An influential provider of sustainability indices, used to guide ethical investments, has been accused of greenwashing. Dow Jones Sustainability Indices has been criticised by environmental charity Friends of the Earth for including Golden Agri-Resources, a Singapore-listed palm oil company, in its Asia Pacific index for a second year.
DJSI is part of S&P Dow Jones Indices, one of the leading index providers. Such indices influence how trillions of dollars of assets are invested. Palm oil is used in products from ice cream to soap and cosmetics. Its production requires a lot of land, which can result in deforestation and the displacement of indigenous communities. The dispute involving DJSI concerns the inclusion of a palm oil company whose Liberian venture was censured for its conduct on disputed lands.
FoE’s criticism stems primarily from GAR’s relationship with Golden Veroleum Liberia, a palm oil company in west Africa. GVL was censured in February by the Roundtable on Sustainable Palm Oil, the industry body, for serious shortcomings in how it handled community relations.
The roundtable found that GVL failed to consult adequately with community members before agreements were signed and that the company had operated on disputed lands. Some community members said they “felt intimidated and coerced” into signing agreements.
GAR is the sole investor in the Verdant Fund. GVL is a subsidiary of Verdant. GVL lost an appeal against the roundtable’s findings and subsequently withdrew from the body. In July, GVL announced measures to improve sustainability, including better monitoring and dispute resolution. It said it would work with GAR to comply with its investor’s social and environmental policies.
FoE said it had raised its concerns with DJSI and Robeco-SAM, the Swiss sustainable investing group that assesses companies for the index. “The DJSI should not greenwash such a problematic company [as GAR],” said Gaurav Madan, senior forests and lands campaigner at FoE in the US.
“It should instead recognise the inherent risks of rampant deforestation, human rights violations and land grabbing — otherwise the DJSI is betraying its mission of sustainable investing.” S&P Dow Jones Indices said: “RobecoSAM is an independent publisher of company scores, which are used by S&P DJI to determine the eligibility and/or weights of companies in the DJSI.
“S&P DJI is following this situation and RobecoSAM is in contact with FoE and GAR.” RobecoSAM said describing the inclusion of GAR in the index as “greenwashing” was inaccurate. It defended its methodology as “robust and rules-based” and said GAR qualified for inclusion.
It added: “We have been in constructive dialogue with [GAR] on several controversial topics since 2011. We have been constantly engaging with GAR, the Roundtable on Sustainable Palm Oil and NGOs such as FoE. We are closely monitoring the steps GAR is taking.”
GAR said it disputed FoE’s allegation as it had disclosed the information requested by RobecoSAM and DJSI when they compiled the index. It said its scoring was adjusted because of the issues at GVL. GVL told the Financial Times that it had “acknowledged shortcomings in its sustainability efforts to date” and that it was confident its action plan “will rebuild confidence in the company’s sustainability commitment and performance”. It added it could not comment on GAR’s DJSI listing as it was not involved in the composition of the index.