Palm oil/BlackRock: passive strategy is at odds with ESG stance

Palm oil/BlackRock: passive strategy is at odds with ESG stance

From Oreo cookies to shaving cream, palm oil is an ingredient in all our daily lives. Global production continues to grow, reaching about 72m metric tonnes last year. Its omnipresence exposes avowedly ethical investors such as BlackRock to charges of hypocrisy. Plantations operators sometimes destroy rainforest or wrest land from small farmers.

An environmental group has levelled the latter allegation at a subsidiary of Astra International, an Indonesian company whose third-largest shareholder is the US passive specialist. The claim is awkward for BlackRock, which participated last year in a shareholder revolt over aspects of Procter & Gamble’s supply chain.

The US consumer products giant says it sources “palm oil materials” from a wholesaler that buys in turn from the unit, Astra Agro Lestari.

Parent group Astra is majority-owned by trading house Jardine Matheson and has a strong business record. Over the past 64 years, it has grown to become one of Indonesia’s largest listed conglomerate.

Its activities are far from environmentally-friendly. Three quarters of sales come from cars, mining and mining equipment. Its machinery is often used in pits producing thermal coal, a polluting energy source.

Astra subsidiary United Tractors bought a majority stake in Indonesia’s Martabe Gold Mine to boost the portion of earnings