Norwegian sovereign wealth fund divests from Alicorp over palm oil-linked destruction in Peruvian Amazon

Tuesday, March 10th, 2020

Peru's rainforests and communities are under growing pressure from agribusiness developments. Credit: Shutterstock.

The world’s largest sovereign wealth fund has withdrawn investment in the Peruvian consumer goods giant Alicorp after it was revealed the firm was buying palm oil from a plantation tied to multiple environmental abuses.

Norges Bank Investment Management (NBIM), the asset management arm of Norway’s central bank, announced in March it had divested $12.3million in Alicorp in light of the allegations.

The company at the centre of the claims is Ocho Sur SAC, an entity linked to controversial commodity businessman Dennis Melka, and which has reportedly cleared 7,000 hectares (ha) the Peruvian Amazon to grow oil palm.

The indigenous Shipibo community, on whose territory Ocho Sur operates, have long campaigned for palm oil companies to halt operations which they claim have forced them from ancestral lands.

Along with NGOs including Forest People’s Programme (FPP), Shipibo locals filed a complaint in 2015 with the Roundtable on Sustainable Palm Oil (RSPO), the global sustainability body, against the Melka-run Plantaciones de Pucallpa for illegally clearing community forest in the Amazon region of Ucayali.

In response, the firm withdrew from the RSPO and transferred its assets to a new entity – Ocho Sur SAC.

A new RSPO complaint was filed by the community in 2019 targeting Alicorp and miller OLPESA, both RSPO members. The complaint alleged that both were purchasing Ocho Sur palm oil “produced through clearance of primary forests and in violation of the community’s rights over their traditional lands”.

The Alicorp complaint was dismissed by RSPO in June last year and the groups instead set their sights on getting NBIM to review its investment portfolio. NBIM’s divestment was welcomed by the Shipibo community.

“We welcome the NBIM’s decision to stop financing Alicorp’s activities, which shows that even huge companies such as this should think twice before buying palm oil from a plantation like the one Ocho Sur operates on our dispossessed lands,” said Ivan Flores, a community leader from Santa Clara de Uchunya.

“Now we await a conclusive decision from the Constitutional Tribunal to return to us our ancestral lands once and for all and put an end to Ocho Sur’s impunity.”

The Federation of Native Communities of Ucayali (FECONAU) said that the tangible action taken by NBIM stood in “stark contrast” to the RSPO’s failure to properly investigate the reports last year.

“Faced with the Peruvian Government’s inaction and following the RSPO’s decision not to investigate our complaint against Alicorp, we are reassured to see that at least investors such as NBIM take seriously human rights violations and the destruction of Amazonian rainforest for oil palm expansion,” said FECONAU president Miguel Guimaraes Vasquez.

“It is encouraging that investors do not simply take the RSPO’s pronouncements at face value, when we haven’t been able to get justice through this mechanism. We hope that this decision to divest sends a clear signal to other companies, investors and financial institutions that there are consequences for businesses which fail to respect our rights and territories.”

Ucayali and surrounding Amazon areas have been exposed to increasing levels of agribusiness-linked deforestation in recent years and indigenous residents have faced mounting threats from land grabs.

Ucayali alone lost 92,000ha of tree cover in the past two years, a sharp rise from the 34,600ha removed a decade earlier, according to Global Forest Watch. Palm oil cultivation in the state has jumped from 6,000ha in 2006 to more than 40,000ha being used for the crop in 2018.

FPP hope the decision of Norway’s sovereign wealth fund will prompt other Alicorp backers into action, including Swedish bank Handelsbanken Fonder AB. Goldman Sachs, LGM Investments Ltd, Grandeur Peak Global Advisors LLC and Brown Advisory Ltd are among its other foreign investors.