The environmental and social risks associated with the palm oil and palm kernel industry are an emerging topic in socially responsible investment portfolios. Palm oil is the most popular vegetable oil on the planet. Chances are you have probably consumed several variations of palm oil in your favorite snack foods or cosmetics this past week alone. Harvested year-round, palm oil has been around for centuries, but only gained global popularity in the 1980s. If you look at the ingredient list on your favorite bag of snacks you may see a palm oil product ingredient in names such as: vegetable palm fat, palm kernel, palm kernel oil, glyceryl, etc.
Palm oil grows in regions within 10 degrees North and South of the equator in rainforest rich countries such as Malaysia, Thailand, and Colombia with Indonesia producing over 50% of the world’s palm oil. Although the global demand and popularity of palm oil has benefitted many countries, significate social and environmental impacts have emerged including:
- Deforestation of rainforests
- Threat to the animal habitats (specifically orangutans)
- Exploitation of workers
Environmental, social, and governance (ESG) controversies such as the ones listed above are material issues for investors and can result into a negative impact on performance. In response, the palm oil industry established in 2004 the “Roundtable on Sustainable Palm Oil” (RSPO) to educate and support palm oil producers to practice in a more sustainable manner. Socially responsible portfolio managers are now responding through voting engagement with companies on Environmental, Social, and Governance related risks or by completely removing companies who do not use sustainable palm oil from portfolios.
So why are we talking about palm oil today and not other harmful industries like fossil fuels, tobacco, pornography, or pay-day loans? When our assistant Melissia, who grew up in Indonesia, learned there were investments that addressed the palm oil industry she gave us a first-hand account on the negative impact palm oil has had on her home country. Most people can’t quickly identify where to place their responsible investments, for those, we have developed a socially responsible investment questionnaire to help you identify areas you would like your investments to address. To learn more please give our office a call.
Sources:
https://www.wwf.org.uk/updates/8-things-know-about-palm-oil
https://www.worldwildlife.org/pages/which-everyday-products-contain-palm-oil
https://global.rbcgam.com/sitefiles/live/documents/cgri/responsible-investing-and-palm-oil.PDF
https://www.ishares.com/us/literature/product-brief/ishares-esg-advanced-brief.pdf
