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/

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Bildquelle: Schroders,Schroders

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