BlackRock was accused of ESG inconsistency over Indonesian palm oil

BlackRock has been accused of inconsistency in its sustainable investment approach for its protest against shareholders against obtaining palm oil from Procter & Gamble.

The largest investment group in the world, which has succeeded ambitious commitments to environmental, social and governance standards, in October joined one investor rebellion in P&G on the wood pulp and palm oil supply chain of the consumer goods group, which extends in Indonesia.

Since then, P&G has asked its Singapore-based supplier, Wilmar International, to investigate Astra Agro Lestari, a palm oil subsidiary of Indonesian conglomerate Astra International that activists have accused of seizing land from farmers. local, among other poor environmental standards.

Rights groups and advocates for sustainable investment have turned their attention to BlackRock, which is a significant shareholder in Astra International, Astra’s parent company Agro Lestari. According to Bloomberg data, the U.S. fund group is Astra International’s third-largest investor, with a stake worth nearly $ 350 million. It also has a small direct stake in Astra Agro Lestari.

If investors want to be consistent, they should challenge palm oil producers to improve

Eco-funding groups said BlackRock has been inconsistent in its approach to ESG considerations in not openly pressuring Astra on its environmental record. The $ 8.7 million fund house has arrived under increasing pressure meet its 2020 commitments on ESG and sustainable investment.

“It’s inconsistent that BlackRock is pressuring P&G to clean up its value chain while still profiting from that same value chain,” said Lara Cuvelier, a sustainable investment advocate for Reclaim Finance, an investor pressure group.

BlackRock should “make detailed and detailed requests to the company. . . and commit to divesting if the necessary changes do not take place, ”added Cuvelier.

Wilmar’s research on Astra Agro Lestari arose from one application made in October by Wahana Lingkungan Hidup Indonesia, an environmental group, at P&G to examine claims that three subsidiaries of the palm oil company were involved in land grabbing by local farmers. The alleged seizures occurred in seven villages in Central Sulawesi, a remote area of ​​Indonesia.

Astra International is majority owned by the Hong Kong trading house Matheson Garden through its Singapore-listed unit, Jardine Cycle and Carriage. BlackRock’s stake, which has gradually increased over nine years, is maintained primarily through mutual funds and ETFs, according to Bloomberg data.

Astra International did not respond directly to the complaints, but said it was working with its subsidiaries on the sustainability and livelihoods of local communities. “Astra Agro Lestari has established a comprehensive code of sustainability. . . and has been working with independent experts to further strengthen its sustainability performance, ”Astra International said.

P&G said Astra Agro Lestari sells palm materials to Wilmar, one of the suppliers of the consumer goods group. “We asked Wilmar to take steps to investigate further with his supplier Astra Agro Lestari and address the case,” P&G said. Wilmar, who has revealed the allegations through his reporting processes, said Astra Agro Lestari had so far been “close and open” in its investigation and was waiting for evidence from environmental group support.

BlackRock said he was “well aware” of the concerns and was “continuously related” to companies over sustainability issues. “Where we believe companies are not moving fast and urgently enough, our most common action will be to hold administrators accountable by voting against their re-election,” the fund manager said.

At Astra International’s annual meeting for 2020, BlackRock voted against a motion on changes to the board and the director’s compensation for outreach issues.

Benjamin McCarron, CEO of Asia Research and Engagement, said: “If investors want to be consistent, they should challenge palm oil producers to improve.”

Mighty Earth, another environmental campaign organization, has also pressured United Tractors, a subsidiary of Astra International dedicated to thermal coal, for its investment in Indonesia’s Martabe gold mine. According to Mighty Earth, the mine, located in Sumatra, coincides with the habitat of the Tapanuli orangutans, which are on the verge of extinction.

Astra Agro Lestari is not a member of the roundtable on sustainable palm oil, an industry body that commits companies to following sustainable standards.

Capital Group, Astra International’s second largest shareholder, declined to comment. The U.S.-based fund manager has previously said ESG’s considerations were “woven” into its investment approach.

UBS and Vanguard Group, which also own shares in Astra International, declined to comment. A unit of Norway’s central bank, Norges Bank, which manages the country’s sovereign wealth fund and also owns shares, has placed Astra International in a exclusion list in 2015 due to the risk of “serious environmental damage”.

Moral money

Moral Money is our new weekly newsletter on business, finance and sustainable investment. Sign up here for breaking news and insightful analysis of this bubble revolution.