The €409 billion ($476.7 billion) Dutch national pension fund APB has divested its shares in Korea’s Posco Daewoo over the deforestation caused by the company’s palm oil plantations in Indonesia.
ABP said it sold off €300,000 worth of shares in South Korean Posco Daewoo due to one of its subsidiaries being involved in environmentally damaging logging in order to create palm oil plantations.
“At the moment we are laying all companies along a strict yardstick to determine what we want to invest in,” APB said in a release. “Posco Daewoo does not meet our requirements and therefore we decided not to include it in our investment portfolio.”
The pension fund said it had held several discussions about sustainability and corporate responsibility with Posco Daewoo. It said the conversations intensified after reports that a subsidiary of the company was involved deforestation of the jungle on the Indonesian island of Papua. There were also conflicts about who was responsible for the land the company used for its plantations.
“Measures that our investors proposed were not picked up quickly enough by the company,” said APB. “As a result, we no longer had confidence that the company would improve.”
According to the World Wide Fund for Nature, formerly the World Wildlife Fund, large swaths of tropical forests and other ecosystems have been cleared to make room for palm oil plantations, which it says has destroyed the habitat for endangered species such as rhinos, elephants, and tigers.
However, ABP said it believes palm oil production can be done in a sustainable and responsible manner. Earlier this year, it announced that it would stop investing in tobacco and nuclear weapons producers as part of an initiative to not invest in companies that make products that are by definition harmful to people. APB doesn’t consider palm oil to fall under this guidance, and said it could continue to invest in palm oil companies as long as they meet the fund’s requirements.
In 2016, APB introduced a new policy for sustainable and responsible investment. For each investment it not only looks at whether it is attractive in terms of potential investment returns, risks, and costs, but also how sustainable and responsible it is.
“This should ensure that in 2020, investments will only be made in shares and bonds from companies that are at the forefront of sustainable and responsible business,” said APB. “In companies that do not lead the way, we only invest when we are confident that they can and want to improve.”