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Federated Hermes: Can palm oil ever be considered sustainable?

8 Apr 2021

With monocropping one of the main causes of deforestation, palm oil production needs to change. Rather than staging a boycott, responsible investors should engage with companies across the supply chain to encourage the adoption of globally recognised certification standards.

At a glance: The power of investors in the fight for sustainable palm oil

  • Extensive monocropping for the production of palm oil is one of the main causes of deforestation.
  • However, environmentalists argue that boycotting palm oil may have adverse environmental, social and economic repercussions.
  • Responsible investors take the same view and prefer engagement over the exclusion of palm oil from investment portfolios, unless the production fails to meet strict sustainability criteria.
  • Engagement and advocacy are needed to eradicate deforestation and exploitation.
  • Actors along the value chain and responsible investor can encourage the adoption of globally recognised certification standards. They can also support smallholders with capital and expertise to increase their yields.
  • While we have no exposure to growers and distributors in our portfolios, we have positions in food or cosmetic companies, local banks and supermarkets selling products that contain palm oil in various emerging markets.
  • On the Global Emerging Markets team, we are encouraged by the progress that our current holdings have made and we will continue to engage on material cases

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