Packaged Food, Palm Oil, and Deforestation | Impact Investing Success Story with Leslie Samuelrich of Green Century Funds
Years ago, I was attending the SRI Conference. I hosted a small reception in my hotel room. To keep in their good graces, I invited the conference guests staying adjacent to my hotel room to join in the festivities. One of those guests was Leslie Samuelrich, President of Green Century Capital Management. We had never met before, but she came right over, and we’ve been friends since. Recently, I was able to interview her about one of her recent impact success stories. I hope you enjoy hearing the story as much as I did.
Sonya: How long have you been working in financial services and impact investing?
Leslie: When I was in college, I briefly flirted with the idea of being a stock broker, but I felt compelled to make a difference – and impact investing didn’t really exist yet – so I went to work for a nonprofit.
I spent the next 25 years leading nonprofit organizations working to alleviate homelessness, train environmental organizers, and press global corporations to stop peddling tobacco and draining public water sources to make bottled water.
In 2012, I was presented with the opportunity to join Green Century – which is the only mutual fund in the U.S. wholly owned by environmental and public health nonprofits – and jumped at the chance to finally realize my fleeting financial services aspirations from college. I viewed it as a unique opportunity that let me continue pressing corporations to improve their environmental stewardship and expand the number of people engaged in environmental issues, by increasing the number of Green Century investors. And I’m still able to support grassroots campaigns, since 100 percent of Green Century’s profits belong to our nonprofit owners.
Sonya: I love that. I always like to ask people what their “a-ha” moment was when it comes to impact investing. It sounds like yours landed at your feet! Was there any moment that really cemented the power of impact investing for you?
Leslie: Yes! My “a-ha” moment was when we started working with Starbucks, in an effort to convince them to source sustainably grown palm oil (meaning no burning or razing of forests to start a palm tree plantation). Three months later, Starbucks adopted a new policy. Three months! Victories don’t usually happen that quickly for nonprofits, so it really drove home how much of an impact investors can make – and that ability to effect positive change is what drives me every day.
Sonya: I know Green Century does a lot of work encouraging companies to switch to sustainably grown palm oil, and more generally working against deforestation. Can you tell me a little bit more about why that is important for businesses and to the planet, and why it’s so important to Green Century?
Leslie: Deforestation is the third largest driver of climate change. It’s also bad business. It exposes corporations and investors to a wide range of operational, reputational, competitive, and regulatory risks. We believe that companies that managing their ESG risks may perform better in the long run.
Tropical forests are integral to carbon sequestration, the preservation of biodiversity, and the maintenance of healthy ecosystems, so it’s critical that we convince companies to stop burning and razing them and to stop sourcing unsustainably-produced agricultural products.
We’ve had success in this area. Since we started working on forest protection in 2012, the percent of Southeast Asian palm oil refineries covered by no-deforestation commitments has ballooned from 5% to 74%. Last fall, we sent one of our shareholder advocates to Indonesia and Malaysia to directly press local companies to improve their practices.
Palm oil expansion has been a leading driver of deforestation in Indonesia, but, thanks in part to corporate commitments to deforestation-free supply chains, its rate of deforestation has actually declined. In 2017, Indonesia experienced a 60% drop in primary forest loss. From 2007 to 2014, three acres of trees were razed every minute in Indonesia, so this is real progress.
Sonya: Can you give me a specific example of a company you’ve worked with on this issue, perhaps a domestic company?
Leslie: Palm oil can be found in products from packaged food to soap to biodiesel. As the global demand for palm oil grows, increased palm oil production can come either from investing in oil palm plants that have higher oil yields or from expanding the land on which oil palms are grown, mostly through deforestation. The same is true of the growing demand for soy, beef, etc. It is imperative that corporations make it clear to their suppliers that they will not purchase products sourced through unsustainable agricultural practices.
In 2018, Green Century started discussions with Aramark, one of the world’s largest food service providers, about its lack of a no-deforestation policy. Ultimately, we filed a shareholder proposal with the company, and a team of Aramark executives traveled to our Boston office to discuss the issue.
In January 2019, Green Century announced that Aramark, which serves two billion meals a year around the world, had agreed to implement a sweeping, global no-deforestation policy by 2025, and that we had withdrawn our shareholder proposal.
Cameron Highlands, Malaysia
Specifically, Aramark pledged to develop a “No Deforestation, No Peat, No Exploitation” (NDPE) forest policy, which will protect tropical forests and peatlands (which are essential for mitigating climate change), endangered species and biodiversity, and local workforces.
Aramark also explicitly agreed to prohibit legal deforestation in its supply chain. This is especially important for commodities, such as soy, cattle, and coffee, that come from Latin America, where government-sanctioned deforestation is a considerable risk. For example, Brazilian President Jair Bolsonaro campaigned on a promise to convert his country’s tropical forests to land for cattle pastures and soybean farms and called forest protection an economic obstacle.
This year, Aramark will perform a supply chain assessment to better understand its forest-related risks across all geographies within its supply chain and complete its transition to 100% sustainably sourced soy and palm oils.
Sonya: Are there financial or risk reduction arguments for corporations, like Aramark, to agree to this?
Leslie: Companies that fail to adopt no-deforestation policies face risks related to their reputations, financial returns, and the reliability of their supply chains. Deforestation already has exacerbated droughts in the Cerrado region of Brazil, which has resulted in significant declines in soy production.
Sonya: What interesting project are you working on now?
Leslie: Since some corporations remain unconvinced about the need to switch to sustainably produced palm oil, we’ve started targeting the banks and asset managers that are funding the production of unsustainable palm oil. We are pressing these “financiers of deforestation” to implement policies that will stem the funding for companies causing deforestation. Investors in these institutions are indirectly exposed to deforestation-related risk, so we strive to convey and highlight the risks inherent to unsustainable palm oil production.
We’re also working to get other investors on board with our efforts to stop tropical deforestation. Last year, CalPERS, the largest U.S. state pension fund, amended its investment policy to include deforestation risk as a material risk to be considered in its investment decisions.
Sonya: This is phenomenal work, thank you for sharing with me. Can other firms or advisors partner with you in your efforts? Or is there something you suggest for financial professionals that want to add advocacy efforts to their impact investing offerings?
Leslie: Yes! I would urge advisors, and investors, to really research how the companies in a fund are selected, because it’s easy to slap ESG or “sustainable” onto the name of a fund. I would urge everyone to review the prospectus of any fund they’re considering. Advisors also should know that “low carbon” is not synonymous with fossil fuel free. Low carbon funds may still be invested in coal, oil, and gas companies. I would urge advisors to research how funds are defining shareholder advocacy. Are they just voting their proxies? Or do they actually have a team of in-house shareholder advocates who are directly engaging corporations about their environmental practices.
This interview has been lightly edited for length and clarity.
Learn more about Green Century here.