Are insurance companies investing in the destruction of the Amazon?

Friday, September 18, 2020

The Amazon and Cerrado are burning

In Brazil the rainforest in the Amazon and the Cerrado savannah are on fire again, as land is cleared for agriculture. Fair Finance Guide Germany examined the investments of 6 insurance companies in businesses linked to deforestation in the region.

In 2019, an area the size of Lebanon was burned - 11,700 km 2 . The fires not only cause significant CO 2 emissions, averaging 870 million tons annually, but also lead to the loss of biodiversity, severe drought , erosion, disease among the population, violations of the rights of indigenous groups and murders of human rights and environmental activists seeking to protect these areas. 

Clearing land for agribusiness

The industrial cultivation of soy, maize, cotton and sugar cane and livestock are responsible for 90% of the converted areas .20% of the exported soy and 17% of the exported meat are based on illegal logging in the Amazon and the Cerrado savannah. In addition, infrastructure and mining projects also threaten the rainforest, often operated by large international companies.

Uncovering deforestation-linked investments

The Fair Finance Guide Germany examined the investments of 6 insurance companies - active in Germany - in 59 companies along the meat and soy supply chains. From slaughterhouses in Brazil, to the production and sale of soy for animal feed, to international dairies and retail chains, investments have been identified in 21 of these companies.

The Alliance group held stocks and bonds from companies in the meat and soy supply chain to the tune of 522 million euros. The subsidiary Pimco in the USA has the largest share of this with investments in the food company Danone. Allianz Global Investors GmbH is also invested in Danone, but also in Archer Daniels Midland and Bunge, two of the most important exporters of soy from Brazil.

Axa a French insurance company, and its subsidiaries invested a total of 110 million euros. A large proportion of Axa's investments also go to the food company Danone and the soy exporter Archer Daniels Midland.

Investments by parts of the Zurich Group are lower at EUR 4.3 million. In 2017, it was reported that Zurich Germany had given asset manager Columbia Threadneelde Investment a mandate to manage part of the funds from a socio-ecological perspective. However, it was not known how large this contract was. Columbia Threadneedle Investments invested a total of 98 million euros in the aforementioned companies Archer Daniels Midland, Bunge and Danone.

Lack of transparency

The investments of the two insurance groups Debeka (50.9 billion euros) and Alte Leipziger (27.4 billion euros) are very opaque. No investments of its own were identified for Debeka Asset Management , and very small shares in Danone and Carrefour were identified for Alte Leipziger Trust Investment Gesellschaft mbH .

Debeka has commissioned DWS Investment GmbH to invest in shares. DWS Investment GmbH has invested a total of 252 million euros in shares in the companies examined here, including 14.8 million euros in BRF, one of the largest manufacturers of animal feed and chicken and pork in Brazil. Other companies in the portfolio are Archer Daniels Midland and Danone.  

Both Debeka and Alte Leipziger offer unit-linked life insurance policies in which customers can choose from a range of funds from third-party providers. These external asset managers such as DWS, Allianz, Lyxor, Comgest and others are also invested in the companies in the meat and soy supply chain. However, it is not possible to determine whether this affects the funds of Debeka's customers or those of the Alte Leipziger.

The R + V Group's capital investments (116 billion euros) are also opaque. No investments were found that could be directly assigned to R + V. Union Investment, the asset manager of the DZ Bank Group, has invested 141 million euros in shares and bonds of the companies examined here, but not on behalf of R + V Versicherung.

Disclose and declare

The investments identified by the insurance companies examined here are on the whole rather low. However, for large parts of the capital investments it was not possible to understand how they were invested at all. It is therefore possible that a large proportion will still flow into “classic” forms of investment such as real estate or government bonds. But the balance sheets of insurance companies also show investments in forms of investment such as "shares, shares in investment funds and other variable-yield securities". 

Insurance companies must disclose how they invest, and declare that they will ensure that these funds do not contribute to the further destruction of the Amazon and the Cerrado.

An overview of the findings (in German) are available here 

 

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