Principles for Responsible Investment (PRI)
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PRI: Fifty-six investors sign statement on sustainable palm oil
Fifty-six global investment organisations* highlight their support for the RSPO and call for the palm oil industry to adopt and implement publicly available No Deforestation, No Peat and No Exploitation policies.
Fifty-six investment organisations with approximately US$7.9 trillion in assets under management have endorsed a statement laying out their expectations of companies operating across the palm oil value chain and highlighting their continued support for a sustainable palm oil industry. This statement comes at an important time for the industry, following the adoption of the revised Roundtable on Sustainable Palm Oil (RSPO) principles and criteria in November 2018, and as calls for consumers and companies to boycott the use of palm oil increase.
Palm oil is the most widely used vegetable oil globally. It has several advantages compared to other vegetable oils, including its versatility, high yields and low costs. Despite this, the growth in demand for palm oil has led to rapid and often poorly managed expansion of production, leading to deforestation and subsequent release of GHG emissions and biodiversity loss. The industry is also linked to land and labour rights issues, particularly related to workers’ rights, child labour, health and safety, and land rights of local communities. These issues can represent a material risk for companies and investors.
With demand for palm oil forecast to grow, it is important that the palm oil industry takes the necessary steps to transition towards more sustainable practices, and this statement sends a strong signal to companies that investors expect this transition.
The investment organisations signing the statement wrote:
“We recognise the heightened yield and versatility that palm oil provides relative to its substitutes, as well as the contribution it makes to national development in the countries where it is grown. However, we are also concerned that the environmental and social issues associated with unsustainable palm oil production could have a material impact on companies across the palm oil value chain.”
The statement applies to all companies with material exposure to palm oil across the value chain, including palm oil producers, refiners and traders, consumer goods manufactures, retailers and banks. Investment organisations signing the statement support the RSPO and its role within the industry and encourage their investee companies to become members of the RSPO where relevant. However, in the statement investment organisations highlight that as a minimum first step they expect companies to adopt and implement a publicly-available No Deforestation, No Peat and No Exploitation (NDPE) policy. The statement also goes into detail on what this NDPE policy should cover.
The investment organisations signing the statement expect companies to commit to full traceability of palm oil to the plantation level, and to report regularly on their progress towards these commitments. They also encourage companies involved in the production of palm oil to map and disclose their palm oil concessions and make efficient investments to improve palm oil yield and productivity.
“We are pleased to see a growing number of palm oil companies adopting and enforcing NDPE commitments. Investors are acutely aware that as such companies drive out deforestation from their value chain those that do not conform to responsible practises will find it increasingly difficult to access markets and capital,” says Mark Mills, Partner, Generation Investment Management and Chair of the PRI Investor Working Group on Sustainable Palm Oil.
“Investment organisations can be the driving force and transform the whole palm oil industry by encouraging the companies they invest in to adopt and implement responsible policies on deforestation, land conflicts and labour conditions”, says Danielle Carreira, Senior Manager, the PRI. “By highlighting their expectations, these investment organisations have sent a strong signal to the industry of the transition they would like to see.”
This statement can be used by investment organisations in their engagement with companies to clearly outline their expectations of the palm oil industry and the objectives of their engagement.
This statement was coordinated by the Principles for Responsible Investment with input from members of the PRI Investor Working Group on Sustainable Palm Oil, many of whom have signed this statement. The PRI Investor Working Group was set up in 2011 to raise investors’ awareness of the ESG issues within the palm oil value chain, to provide a unified investor voice in support of sustainable palm oil, and to engage with companies across the value chain in support of more sustainable practices. This group currently comprises more than 50 PRI signatories.
*In this context, investment organisations refer to asset owners, investment managers and stewardship services providers.
For more information, please contact Duncan Smith.