- Investment firms managing trillions of dollars of assets are falling short in eliminating environmental harm, such as deforestation from the operations of the palm oil companies in which they hold a stake, say U.S. senators.
- The legislators are pointing to the world’s largest fund manager, BlackRock, among others as choosing words over action in their environmental oversight.
- The companies identified will find it hard to ignore the politicians’ demand for greater transparency, a campaigner says.
An influential group of U.S. senators, including possible candidates for the 2020 presidential race Bernie Sanders and Elizabeth Warren, is calling on investment firms to take responsibility for deforestation caused by the operations of palm oil companies in which they invest.
In a widely publicized letter dated Feb. 4, the senators warned 11 firms that collectively manage more than $3 billion worth of assets in the palm oil industry that they should clean house. “Some companies in your portfolio may not be living up to their commitments to address deforestation in their supply chain,” the letter states, adding “if they have made such commitments at all.”
The initiative was initiated by Sen. Brian Schatz (D-HI), co-founder of the Senate Climate Action Task Force and a member of the Senate Banking Committee.
The firms identified include BlackRock, which manages nearly $6.4 trillion worth of total assets, including nearly $600 million in palm oil, and has been the subject of the BlackRock’s Big Problem campaign. The campaign is run by Friends of the Earth US (FoE), Amazon Watch and other environmental NGOs.
As the world’s biggest asset manager, BlackRock has been accused of making commitments to improve environmental standards without meaningful action.
“BlackRock strongly projects an image of social responsibility,” FoE’s international forests program director, Jeff Conant, said in an interview. “But there is a huge gap between the rhetoric and reality, and this is an opportunity for the company to close that gap.”
Asked to comment on the congressional letter and related initiative, BlackRock said in a statement: “We welcome the Senators’ interest in learning more about BlackRock’s approach to the material environmental, social and governance factors inherent in the business models of the companies in which we invest on behalf of our clients.”
Also identified by the senators was J.P. Morgan Chase & Co., which has about $1.3 billion of high-risk deforestation assets in the palm oil sector, according to the Forests & Finance database. Mongabay contacted J.P. Morgan for a response, but the company declined to comment. Other firms listed were Vanguard (with $805 million invested in palm oil), Dimensional Fund Advisors ($274 million) and Northern Trust ($167 million), along with TIAA, Prudential Financial, CalPERS, Fidelity, Northern Cross, and Kopernik Global Investors.
On its website, J.P. Morgan says it has adopted a “compact” — a voluntary initiative — that commits the company to “helping achieve zero net deforestation by 2020 in their financing sectors such as palm oil, timber products and soy.”
The company’s Soft Commodities Compact Report reveals that J.P. Morgan has assets in one company that has achieved full certification from the Roundtable on Sustainable Palm Oil (RSPO) and five companies that have no certification, out of 17 companies in total.
Though managing a relatively small investment in the palm oil sector of $45 million, the California Public Employees’ Retirement System (CalPERS) was also targeted by the senators as needing to improve its environmental oversight.
CalPERS told Mongabay that, along with 90 other institutional investors, it has called for higher standards from RSPO and is working to reduce deforestation in not just the palm oil industry, but soy and cattle farming too. “Rather than just looking at one commodity in isolation, we are looking more holistically at the drivers of deforestation across our global portfolio, various industries and commodities,” CalPERS said in a statement.
High-risk ventures
In the letter, senators warn companies of the risks associated with “exposure to climate change, environmental destruction and human rights violations.” The comments are in line with a report published by the consultancy Climate Advisers in December.
Addressing risks arising from deforestation is in line with asset managers’ legal and ethical responsibilities, they point out. “As such, we are interested in learning what due diligence and risk management procedures your firm has put in place to address and mitigate these risks for both active investments and passively managed funds.”
FoE’s Conant said the letter was “extremely significant,” given that influential legislators like Sanders and Warren signed their names.
“Both senators have a very clear track record of trying to hold Wall Street to account,” Conant said. “If BlackRock does nothing more in response than put out a bland meaningless statement, there will be some follow-up. They will say, ‘You need to give us more to go on here.’”