World’s largest sovereign wealth fund just dropped 11 companies over deforestation

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Norway’s Government Pension Fund Global, the world’s largest sovereign wealth fund, dropped 11 companies in 2015 over their connections to forest destruction.

World’s largest sovereign wealth fund just dropped 11 companies over deforestation
  • Norway’s Government Pension Fund Global (GPFG), which manages $828 billion worth of funds, released its annual report for 2015 today, revealing that six palm oil companies, four pulp and paper companies, and one coal company were dropped from its investment portfolio.
  • Lars Løvold, director of the NGO Rainforest Foundation Norway, said that the GPFG’s actions show that companies involved in deforestation risk being cut off from international investment.
  • Despite dropping these holdings, the fund still has as much as $13 billion invested in high deforestation risk business sectors.

Norway’s Government Pension Fund Global (GPFG), the world’s largest sovereign wealth fund, dropped 11 companies in 2015 over their connections to forest destruction.

The GPFG, which manages $828 billion worth of funds, released its annual report for 2015 today, revealing that six palm oil companies, four pulp and paper companies, and one coal company were dropped from its investment portfolio.

Four companies — Daewoo International Corp, Genting Bhd, IJM Corp Bhd, and POSCO — were formally excluded by the fund’s Council on Ethics after investigations showed their palm oil plantations cause severe environmental damage. Two more palm oil companies, First Pacific and Kulim Malaysia, were divested by GPFG managers directly due to their unsustainable palm oil production operations.

Lars Løvold, director of the NGO Rainforest Foundation Norway, said in a statement that the GPFG’s actions show that companies involved in deforestation risk being cut off from international investment.

“One of the world’s largest investors sends a clear signal to the palm oil industry that the industry must stop rainforest destruction,” Løvold said. “The divestment from First Pacific shows that international investors are moving away from unsustainable practices, and should give First Pacific a reason to reform its business model.”

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Deforestation in Riau, an Indonesian province. Photo by Rhett Butler.

First Pacific’s involvement in large scale deforestation through its subsidiary Indofood Agri was first exposed by Rainforest Foundation Norway and San Francisco-based NGO Rainforest Action Network.

Last month, Norges Bank Investment Management, which manages the GPFG, announced a new policy making 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.

The GPFG’s managers have been pursuing a “risk-based divestment” strategy for the past few years. The fund divested its shares in more than 100 companies between 2012 and 2015 over concerns around global warming, deforestation, and sustainability. 50 companies were dropped because of their connection to deforestation, while eight companies were formally excluded due to severe environmental damage in rainforest areas caused by their operations.

According to Rainforest Foundation Norway, other notable divestments revealed by the GPFG’s 2015 annual report include Canadian oil company Pacific Rubiales, which has been awarded licenses for oil exploration in the Peruvian Amazon that threaten indigenous peoples living in voluntary isolation, and Australian company Panaust, which is involved in the Frieda open pit copper mine project in Papua New Guinea.

Despite dropping these holdings, the fund still has as much as $13 billion invested in high deforestation risk business sectors like beef and cattle, hydroenergy, mining, oil and gas, palm oil, soy, and timber and pulp. This gives the GPFG a “significant liability,” but also a “great opportunity to influence companies to stop destroying rainforests,” Løvold said.

“There is an urgent need for increased attention from investors on the sustainability of the companies they invest in. GPFG is an international pioneer in this work, and divestment decisions of the fund are routinely followed by responsible investors from around the world.”

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