I’ve blogged before about the hard work we and our partners do to influence the behavior of the companies we own.  No company is perfect, but they do listen (some better than others) to their shareholders concerns.  One of our strongest allies in such advocacy is Green Century Funds.  Their ongoing work to improve the supply chain for sustainable palm oil, an ingredient in a huge number of consumer products, exemplifies how social investors make a difference.

You can read more about their work on Green Century’s website where you will find several blogs about their Shareholder Advocate’s trip to Southeast Asia this fall to investigate this issue.  As you might imagine, they do a good deal more than send a questionnaire to the companies they own asking them whether their supply chain is sustainable.

I’ve asked Kate Kroll, Green Century’s Shareholder Advocate, to share her recent experience on a trip to Indonesia, Singapore and Malaysia to continue to press for progress on this issue.  You’ll see that there is more hard work to be done.  I’m pleased to report that First Affirmative has committed to continue prioritizing deforestation associated with palm oil and other commodities as an issue to tackle during the 2017 proxy season:

 

For too long it has been common practice to burn down tropical rainforests across Southeast Asia in order to clear land to grow palm oil. Palm oil is the most widely used vegetable oil in the world.  Found in everything from soap to breakfast cereal, the cultivation and production of palm oil has an extensive supply chain that can negatively impact indigenous communities, endangered species, and the environment when clear-cutting and other unsustainable practices are employed that lead to deforestation. Deforestation is believed to be responsible for approximately 15% of the increase in greenhouse gases, or about as much as all vehicle emissions worldwide. For these reasons, and others, we are working on several fronts to protect forests around the world.

 

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There are several ways to make concrete improvements to palm oil’s agricultural production, its certification standards, and the size of its environmental footprint.  At Green Century, we focus on engaging companies and suppliers to improve their practices and work with other stakeholders, such as non-governmental organizations and policy makers, to ensure vigorous standards are in place to protect the environment and hold laggards accountable.

On the shareholder engagement front, we have already helped a number of companies including Starbucks, Kellogg’s, and ConAgra adopt sustainable sourcing practices of forest risk commodities.  In Singapore this fall, we had the opportunity to meet with the biggest palm oil suppliers in the world.  Most notably, one company representative from Wilmar International cited an increase in palm oil yields when the crop was sourced sustainably, demonstrating the clear business case for strong environmental performance.

Indonesian President, Joko Widodo, surveys the deforestation caused by clear-cutting and slash and burn techniques used to clear land for palm oil production.

Indonesian President, Joko Widodo, surveys the deforestation caused by clear-cutting and slash and burn techniques used to clear land for palm oil production.

In addition to working with companies to improve practices and production processes, promoting stronger policies that support zero deforestation standards can have notable impacts on the environment as well.  Last year, the slash and burn clearing techniques used to produce palm oil plantations caused a haze crisis in Indonesia’s backyard, costing the country $16 billion in losses according to the World Bank and spurred geopolitical tension with its neighbors.  When the fires stopped and the haze cleared, the President of Indonesia instituted a moratorium on new land leases and implemented land restoration efforts after receiving an investor letter coordinated by Green Century.

The environmental, social and governance impacts of a single commodity can be significant.  Those that cause deforestation drive climate change by eliminating a natural carbon trap.  But the progress investors have made in the palm oil industry are significant.  For example, through our advocacy we helped secure a zero deforestation agreement from Wilmar, the largest palm oil trader in the world, that will keep 1.5 gigatons of carbon in the ground. This is equal to the amount needed to power an average house for 115,385 years.

Although we have achieved a number of successes, we know our work is not done, which is why we recently launched a five-year campaign with partners in the U.S. and Europe to help stop deforestation caused by the production of other forest commodities such as soy, cattle, timber, and rubber in Africa and Latin America. The opportunity for sustainable and responsible investors to make an impact and help curb deforestation and climate change is vast. We look forward to continuing to partner with First Affirmative and advisors like Ken on these efforts.  

Mention of specific securities is not a recommendation to buy or sell.

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Ken Jacobs CFP®, AIF®, CLU and Renee Morgan are investment advisor representatives of First Affirmative Financial Network (“First Affirmative”). Ken and Renee own an entity called Sustainable World Financial Advisors (SWFA) which is not affiliated with First Affirmative nor is it a registered entity. SWFA does not offer investment services, those services are offered by First Affirmative which is a Registered Investment Advisor (SEC File #801-56587). SWFA is a “doing business as” (DBA) name for use in its operations and should not be considered a registered entity offering investment services. The credentials CFP® & AIF® listed above bear trademarks. FAFN-Logo-(1)
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