BlackRock has been accused of inconsistency in its approach to sustainable investing over its support for a shareholder protest against Procter & Gamble’s palm oil sourcing.
The world’s largest investment group, which has made ambitious commitments to environmental, social and governance standards, joined an investor rebellion at P&G in October over the supply chain in wood pulp and palm oil from the consumer goods group, which extends to Indonesia.
P&G has since called on 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 grabbing land from local farmers among them. other poor environmental standards.
Rights groups and sustainable investing advocates have turned to BlackRock, which is a significant shareholder in Astra International, the parent company of Astra Agro Lestari. According to Bloomberg data, the US fund group is Astra International’s third-largest investor, with a value of nearly $ 350 million. He also owns a small direct stake in Astra Agro Lestari.
Green finance groups have said BlackRock has been inconsistent in its approach to ESG considerations by not openly pressuring Astra over its environmental record. The $ 8.7 billion fund house is under increasing pressure to deliver on its 2020 ESG and sustainable investing promises.
“It is inconsistent that BlackRock is pushing P&G to clean up its value chain while continuing to profit from that same value chain,” said Lara Cuvelier, activist for sustainable investments at Reclaim Finance, an investor lobby group.
BlackRock should “make detailed and time-bound requests to the company.” . . and commit to giving in if the necessary changes are not forthcoming, ”added Cuvelier.
Wilmar’s investigation into Astra Agro Lestari stems from a request made in October by Wahana Lingkungan Hidup Indonesia, an environmental group, to P&G to investigate allegations that three subsidiaries of the palm oil company were involved in the land grabbing by local farmers. The alleged seizures took place in seven villages in central Sulawesi, a remote region of Indonesia.
Astra International is majority owned by Hong Kong trading house Jardine Matheson through its Singapore listed unit, Jardine Cycle and Carriage. BlackRock’s shareholding, which has grown steadily over nine years, is mostly held through mutual funds and ETFs, according to Bloomberg data.
Astra International did not respond directly to the allegations, but said it was working with its subsidiaries on sustainability and the livelihoods of local communities. “Astra Agro Lestari has implemented a comprehensive sustainable development code. . . and worked with independent experts to further strengthen its sustainability performance, ”said Astra International.
P&G said Astra Agro Lestari sells palm materials to Wilmar, one of the group’s suppliers of consumer goods. “We asked Wilmar to take steps to investigate further with their supplier Astra Agro Lestari and deal with the case,” P&G said. Wilmar, who disclosed the allegations through his reporting processes, said Astra Agro Lestari has so far been “open and open” in its investigation and is awaiting evidence to support environmental groups.
BlackRock said it was “well aware” of the concerns and was “continually engaged” with companies on sustainability concerns. “Where we believe companies are not moving with sufficient speed and urgency, our most frequent action will be to hold directors accountable by voting against their re-election,” said the fund manager.
At Astra International’s 2020 annual meeting, BlackRock voted against a motion regarding board changes and director compensation due to disclosure issues.
Benjamin McCarron, Managing Director of Asia Research and Engagement, said: “If investors want to be consistent, they should push palm oil producers to improve.”
Mighty Earth, another environmental campaign organization, also lobbied United Tractors, a subsidiary of Astra International involved in thermal coal, over its investment in Indonesia’s Martabe gold mine. According to Mighty Earth, the mine, located in Sumatra, straddles the habitat of Tapanuli orangutans, which are on the brink of extinction.
Astra Agro Lestari is not a member of the Roundtable on Sustainable Palm Oil, an industry body that commits companies to meeting sustainable standards.
Capital Group, Astra International’s second largest shareholder, declined to comment. The US-based fund manager has previously said ESG considerations are “built in” to his approach to investing.
UBS and Vanguard Group, which also own shares of Astra International, declined to comment. A unit of the Norwegian central bank, Norges Bank, which manages the country’s sovereign wealth fund and also owns shares, placed Astra International on an exclusion watch list in 2015 due to the risk of “serious environmental damage”.
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