California Forum

If state is a climate leader, why is CalPERS backing firms that burn rainforests down?

A palm oil plantation in Central Kalimantan, Indonesia, in September 2015.
A palm oil plantation in Central Kalimantan, Indonesia, in September 2015. Friends of the Earth Spain

While the Trump administration has turned away from the Paris Agreement and actively sought to dismantle federal environmental protections, I am proud to see that California’s legislators are boldly stepping up to the challenge of climate change.

However, there is one disappointing gap in California’s leadership on climate. The state public employees’ retirement fund, CalPERS, is invested in a number of companies well known for burning and bulldozing the world’s rainforests.

Deforestation is second only to burning fossil fuels as the leading cause of global greenhouse gas emissions, with some 80 percent of global deforestation driven by agribusiness.

CalPERS has close to $400 million invested in many palm oil plantation companies clearing native forests around the world. Why? Because CalPERS isn’t looking for deforestation in its portfolios.

While tropical deforestation is linked to the production of soybeans, cattle, rubber, chocolate and other commodities, palm oil production has long been one of the leading drivers of deforestation. In Indonesia alone, estimated CO2 emissions from the palm oil sector amount to more than 300 million tons per year – roughly equivalent to the annual emissions of Spain.

Sadly, California is tied to this destruction through CalPERS, which has close to $400 million invested in many palm oil plantation companies clearing native forests around the world.

For example, CalPERS holds $64 million in Posco, a notorious Korean conglomerate that has set up camp in Indonesia’s largest intact rainforest and razed it to make room for monoculture palm oil plantations. The company has in recent years destroyed more than 66,000 acres of rainforest – an area twice the size of San Francisco.

Fortunately, Colgate-Palmolive, Unilever, Kroger and more than a dozen others have said they won’t buy from Posco because of its deforestation. But CalPERS continues to finance this company even as recent satellite mapping shows continued destructive practices. Why? Because CalPERS isn’t looking for deforestation in its portfolios.

Another example is CalPERS’s $25 million investment in Bunge, the agribusiness giant. A major investigation found that Bunge was far and away the company that drove the most deforestation for animal feed in Brazil last year.

Fortunately, some responsibly-minded companies are trying to hold Bunge accountable. Just recently, 23 of the world’s largest meat retailers, including McDonald’s and Walmart, called on Bunge and other companies to stop its deforestation. But Bunge has shown no interest in changing its practices. And, again, they’re able to do so in part because CalPERS, while propping them up financially, has failed to take the company to task for its destructive practices.

While CalPERS waits on the sidelines, other international financial institutions large and small are acting. The international banks HSBC and BNP Paribas have adopted strong policies to limit financing of companies driving deforestation. And institutional investors like New York State Pension Fund and Green Century Capital Management, representing trillions of dollars in assets, have called on companies like Posco and Bunge to stop deforestation.

Funding tropical deforestation is out of step with the values best represented by California’s leaders, who have long taken the mantle as environmental vanguards. CalPERS can do better, as it showed by being one of the first major funds to divest from coal, inspiring other investors to follow suit.

By applying similar principles to its agricultural investments, it can make a big difference as well. By divesting from bad actors like Posco and Bunge, and instituting a comprehensive approach to preventing rainforest destruction by its investees, CalPERS can join the rest of California in truly leading on climate change.

Henry A. Waxman represented Los Angeles in Congress for 40 years and served as Chairman of the Energy & Commerce and Government Oversight Committees. He is chairman of Mighty Earth, a global environmental organization.

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