World’s largest wealth fund drops PepsiCo partner because of profits from unsustainable palm oil

Palm oil plantation and deforestation likely caused by Indiofood partner, photo by Wakx, flickr

Palm oil plantation and deforestation likely caused by Indiofood partner, photo by Wakx, flickr

Consumers are speaking up and corporations are paying attention. And, like us, they’re voting with their dollars.

Norway’s Government Pension Fund Global (GPFG), the world’s largest sovereign wealth fund, announced that it has divested from First Pacific Group Ltd (HK: 0142), the parent company of Indonesia based Indofood – a major snack food company with controlling interests in one of Indonesia’s largest laggard palm oil plantation companies. The divestment – the latest in the Fund’s consumer conscious business moves – is due to risks associated with investing in companies profiting from the unsustainable production of palm oil. Indofood is the Indonesian joint partner of snack food giant PepsiCo (NYSE: PEP), and produces PepsiCo branded snack foods for sale in that country’s growing snack food market.

Palm oil deforestation, photo courtesy of Rainforest Action Network

Palm oil deforestation, photo courtesy of Rainforest Action Network

A report released in 2015 by the Rainforest Action Network (RAN) and Rainforest Foundation Norway exposed the risks in Indofood’s global operations.  The report documents Indofood’s links to and role in rainforest destruction and social conflict.

The wealth fund, which manages $828 billion worth of funds, actually dropped 11 companies in 2015 due to their connections to deforestation practices. Six palm oil companies, four pulp and paper companies and one coal company were dropped from GPFG’s portfolio.

Norges Bank Investment Management, the company that manages the GPFG, announced a new policy last month that makes it clear that companies it invests in must also address human rights issues in their business practices. The GPFG has funds invested in some 9,000 companies in 75 countries around the world.

This move is a growing trend in the corporate world. Consumers demanding accountability and more sustainable business practices pushes corporations to make these kind of moves. That drives the marketplace to Corporate Social Responsibility (CSR) And everybody wins.

 

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