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US Retirement Funds Contribute to Deforestation and Climate Change

As of June 2016, US mutual funds had a net investment of more than $5 billion in palm oil producers.

Open burning in a newly cleared rainforest at Duta Palma's PT Ledo Lestari palm oil plantation, West Kalimantan, Borneo, 2009. (Photo: David Gilbert / RAN)

Even as a new administration hostile to efforts to combat global warming is poised to take over the White House, climate activists in the U.S. are continuing to push for action in myriad and sometimes even unexpected ways. For instance, you may not realize that saving for your golden years could have an impact on the global climate, but a movement is currently underway to make the retirement funds relied on by millions of Americans free of any connection to deforestation and associated carbon emissions due to investments in palm oil producers.

Responding to the election of Donald Trump as U.S. president and what that might mean for global efforts to combat climate change, Katherine Hayhoe, an atmospheric scientist and associate professor of political science at Texas Tech University, said in a statement that “The bright light of hope the Paris Agreement shone on the bleak and discouraging landscape of climate change has been dimmed but not extinguished.”

While Trump’s election is undoubtedly a setback for international efforts to mitigate global warming, Hayhoe is probably right that it’s not a death knell for those efforts. See, for instance, the letter sent by nearly 400 businesses and investors urging Trump not to withdraw the US from the Paris Climate Agreement and to continue “investment in the low carbon economy at home and abroad.”

Climate action, domestically and internationally, has been gaining momentum for years. As the governments of the world have moved ever-closer toward collective action — culminating in the Paris Climate Agreement, which was finalized last December and officially went into force earlier this month, much faster than anyone expected — virtually every sector of the global economy is at least starting to come to grips with the need to de-carbonize its operations.

As an example, deforestation driven by the production of global commodities like palm oil is now recognized as a significant source of emissions, prompting hundreds of companies to adopt “Zero Deforestation Commitments.” And it’s not just companies directly involved in the production of palm oil that are being called on to eliminate deforestation from their supply chains: Even investors in those companies are taking a hard look at their portfolios, whether on their own initiative or at the urging of clients and advocates for climate action, and seeking to root out any association with forest loss and the carbon emissions that result.

Not every financial firm is immediately receptive to calls to remove deforestation from their investment portfolios, however. That’s why, last July, two US-based NGOs, Friends of the Earth and As You Sow, launched a “transparency tool,” called Deforestation Free Funds, to help investors find information on which global mutual funds have holdings in palm oil producers with links to deforestation. According to the groups, some 10 percent of the global palm oil industry is financed by equity investors, including many mutual funds.

“Investments in palm oil are embedded in our pension funds, IRAs, and 401(k)s but most of us are not even aware of it,” Andrew Behar, CEO of As You Sow, said in a statement. “This web tool empowers investors to know exactly what they own so that they can pressure fund managers to implement sustainable investment policies and find investment options that support a forest-friendly future.”

As of June 2016, Friends of the Earth and As You Sow said in a statement, U.S. mutual funds had a net investment of more than $5 billion in palm oil producers. A focus of the groups’ campaign is one of the largest investment firms in the U.S., TIAA (formerly known as TIAA-CREF), which manages retirement funds for many academic and cultural institutions, from museums and universities to nonprofits and unions.

“TIAA publicly prides itself on social responsibility, transparency and engagement — yet it is the fifth-largest US investor in the palm oil sector and is thus directly invested in companies linked to tropical deforestation and land grabbing,” Jeff Conant, senior international forests program manager for Friends of the Earth, told Mongabay. “With holdings in IOI, Indofood, KLK, Felda Global Ventures, Wilmar, and Golden-Agri Resources — all of which have problematic histories — we really need to know how TIAA justifies these investments, and what it’s doing to address the risks of deforestation, land grabbing, legality, and labor rights, not to mention the climate impacts.”

TIAA did not respond to Mongabay’s requests for comment.

Friends of the Earth and As You Sow are circulating a letter to TIAA clients calling on the firm to disclose information about all of its investments in companies with farmland and palm oil operations, and to commit to a deforestation- and land grab-free investment policy. Conant said that the letter has not yet been delivered to TIAA, but that current signatories include non-profit clients of TIAA such as the Union of Concerned Scientists and ActionAid USA, as well as faculty members from several dozen universities that use TIAA, including CalTech, Columbia, Cornell, Ohio State, Princeton, Rutgers, and the Universities of California, Kansas, Michigan, Washington, and Wisconsin.

According to Conant, there are several companies in TIAA’s portfolios that have “a long way to go” to adequately address deforestation and climate. “POSCO has no commitment to reducing deforestation in its palm oil operations; Felda Global Ventures withdrew all of its Malaysian RSPO certificates in 2016 in an apparent effort to reduce accountability; KLK has been cited by Chain Reaction Research as facing ‘serious financial risks by failing to address the sustainability risks in its own operations and to its external procurement of palm oil products,'” he said.

Conant added that even companies that are considered to have industry-leading Zero Deforestation policies “are not beyond reproach,” citing Wilmar, which continues to purchase conflict palm oil from Guatemalan Grupo Olmeca, and GAR, which has a Liberian subsidiary that continues to divide communities.

By responding to its clients’ concerns around land-grabbing, deforestation, and impacts on the global climate, Conant said that TIAA has the opportunity to lead the way toward a more sustainable future.

“The US financial sector writ large has no rules to prevent investments in gross environmental and social abuses,” he said. “In our campaign, we’re giving TIAA an opportunity to take the lead in the field, and establish a policy that prevents it investing in land grabbing and rainforest destruction — because we believe this is essential to shifting the paradigm of investment away from exploitation and towards restoration.”

And Conant sees this work moving forward despite whatever the incoming Trump Administration might decide to do about the Paris Climate Agreement. “No matter what Trump and his climate-denying corporate cronies say or do, climate action is gaining momentum,” he said. “If US federal policy comes to a standstill on climate, we’ll still be increasing the pressure on consumer companies and financial markets to end climate destruction.”

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