World’s largest sovereign wealth fund drops 11 companies over deforestation links

Signal of change / World’s largest sovereign wealth fund drops 11 companies over deforestation links

By Ivana Gazibara / 19 Apr 2016

Norway’s Government Pension Fund Global (GPFG), the world’s largest sovereign wealth fund, dropped 11 companies in 2015 over their connections to forest destruction: six palm oil companies, four pulp and paper companies, and one coal company.

NGOs have been raising this issue with GPFG for several year.

Of particular significance is its divestment from First Pacific Group Ltd., the parent company of Indonesia’s Indofood – one of the biggest palm oil players connected to conflict palm oil and large-scale deforestation. Conflict palm oil is produced under conditions associated with the ongoing destruction of rainforests, expansion on carbon-rich peatlands, and/or human rights violations, including the failure to recognize and respect the customary land rights of forest-dependent communities and the use of forced and child labour.

So what?

This divestment sends a powerful message to companies sourcing from producers linked to deforestation, as well as to the responsible investment community. GPFG manages $828 billion worth of funds and its divestment decisions are regularly emulated by other responsible investors.

It also indicates that the divestment movement, as a broader expression of shareholder activism, is picking up steam. What began with the a campaign calling for divestment from fossil fuel companies has expanded to include, for example, a recent call by the Coller Foundation for investors to drop companies engaged in factory farming practices.

Palm oil, in particular is such a ubiquitous commodity (found in consumer products ranging from chocolate bars to lipstick) that a radical shift in how it’s produced and sourced would have a profound impact on the sustainable management of tropical agriculture, forests, and local species.

However, whilst this is an important step for the world’s largest sovereign wealth fund, it is just a part of the journey. Too many investors continue to back companies linked to deforestation, and too many of the world’s major food companies, from Pepsico to Cargill, continue to source from them.

Image credit: Aleksandar Radovanovic / Unsplash


What might the implications of this be? What related signals of change have you seen?

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