Tag Archives: palm oil

Funding Deforestation

palmeijsum17

Earth Island Journal  is a recent find in the world of periodicals.  It provides “News of the World Environment” and reports on a variety of assaults on the environment, from human intervention to natural disasters.  (www.earthislandjournal.org)

The Summer, 2017 issue’s cover story is about the “Toxic Footprint of America’s Prisons,” but the article that grabbed my interest, and my $5.00, was “Crisis Among the Palms,” by Jeff Conant.  The subtitle, “How Your Retirement Fund May be Fueling Rainforest Destruction,” supports my longstanding belief that people who have retirement accounts—especially accounts managed by large fund managers—often don’t know where their money is invested or how they are contributing to eco-rape and human rights abuses.

It stands to reason that fund managers, who control large pots of money, look for the most profitable investments.  They may not know or care how the individual companies or governments generate those profits, but even a superficial overview suggests that maximum profits come from squeezing labor and compromising the environment where the companies operate.  Compound this with the fiercely competitive market for the almighty dollar, and the fact that multi-national corporations have many levels of protective shells, as well as local government collusion, and it’s a set-up for disaster.  Foreign investment is notorious for bankrupting and/or corrupting third-world governments and devastating local environments.  (Rosaliene Bacchus’ most recent blog post,   “Guyana ties the knot with ExxonMobil” (https://rosalienebacchus.blog) reports on such a possibility with the June, 2017 deal between ExxonMobil and the government of Guyana.)

“Crisis Among the Palms” shows how this strategy works in the palm oil industry, but the same strategy is used in every commodity industry I’ve encountered.  The article gives specific examples in Liberia, Guatemala, and Indonesia, three tropical countries where the palm oil industry has grown up and thrived, consuming millions of acres a year over the past several decades.  Palm oil is now the most widely traded vegetable oil on the planet.

In May, 2015, in Butaw, Liberia, villagers who complained to the CEO of Golden Veroleum (subsidiary of Malaysian multinational Golden Agri Resources) about theft of family lands, grinding poverty, and bare subsistence level wages were brutally beaten and arrested by local police.  Homes were ransacked and looted.

A month later, in northern Guatemala, effluent from ponds on the property of a local palm oil company, REPSA, overflowed into the Pasion River, spilling enough malathion—an organophosphate pesticide–to kill hundreds of thousands of fish, an incident local courts would later call an “ecocide.”  The river has provided the lifeblood of the region that was until recently one of the world’s largest rainforests, now given over to plantations and cattle pasture.

Later that summer, Indonesia’s forests and peatlands burned out of control, forcing hundreds of thousands of people to evacuate to medical centers.  The fires were linked to the country’s expanding palm oil and pulpwood plantations.

Author Conant says “. . .the palm oil industry is a leading cause of rainforest destruction—and a source of both economic dispossession and wage labor for countless people—from the Congo basin to Malaysia to Peru . . .the industry has quickly grown to rely on global financing to fuel its expansion.”  Thus the companies that profit from the exploitation appear more and more on the world’s stock exchanges.

The financing of some of the world’s largest and most notorious palm oil companies comes from well known financial management companies, like Vanguard, Teachers Insurance and Annuity Associate (TIAA), BlackRock, CitiGroup, and California Public Employees’ Retirement System (CalPERS).  “What this means is that IRAs, pension funds, and 401Ks . . . are increasingly investing in an industry that is destroying the world’s last rain forests and impoverishing the people who live there.”

With the exception of Cargill, Archer Daniels Midland, and Unilever, the large palm oil juggernauts are mostly southeast Asian, says Conant.  He notes that the industry—almost unknown in the West ten years ago, is projected to be worth $88 billion by the year 2022.  Its growth was spurred in part by the US FDA ban on trans-fats, with 71 percent of production now going to the food industry, everything from Krispy Kreme donuts to Nestle’s chocolate to PepsiCo’s Frito-Lay snacks.  Sixteen percent of palm oil production goes to biofuels, and 12 percent to the chemicals industry.

Conant says the industry’s growth has coincided with two global trends in finance.  First is the massively increased investment in “emerging economies,” which grew by 30 percent just between 2011 and 2015.  Concurrently, there was a huge increase in “index funds” in which multiple companies are bundled into a fund that spreads risk and follows the fluctuations of the market as a whole. They are sold as low-risk funds. Between 2000 and 2014, money invested in index funds more than quintupled.

The article points out that deforestation causes up to 18 percent of global greenhouse gas emissions, and industrial agriculture drives an additional 13 percent.  A rather typical scenario is that “landowners who sold or otherwise gave up their land to agribusiness companies could be driven deeply into poverty.  In this sense, the palm oil boom has come to replace less environmentally damaging, subsistence livelihoods.  It has brought debt, wealth inequality, and, of course, ecological destruction on a vast scale.  In Indonesia, villagers frequently concede to relinquishing land to corporations because the plantation companies promise them roads, schools, and clinics.  But companies have by and large failed to fulfill the terms of community agreements  . . . .  Farmers often don’t know what they are getting into.  Lack of information and transparency are big problems.  ‘A company often collects the farmers’ land certificates, after which they become laborers on their own land.’”