02.07.2020 11:40:44

Schroders: Palm oil: how bad is it really?

Schroders: Palm oil: how bad is it really?

Elly Irving
Sustainable Investment Analyst

Katherine Davidson
Portfolio Manager, Global & International Equities

Palm oil is associated with images of forest fires and cute orangutans made homeless by deforestation. As a result, it’s become public enemy no. 1 for many consumers.

But if you wanted to boycott palm oil, its omnipresence in our food and other goods would make it nearly impossible. If you’ve had any kind of spread on your morning toast, a biscuit with your tea, chewed gum or even just brushed your teeth, chances are you’ve used a product containing palm oil.

The crux of the issue is that, compared to other oil crops (soy, rapeseed, sunflower), oil palms are much more productive.

For example, to replace palm oil with soybean oil, we’d need to plant 185 million hectares of new soy, approximately one-third of the Amazon rainforest. So trying to switch to a substitute for palm could actually make things worse.

The counter-argument is that palm oil causes more deforestation than nearly every other soft commodity, and in parts of the world that are disproportionately rich in biodiversity.

The other debate is over palm oil’s impact on poverty alleviation and economic development. It’s an incredibly important industry for some countries. Malaysia made the palm oil industry exempt from its coronavirus lockdown, such is its importance to the economy.

Shifting away from palm would have the biggest impact on smallholder farmers who rely on global buyers to earn a crust. But it is hard to be confident about the positive impact given low visibility down the supply chain. And the palm oil industry’s supply chain standards are far behind those of other commodities such as coffee or tobacco.

We delve deeper into these issues in the full paper below.

Read the full report

You can find more Insights articles here: https://www.schroders.com/de/ch/asset-management/insights/

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. The content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.


Bildquelle: Schroders,Schroders

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