If you were to take stock of the items in your home, particularly the kitchen and bathroom, it wouldn’t be hard to identify numerous items that commonly include one of the four major commodities driving deforestation: palm oil, cattle, soy, and wood pulp and paper products .
Palm oil is used in items like lipstick, shampoo, ice cream, laundry detergent, chocolate, cookies, soap and packaged bread.1 It is estimated that 80% of deforestation in the Amazon is to create grazing land for cattle .2 Soybean production has increased fifteen times over since the 1950s; today, it accounts for 27% of worldwide vegetable oil production, and drives further deforestation in the Amazon.3 The forests of Southeast Asia are being destroyed largely to make way for palm oil plantations.4
In using these resources for short-term gain, we have forgotten the long-term and harmful implications of rapid consumption to forests. Combatting forest destruction means reducing demand for forest commodities to a sustainable level. At Domini, we have the leverage to pressure companies to find more forest-positive means of production and to seek out companies whose business models are based on providing innovative products that avoid the use of forest commodities altogether.
Capturing Forest-Risk in Our Investments
As part of being a forest value creator ourselves, we wanted to ensure that the criteria we use to assess companies for investment eligibility included specific risks related to deforestation. To do so, in 2019 we developed over 70 new forest-related Key Performance Indicators (KPIs), which are used to contextualize and focus our eligibility review of companies, in relevant subindustries, such as pharmaceuticals, food products and financial services. Pharmaceutical firms may rely on forest biodiversity to produce new drugs, while companies that produce food products must pay attention to palm oil and soy inputs. 5 Financial services companies often provide loans and underwriting services for forest-related firms.
Through these KPIs, we weigh positively companies that have forestland and paper products certified by sustainable forestry programs, Roundtable of Sustainable Palm Oil membership and palm oil traceability. We also commend efforts to protect and restore biodiversity, forest, and soil, and to promote alternatives to commodities driving deforestation.
Our KPIs were also updated to assess a company’s negative impacts on forest destruction. As a result, companies with major controversies related to deforestation in their supply chain may face exclusion from our approved universe of stocks for our U.S. and International funds. A Japanese pulp and paper company, for example, was excluded for not banning the use of High Conservation Value Forests leading to its sourcing of primary forest wood from Tasmania, Australia, for use in wood chips.
Forest Beliefs in Action
In the first publication of our blog series, “Why Forests? A Look into Domini’s Forest Project,” we discussed the development of our Forest Beliefs and how they reflect our role in protecting forest value. We subsequently outlined the following Forest Principles as a means of implementing our beliefs. Our KPI revision project is just one example of how we are beginning to do so.
Forest Project Effectiveness Principles
- Base our investments, engagements, and other operational decisions on a holistic understanding of the corporate and investor dependence and impact on the long-term value and services from forests.
- Work to create a positive system dynamic that enhances the value of forests systems.
- Identify and monitor our direct and indirect impacts on forests, considering both positive and negative effects.
- Share our principles and process with investors, investees and the financial community to promote holistic, long-term policies and practices regarding forests.
Companies and individuals alike have a role to play in minding our forests. As a consumer, you may be asking what personal actions you can take to make your household more deforestation-free. When in the grocery store, we suggest looking for labels on snack foods that indicate the product doesn’t use palm oil, the company is a member of the RSPO, or uses paper products certified by the Forest Stewardship Council (FSC). Switching out beef products for plant-based alternatives, when you can, is also a step in the right direction.
- “Which Everyday Products Contain Palm Oil?” WWF (webpage). Accessed at https://www.worldwildlife.org/pages/which-everyday-products-contain-palm-oil. on September 11, 2020.
- “Unsustainable Cattle Ranching.” WWF (webpage). Accessed at https://wwf.panda.org/knowledge_hub/where_we_work/amazon/amazon_threats/unsustainable_cattle_ranching/ on September 11, 2020.
- “Overview: Soy.” WWF (webpage). Accessed at https://www.worldwildlife.org/industries/soy on September 11, 2020.
- WWF. Palm Oil Buyers Scorecard. (Gland, Switzerland: WWF), 2020:12. Accessed at https://palmoilscorecard.panda.org/file/WWF_Palm_Oil_Scorecard_2020.pdf. on September 11, 2020.
- Seymour, F. and Busch, J., Why Forests? Why Now?: The Science, Economics and Politics of Tropical Forests and Climate Change, Center for Global Development. (Washington, D.C.) 2016:73. Accessed at https://www.cgdev.org/publication/why-forests-why-now-science-economics-and-politics-tropical-forests-and-climate-change on September 11, 2020.