Graph of the week

Graph of the week

08-11-2019 | Insight

The importance of sustainably produced palm oil

  • Sylvia van Waveren
    van Waveren
    Engagement Specialist

This week sees the 17th annual conference of the Roundtable on Sustainable Palm Oil (RSPO) in Bangkok and representatives from Robeco will be in attendance. In 2018, the RSPO drew up clear principles and criteria on the production of sustainable palm oil. And that’s important, because around half the products you buy in the supermarket contain palm oil: from chocolate and soap to lipstick and pizza dough.

Source: RSPO
Palm oil is a very popular commodity, thanks to the low production costs and relatively small surface area needed to grow oil palms. In recent years, however, the spotlight has shifted increasingly to the negative side of production. In order to plant oil palms, often large areas of rainforest are cut down, destroying the habitats of all different kinds of animals and releasing huge amounts of carbon dioxide into the atmosphere.

The role of investors

A further cause for concern is the disregard palm oil producers sometimes have for human rights. So, professional investors have to think carefully about how they deal with palm oil producers. The easiest option, of course, is to exclude the sector. But there are two disadvantages to this approach.

By excluding companies, you miss the opportunity to bring about sustainable change. In addition, we want to achieve optimal returns for our clients. In that respect, it wouldn't be good policy to ignore a sector with good profit margins.

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Engaging for more sustainable production

That is why Robeco chooses to engage in serious dialogue with companies to make the production of palm oil more sustainable. The progress of this engagement process is monitored closely. We no longer invest in companies that don’t do enough to meet our sustainability criteria.

What's more, we encourage packaging and food companies to favor sustainable palm oil. The graph shows the growth in the production of certified sustainable palm oil between 2008 and now. This includes both the palm oil itself (dark bar) and palm seeds that are used in cosmetics and other skin and haircare products, such as shampoo (light bar).

Fortunately, the graph shows an increase in the production of sustainable palm oil since the RSPO’s creation of clear principles and criteria in 2018.

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