for more than $5bn in funds

Currently, around 10% of the global palm oil industry is financed by equity investors, with US financial backing alone accounting for more than $5bn in funds

The “Deforestation Free Funds” webpage is a new transparency tool created by Friends of the Earth and corporate accountability non-profit As You Sow. The free tool gives investors access to an online database in order to determine what links their portfolios have to tropical deforestation and land grabs.

As You Sow’s chief executive Andrew Behar said: “This web tool empowers investors to know exactly what they own so that they can pressure fund managers to implement sustainable investment policies and find investment options that support a forest-friendly future.”

The search platform, which currently holds data for 6,500 global mutual funds, was established with the aim of empowering investors to pressure companies into implementing deforestation-free actions.

Currently, around 10% of the global palm oil industry – one of the largest sources of deforestation issues – is financed by equity investors, with US financial backing alone accounting for more than $5bn in backing.

The tool aims to highlight which funds are acting in a “socially responsible” manner and considers aspects such as human rights and environmental impacts when assessing the funds. If an individual isn’t satisfied with the social responsibility of a certain of a fund, Deforestation Free Funds can offer better-rated alternatives, as well as creating a platform to amplify any calls for reform. The database will soon be expanded to account for timber, paper, cattle, soy and sugar sourcing.

External pressure

Investors are beginning to take-up a prominent role in the battle to combat climate change and create a resilient and low-carbon future. Through the CDP’s Carbon Action initiative, investors with $22trn in assets have reduced global corporate emissions by 641 million tonnes.

Environmental lawyers from Client Earth have also warned that investors and asset managers who continuously ignore the risks of climate change could soon be faced with legal action. The firm claims that a failure to act on systemic climate risk could reduce the value of investment portfolios by as much as 10%. This would create a potential $7trn loss on the shares on the world’s equity markets.

Global corporates are also under increased external pressure in regards to palm oil sourcing and deforestation concerns. A recent report from Greenpeace concluded that PepsiCo, Colgate-Palmolive and Johnson & Johnson were among a raft of consumer goods companies that are "letting their customers down" by failing to break the link between the use of palm oil in everyday products and deforestation.

Palm before the storm

Unilever has already moved to de-risk its supply chain, after cancelling its contracts with a Malaysian-based palm oil producer and trader which has been suspended over deforestation and community conflict issues.

The world's second largest palm oil plantation company Golden Agri-Resources (GAR) has revealed that it is engaging with individual supplier mills which have allegedly been using 'tainted and illegal' palm oil sources. GAR recently told edie it wants to achieve "greater awareness of the production practices in the supply chain" as it sets itself an ambitious goal of 100% traceability to plantation by 2020.

With rising transparency issues leading to supplier contracts being scrapped and green groups piling on the pressure to tackle the situation, a new World Resources Institute (WRI)-backed initiative could finally allow companies to gauge deforestation risks by evaluating satellite surveillance of global palm oil mills.

This mapping system could be streamlined further, after the UN’s Food and Agriculture Organisation (FAO) revealed it is using new software from Google to speed up the satellite mapping process from three years to just one week.

Matt Mace


| investors | palm oil | supply chain | traceability


CSR & ethics
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