Who Cares About Vegetable Oil Spills?

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    Stockholm (NordSIP) – On 16 March, a major spill of soybean oil occurred in the port area of Karlshamn in southern Sweden. AAK, formerly AarhusKarlshamn, a global Sweden-based company and producer of vegetable oils and fats, promptly confirmed that the spill originated at their facility, during the unloading from a tanker ship. Over the weekend, the local rescue services have been busy trying to prevent the spill from spreading further and the police have launched an investigation into the circumstances of the spill. According to a spokesperson for AAK, however, while turning the water in the port unpleasantly yellow and sticky, the released oil wasn’t dangerous.

    As someone who has been aware of the problem of vegetable oil spills for some time now, David Seekell, Head of Sustainable Investing and ESG at Atle, is following closely the developing situation. “The newspapers really did AAK a favour by just accepting and reporting that cooking oil is non-toxic rather than actually looking into it,” he comments. “They mention that the leak is contained in the harbour. However, in terms of impact, it is still very bad as it is where you are most likely to create oxygen depletion and dead zones. This is also where all the fish and birds are found. Hopefully, they can clean it up quickly before that happens!”

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    A staunch advocate of corporate accountability, Seekell is eager to explain why investors should care about vegetable oil spills and what they can do about the issue. “Vegetable oil spills are often biodegradable, but the flip side is that this involves intense bacterial respiration that consumes huge amounts of oxygen, creating dead zones,” he wrote on LinkedIn in November, listing several related environmental impacts ranging from dying waterfowl, fish, and shellfish to contaminated shorelines and beaches.

    According to Seekell, active investors can and should do something about the problem. “Ask companies for transparency,” he says. “The Global Reporting Initiative (GRI) disclosure 306-3 for significant spills is a good first step on their part.” He also points out the importance of ensuring that companies have developed adequate spill prevention and response plans. “Ask your companies if they have them at their facilities,” he urges.

    Putting their money where the mouth is, Humle Fonder, one of the fund companies within Atle, has been engaging with AAK on the very same issue as an active shareholder. Upon noticing that AAK had stopped reporting on oil spills, Seekell and his colleague, portfolio manager Petter Löfqvist, felt compelled to react, demanding that the company disclose the number and size of its significant vegetable oil spills in the annual sustainability report. They have also sought clarification on the company’s compliance with spill prevention, control, and countermeasure regulations as well as several related issues.

    According to Löfqvist and Seekell, AAK’s history of occasional spills poses a significant reputational risk which could have financial implications. “We believe transparency is the best approach to assure stakeholders that AAK’s commitment to managing sustainability risks extends across its entire business,” they assert.

    “Of course, none of this is unique to AAK,” adds Seekell. “As the trade in vegetable oils continues to increase, it has become a question of ‘when’ rather than ‘if’ spills will happen. I believe the problem will become more frequent in the future.”

    It is time more responsible investors joined forces with Atle to engage with AAK and its peers on vegetable oil spills.

    Image courtesy of NordSIP via Midjourney
    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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