For the eco-conscious American, it may seem counterintuitive to invest in companies notorious for deforestation. Unfortunately, they may be unknowingly supporting such corporations through their retirement funds.
“When Americans put their hard-earned money in savings and retirement accounts, they believe they are preparing for a better future. But large asset managers undermine that very future, globally speaking, by putting this money into destructive agribusiness firms, generally through complex investment chains and failures in due diligence,” said Jeff Conant, the senior international forests program manager at Friends of the Earth.
With this issue in mind, Friends of the Earth and shareholder advocacy non-profit As You Sow have created a free online database, DeforestationFreeFunds.org, to allow individual investors to determine their links to tropical deforestation and land grabs. The search platform currently includes 6,500 global mutual funds.
The new transparency tool is focused on palm oil-related holdings, with the rationale that palm oil is the fastest growing cause of rainforest destruction today. On top of the destruction of valuable habitat for endangered species, the rapid expansion of oil palm plantations across the tropics has caused social conflict and human rights abuses in countries including Indonesia, Liberia, Nigeria, Guatemala and Malaysia. The organizations admit that thanks to public pressure, many multinationals dependent on palm oil are working to eliminate deforestation from their supply chains, but add that promises have been slow to materialize. Transparency and traceability have been persistent problems, with reports revealing “systematic misreporting” and how “tainted” crude palm oil can enter supply chains.
According to Friends of the Earth and As You Sow, some 10 percent of the global palm oil industry is financed by equity investors, including many mutual funds, and as of June 2016, U.S. mutual funds had a net investment of more than $5 billion in palm oil producers.
“Investments in palm oil are embedded in our pension funds, IRAs, and 401(k)s but most of us are not even aware of it,” said Andrew Behar, the CEO of As You Sow. “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.”
DeforestationFreeFunds.org empowers investors to demand deforestation-free investment options and responsible policies from workplace retirement plan managers and major fund families. The tool not only helps individuals discover if their investments are linked to deforestation and exploitation, but can also show them better-rated alternatives to help amplify their calls for reform. The platform highlights socially responsible funds that “carefully consider” environmental and human rights issues.
Friends of the Environment and As You Sow plan to expand the platform in the future to include information on “all commodified sources of deforestation,” including timber, paper, cattle, soy and sugar.
Friends of the Earth also released a corresponding report, Are You Invested in Exploitation? that names the top 10 U.S. asset managers invested in palm oil production, including BlackRock, Vanguard, CalPERS, TIAA-CREF and Dimensional Fund Advisors. It shows that none of these firms have clear criteria for disclosing or avoiding risks related to deforestation and land rights, and outlines ways that these and other U.S. investment institutions can take greater responsibility for the social and environmental impacts of their investments. Last month, Global Forest Watch released a palm oil risk tool to better identify deforestation risk.
As You Sow previously released another transparency tool for retirement funds focused on fossil fuels, FossilFreeFunds.org.