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Norway’s Sovereign Wealth Fund divests from 23 palm oil companies

Norway's Sovereign Wealth FundThe Norwegian Government Pension Fund Global (GPFG) divested from 23 palm oil companies in 2012. “Several palm oil producers were excluded from the portfolio because their long-term business model was deemed unsustainable,” GPFG writes in its 2012 annual report.

For several years, Norway’s US$667 billion Sovereign Wealth Fund has been targeted by NGOs concerned about its investments in the palm oil sector and other sectors responsible for deforestation and environmental impacts.

In 2009, the Environmental Investigation Agency wrote to the GPFG about its problematic investments in the oil palm sector. Two years later, Rainforest Foundation Norway and the Environmental Investigation Agency followed this up with a letter to Jens Stoltenberg, Norway’s Prime Minister. Last year, Rainforest Foundation Norway and and Friends of the Earth Norway published a report about Norway’s investments in environmentally damaging companies.

Rainforest Foundation Norway’s Nils Hermann Ranum welcomes the divestment:

“This is a major step forward and a victory for the remaining rainforests. One of the world’s biggest investors sends a clear signal to the oil palm industry that its destructive practices are unacceptable.”

In its annual report, GPFG explains the divestment as follows:

In the first quarter of 2012 we sold our stakes in 23 companies that by our reckoning produced palm oil unsustainably. Before reaching this decision, we reviewed a number of companies contributing to tropical deforestation through their involvement in the palm oil industry in Malaysia and Indonesia. We contacted several of the companies to obtain information on how they managed deforestation and we placed weight on whether the companies had committed to the Roundtable on Sustainable Palm Oil, which provides an international certification scheme for sustainable palm oil production.

JP Morgan Asia Pacific Equity Research doesn’t seem to have read that part of GPFP’s annual report and appears unaware that some RSPO member companies continue to destroy forests. JP Morgan sees GPFP’s exit as a chance for other investors to buy shares in palm oil companies. Malaysian newspaper The Star reports JP Morgan as stating that,

GPFG sales appear to be a blanket sell-down of the sector without company specific consideration — take the opportunity to accumulate good quality names…. Notably, many companies in the sector have during the course of the past 2 years been increasing their proportion of RSPO certified plantations. Furthermore, it was reported that stakes in the companies mentioned have been divested completely in 2012, indicating that they [sic] would be no further overhang on stock prices from stake sale by GPFG from hereon.

Among the companies from which GPFP divested are some RSPO members, including Wilmar, Golden Agri-Resorces, First Resources, Kuala Lumpur Kepong. Others are not RSPO members (a full list of the divested companies is below). Wilmar came 500th (out of 500) in Newsweek’s Green Rankings list in 2012. The fact that GPFP divested from Golden Agri-Resources perhaps suggests that it does not hold much faith in GAR’s no deforestation promise.

However, the GPFG has not divested all of its investments in the palm oil sector. At the end of 2012, GPFG still had US$450 million invested in palm oil companies. And GPFP’s investments in Malaysian oil palm giant Sime Darby quadrupled between 2011 and 2012. Sime Darby came 495th in Newsweek’s Green Rankings.

Ranum points out that,

“Sime Darby is infamous for illegal land clearing, violent clashes with local communities, illegal forest fires and for threatening the last orangutan habitats. Sime Darby is also expanding into the African rainforest, an extremely worrying trend in the oil palm industry. This does not merit increased Norwegian public investments.”

Greenpeace also welcomes the news, but Erika Bjureby from Greenpeace Nordic points out that RSPO “does not prevent deforestation”. She also criticises the increased investment in Sime Darby:

“The fact that the pension fund has decided to quadruple investments in the Malaysian company Sime Darby indicates that the Pension fund is still lacking a clear, consistent approach. This company has not committed to forest protection beyond the weak RSPO-guidelines, while currently expanding in forested areas in Africa.”

Rainforest Foundation Norway provides this list of companies from which GPFG has completely divested:

    Divested in 2012:

    Astra International Tbk PT, Indonesia
    Berjaya Corp Bhd, Malaysia
    Boustead Holdings Bhd, Malaysia
    First Resources Ltd, Singapore
    Genting Plantations, Malaysia
    Golden Agri-Resorces Ltd, Singapore
    Indofood Agri Resources Ltd, Indonesia
    Kuala Lumpur Kepong Bhd, Malaysia
    Ta Ann Holdings Bhd, Malaysia
    United Plantations Bhd, Malaysia
    Wilmar International Ltd, Singapore
    WTK Holdings Bhd, Malaysia

    Divested in 2011:

    Astra Agro Lestari Tbk PT, Indonesia,
    Bakrie Sumatera Plantations Tbk PT, Indonesia
    Bakrie & Brothers, Indonesia
    Hap Seng Plantations Holdings, Malaysia
    IJM Plantations Bhd, Malaysia
    IOI Corp Bhd, Malaysia
    Kim Loong Resources Bhd, Malaysia
    Medco Energi International, Indonesia
    Perusahaan Perkebunan London Sumatra, Indonesia
    PPB Group Bhd, Malaysia
    Sarawak Oil Palms Bhd, Malaysia
    Tradewinds Plantations Bhd, Malaysia
    TSH Resources, Malaysia

    Divested in 2010:

    Barito Pacific Tbk PT, Indonesia
    Oriental Holdings Bhd, Malaysia
    Sampoerna Agro, Indonesia
    United Malacca Bhd, Malaysia
    YNH Property Bhd, Malaysia


PHOTO Credit: Greenpeace
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  1. Bustar Maitar, of Greenpeace Indonesia, wrote an article today praising Golden Agri Resources: “Indonesia’s largest palm oil producer shows the way”. It’s bizarre that the Norwegian Sovereign Wealth Fund pulled out its investment in GAR while Greenpeace is praising the company. Campaigns usually tend to work the other way round.

    Maitar has the following to say about the “logic of the RSPO”:

    Most forests in Sumatra and Kalimantan, the Indonesian part of Borneo, where the majority of Indonesia’s oil palm expansion has been taking place, are not primary forests any more after years of (often illegal) logging and other disturbance. The conversion of these degraded or secondary forests to plantations still causes huge greenhouse gas emissions, exacerbating climate change.

    If left alone, these forests could regenerate into rainforests full of life, again capable of providing habitat for a huge diversity of plants and animals. I have been in meetings where I would show images of bulldozers trashing rich and beautiful rainforests, and the plantation companies would ask: “is it a primary forest or an HCV? No, OK, than we can clear it.”

    Unfortunately that’s the logic of the RSPO, and it will not save Indonesia’s rainforests or curb the massive amount of emissions from deforestation.