London Stock Exchange refuses to remove palm oil firm from green index

The London Stock Exchange Group has refused to remove a palm oil company from an influential investment index of environmentally friendly firms, despite a string of allegations of corruption and unsustainable business practices.

The group’s index subsidiary, FTSE Russell, has written to environmental groups declining to remove Golden-Agri Resources (GAR) from its FTSE4Good indices, which only include “companies demonstrating strong environmental, social and governance (ESG) practices”.

GAR, which is headquartered in Singapore and has a market value of 4.1bn Singapore dollars (£2.3bn), trumpeted its inclusion in the FTSE4Good indices in a press release in July 2018. Rafael B Concepcion Jr, GAR’s chief financial officer, said the firm was “honoured” by the inclusion.

However, GAR has since been involved in a corruption scandal. In October, Indonesia’s anti-graft agency arrested two senior executives at GAR subsidiaries over allegations of bribery of officials. Reuters reported that the companies were alleged to have polluted a local lake.

Some environmental groups also criticise the production of palm oil, used in products from soap to food, for its contribution to deforestation.

Dow Jones Sustainability Indices, a US rival to FTSE Russell’s FTSE4Good series, removed GAR from its products in February after Friends of the Earth accused it of “greenwashing”.

ESG stock market indices are used by investors to allocate billions of pounds of investments.

Gaurav Madan, a senior forests and lands campaigner at Friends of the Earth US, said: “It is unacceptable that an index provider oriented towards driving sustainability standards should list companies whose business is predicated on an outdated model of industrial production that decimates local communities and globally significant forests.

“Golden Agri-Resources has been involved in well-documented financial crimes, environmental degradation, and human rights violations.”

Friends of the Earth said the inclusion of GAR highlighted the need for standardisation of ESG ratings.

The London Stock Exchange said: “We can confirm that GAR’s latest assessment did not breach the required threshold in our Controversy Monitoring model to be suspended from the FTSE4Good Index Series. We continue to monitor GAR and the next evaluation will feed into the June semi-annual review process for the FTSE4Good index series.”

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