The Norwegian sovereign wealth fund will sell off ownership stakes in a major Indonesian conglomerate after concerns that its gold mining ambitions in Sumatra represents an unacceptable threat to a critically endangered species of orangutan.
Norges Bank Investment Management (NBIM), the world’s biggest sovereign wealth fund, will exclude Indonesian conglomerate PT Astra international and its subsidiaries Jardine Matheson Holdings and Jardne Cycle & Carriage, it announced on Feb. 29.
The fund’s ethics council had recommended the company take the action “due to an unacceptable risk that they are contributing to or are themselves responsible for serious environmental damage”.
At the heart of the issue is the Martabe gold mine in Sumatra, which is owned by Astra subsidiary United Tractors.
It is located within the habitat of the Tapanuli orangutan, of which there are fewer than 800 individuals left.
“The council attaches importance to the fact that the company is planning to significantly increase the mining area during the mine’s lifetime, that new deposits will be exploited if commercially viable, and that the Indonesian authorities have granted permission for mining operations in an area that is as yet undeveloped,” NBIM’s ethical council said in its assessment.
“The council considers that, as long as PTAR’s activities result in a reduction in the size of the orangutan’s habitat, the risk of the companies contributing to serious environmental damage will remain unacceptable.”
Astra had been “under observation” since 2015 over palm oil plantation and deforestation risk concerns.
The NBIM council had considered whether it would be a more fruitful strategy to use its stake in the company to try to influence the company’s choices going forward, but found in this case that excluding the firm would be the appropriate course of action.
IT’S WORKING
The NBIM decision was welcomed by observers who saw it as a sign that the world is moving forward on nature and biodiversity-related issues.
NBIM’s decision is an “example of the growing momentum around nature stewardship action among asset owners and asset managers”, said Tony Goldner, executive director of the Taskforce on Nature-related Financial Disclosures (TNFD), in a comment on social media platform X.
TNFD in January launched its Locate, Evaluate, Assess, Prepare (LEAP) reporting framework on nature impacts and dependencies, with 320 global companies signing on as early adopters.
“The approach of the [TNFD] is grounded in the need to look at the specific geo-location of impacts and dependencies on nature and biodiversity, and calls out Key Biodiversity Areas as a basis for disclosure of operations in ‘priority locations’,” Goldner said.
“A number of asset managers and asset owners have said this can be very hard to do, but Norges Bank Investment Management and [others] have pilot tested the TNFD’s LEAP assessment approach and are now using it show how it is possible to get these decision-useful insights to enable action.”
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