Jamie Morton is the NZ Herald's science reporter.

NZ funds' $21m 'dodgy' palm oil investment

New Zealand's three largest government investment funds have more than $20 million invested in foreign palm oil companies linked to devastation of Indonesian rainforests.

Groups fighting to save the critical habitats for Sumatran tigers, orangutans and thousands of other threatened animals are appalled and want the funds pulled immediately.

The revelations come amid an unprecedented push for action on dodgy palm oil production - spurring dairy giants Landcorp and Fonterra to import only sustainable products - and fresh after a Herald investigation revealed millions of Kiwis had unwittingly invested in tobacco and controversial weapons companies through KiwiSaver.

Figures provided to the Green Party and the Herald showed the NZ Superannuation Fund, ACC Investment Fund, and Government Superannuation Fund had a combined $21,870,037 tied up in at least one of the companies - Genting Bhd, IJM Corp Berhad, Posco and Posco Daewoo Corp.

All four companies were last year dropped by Norway's $900 billion state pension fund, the world's biggest, after a report found an unacceptable risk of "severe environmental damage".

Representatives for the three New Zealand funds said they were aware of Norway's move - and similarly had concerns around unsustainable palm oil production - but stopped short of confirming whether they would also divest.

Green Party conservation and animal welfare spokesperson Mojo Mathers said the habitat destruction was threatening many iconic animals like the orangutan with extinction, "just to boost the short-term profits of investors".

She also noted that, over a three-week period last year, forest-clearing fires in Indonesia alone produced more carbon dioxide than the total annual emissions of Germany.

"The NZ Superannuation Fund should not be profiting from these destructive practices," Mathers said.

"The Norwegian Fund, which is 40 times bigger than our own, found that they couldn't engage constructively with these companies; so it is time that our own, much smaller fund stops trying to pretend it can do so."

Unmask Palm Oil campaigner Ben Dowdle called the investments "extremely disappointing".

"Companies need to know that if they engage in deforestation and put wildlife, indigenous communities and rainforest at risk then they will not find investors in New Zealand."

Greenpeace forests campaigner Grant Rosoman said the New Zealand super funds need to screen and review their investments for any links to deforestation, peatland destruction or exploitation.

"I think New Zealanders would be horrified to find out they were contributing to destroying rainforests and the home of endangered orangutans and other species," he said.

"One of these companies is a supplier to at least two of the companies supplying the controversial palm kernel extract to New Zealand."

Dirty money?

The figures showed the $31 billion NZ Super Fund had $6.6 million invested in the companies, including $301,621 and $4.2 million respectively in South Korean company Posco Daewoo Corp and its parent company Posco, and $1.4 million and $697,505 in Malaysian companies Genting Bhd and IJM Corp Berhad.

The NZ Super Fund recently received an A+ rating for governance and strategy around responsible investment by the UN-supported Principles for Responsible Investment.

As at the end of last month, the Government Super Fund had a holding in Posco of 53,038 shares valued at $8,445,030, and the ACC Investment Fund had holdings in Genting Bhd and Posco worth $2,228,353 and $4,550,727 respectively.

The Council on Ethics for the Oslo-based Government Pension Fund Global (GPFG) found Posco Daewoo Corp and Posco may be responsible for "severe environmental damage" in converting tropical Indonesian forest into oil palm plantations, in a region of "unusually rich and, unique biodiversity".

A lone, burned stump - all that's left of a once dense forest in a field cleared for palm oil plantations in Indonesia. Photo: AP
A lone, burned stump - all that's left of a once dense forest in a field cleared for palm oil plantations in Indonesia. Photo: AP

The council raised similar concerns about IJM Corp Berhad, which did "not seem to be implementing measures" to prevent the loss of important conservation values, and Genting Bhd, five of whose plantation licence areas were located on land that had been mapped as potential habitats for orangutans and other endangered species.

"The Fund finds that the company's lack of transparency, the fact that the concessions are located in ecologically important regions, and that the company appears to be clearing forest in good condition and peatlands, entail an unacceptable risk that the conversion of forest will have severe and irreversible impacts on biodiversity and ecosystems in the region," the council's report on Genting Bhd stated.

In the wake of Norway's divestment, IJM told Focus Malaysia it had a "different definition of deforestation" to the council.

Along with Genting Bhd, a member of the global Roundtable on Sustainable Palm Oil (RSPO), IJM boasts its sustainability efforts on its website.

Neither Posco or Posco Daewoo Corp are accredited RSPO members, and IJM resigned from the organisation.

The Sustainable Palm Oil Transparency Toolkit, run by the Zoological Society of London, gave Posco Daewoo Corp a score of just 3.6 per cent, and Genting and IJM scores of 28.6 per cent and 12.5 per cent.

Fund managers: divestment the "last resort"

Finance Minister Bill English told the Herald "it wouldn't be appropriate" for the Government to comment on specific investments, given that the independence of the NZ Super Fund in making investment decisions was a "critical component" of its framework.

"However, it is the responsibility of the fund to invest on a prudent, commercial basis and, in doing so, to manage and administer its investments in a manner consistent with best practice portfolio management."

NZ Super Fund head of responsible investment, Anne-Maree O'Connor, said the fund was considering its work around palm oil in light of Norway's decision and what staff learned on a visit to Indonesia last month.

"However, it is important to note that our overall approach to responsible investment is different to the Norwegian one."

The fund's preference was to engage companies to change their practices and policies, and considered divestment a last resort, she said.

"We note that once an investor has divested from a company, it considerably reduces its ability to influence it."

Government Superannuation Fund Authority chief executive Simon Tyler also said divestment was a last resort, adding the three funds are involved with palm oil efforts led by the UN-backed Principles for Responsible Investment initiative.

"The [funds] also use an independent global engagement firm to engage with companies in the palm oil supply chain on behalf of ourselves and other global investors," Tyler said.

"Collective capital carries more weight."

The ACC Investment Fund's manager, Nicholas Bagnall, said it was planning to write to Posco to ask questions and "raise our concerns".

While ACC's policy was to exclude investment in activities that would clearly be illegal under New Zealand law, neither Posco nor Genting Bhd were on its ethical exclusion list.

"New Zealand law recognises trade-offs between environment impacts and economic benefits, and the environmental approval regulations in most foreign countries also recognise this trade-off," Bagnall said.

"It can therefore be difficult to assess whether legally mandated activities that are impacting the environment in foreign countries would be contrary to ACC's investment criteria."

- NZ Herald

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