Chopping down rainforests for palm oil production in Malaysia
Former movie star and politician Arnold Schwarzenegger is facing criticism after Global Witness produced evidence that his investment company is profiting off rainforest destruction in Southeast Asia. The findings are significant because Schwarzenegger championed rainforest conservation while serving as governor of California.
According to analysis released by the environmental group last week, Dimensional Fund Advisors (DFA) — an asset manager in which Schwarzenegger has a substantial stake — has extensive holdings in 50 of the world’s biggest tropical forestry companies, including some of the most notorious rainforest destroyers.
“DFA holds shares totaling US$174 million in 20 of the 50 companies chosen for the study, more than any other financial institution,” said the group in a statement. “This includes firms implicated in highly destructive, and sometimes illegal, activities wiping out the rainforests of Borneo.”
Like many fund managers, DFA relies heavily on programmatic trading, using algorithms to move large sums of money into companies and sectors. These algorithms largely respond to technical indicators, rather than ethical considerations, which Global Witness says puts Schwarzenegger at odds with his self-proclaimed love of rainforests.
“Before he became Governor and an environmental activist, Arnold Schwarzenegger made his name as a killer robot from the future; now he’s making a fortune from a robo-fund company that is helping to destroy our future,” said Andrew Simms of Global Witness, which earlier this month was honored with both the Skoll Award for Social Entrepreneurship and the TED Prize.
“The industrial-scale deforestation caused by some of the companies that Mr Schwarzenegger profits from accelerates the climate change that he wants to stop. In environmental terms, it’s a weaponized contradiction,” Simms continued. “To put his money where his mouth is, he needs to get DFA to cut its investment in these companies or get out of DFA himself.”
Global Witness’s targeting of a trading firm may mark a new front in campaigners’ efforts to pressure financiers of deforestation. Until now, green groups have primarily focused on banks and government funds that provide capital to logging, mining, and plantation companies, rather than traders. But increased scrutiny of the role of commodity traders, hedge funds, and other trading houses play in driving deforestation could raise the stakes for those kind of investments, a point Global Witness is trying to push.
“DFA’s trading algorithms seem devoid of any regard for tropical forests or the people that depend on them”, said Simms. “At the moment, when the computer says yes, you can almost hear the sound of chainsaws whirring. Clients of DFA that do not wish to be associated with tropical deforestation and the havoc it causes should divest unless DFA commits immediately to implement robust forestry policies.”
(01/27/2014) Storebrand, one of Norway’s largest life insurance and pension savings companies, has sold off holdings in eleven palm oil companies due to environmental concerns. In a statement issued last week, Storebrand said it divested after it found the companies had breached its sustainability standards.
(10/14/2013) Norway’s $760 billion pension fund has divested from two Malaysian forestry companies due to ‘severe environmental damage’.
(06/12/2013) The Norwegian Parliament has called for the country’s pension fund to strengthen its commitment to avoid investing in companies linked to rainforest destruction.