Storebrand Acts on Deforestation

    Stockholm (NordSIP) – Cumulative deforestation in Brazil’s Amazon hit its highest level since 2006 last year. According to official data from INPE (the Brazilian space research agency), forest destruction rose 22% from the previous year. More than 13 thousand square kilometres of forest were lost in the Amazon just between August 2020 and July 2021.

    On the background of such grim numbers and following a thorough analysis of their investments in Brazil, Storebrand Asset Management announced this week that they would be putting two companies, Bunge Ltd (Bunge) and Archer Daniels Midland (ADM), on their observation list. The asset manager’s portfolios without prior holdings will be restricted from investing in the companies whereas those with prior positions are allowed to maintain but not increase them.

    “Deforestation creates financial risk for companies and their shareholders, and Storebrand Asset Management has committed to deforestation-free portfolios by 2025,” comments Jan Erik Saugestad, Storebrand AM’s CEO on the decision. “We have assessed our portfolios for deforestation risk and selected 50 companies for engagement. Bunge and ADM are among the companies with the highest deforestation risk in our portfolio,” he adds.

    Storebrand AM is already participating in collaborative shareholder engagements with Bunge and ADM and has co-filed a shareholder resolution at Bunge’s AGM in 2021, calling on the company to step up efforts to end supply chain links to deforestation. While acknowledging that both companies have made recent improvements to their commitments, policies, and action plans, Storebrand AM considers the companies’ respective timeframes for achieving verifiable deforestation-free operations to be too long, and their current efforts insufficient to eliminate deforestation risk from their supply chains.

    Both Bunge and ADM are making some efforts to improve traceability and monitor their supply chains. These steps may reduce the risk of contributing to deforestation in the future. The companies are, therefore, placed under observation for the time being rather than excluded from the portfolios.

    Meanwhile, it is important to acknowledge that these two companies are just the tip of the iceberg, as the challenge is a systematic one. “The risk associated with Bunge and ADM increases because of Brazil’s rising deforestation rate and the political context in the country,” comments Storebrand AM’s CEO. “Several legal reform proposals are on the table which may reduce forest protection even further. To promote forest protection and sustainable land use, Storebrand Asset Management maintains a dialogue with the government of Brazil through the Investor Policy Dialogue on Deforestation (IPDD),” concludes Saugestad.

    Image courtesy of Lise Eide Risanger / Storebrand
    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.

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