The Chain: Dimensional Fund Advisors Divests From Some Palm Oil Positions to Mitigate Risks

Bloomberg reported December 22 that Dimensional Fund Advisors, a U.S. investment firm with $445 billion of assets under management, has divested two of its portfolios of all palm oil plantation companies.

The move by Dimensional to remove all palm oil companies from two of its sustainability portfolios – US Sustainability Core 1 Portfolio and International Sustainability Core 1 Portfolio – makes these the first broadly diversified U.S. and international funds from a top-ten U.S. fund manager to explicitly exclude palm oil.

“Dimensional is always looking for ways to improve the sustainability considerations for those two funds,” Dimensional spokesman Alex Stockham told Bloomberg.

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In these two portfolios, Dimensional divested from Wilmar International, Olam International, Sipef SA, and Indofood Agri Resources. Three of these companies have been the focus of recent reports concerning environmental and human rights risks. However, it is not known whether these reports bore a direct influence on Dimensional’s divestment decision. Dimensional worked alongside Macroclimate, consultants, and wealth managers not affiliated with Dimensional to divest these two portfolios of all palm oil plantation companies.

Dimensional continues to hold shares in these and other palm oil companies involved in its other funds. As You Sow and Friends of the Earth have shown that Dimensional is among the top ten US asset managers with investments in the palm oil sector. According to publicly available data, after divesting from these positions in their two funds, Dimensional has 27 other mutual funds with $700 million in assets under management invested in 44 other palm oil plantation companies.

microsoft-word-palm-oil-companiesFinally, today’s Bloomberg article Dimensional Dumps Palm Oil From Sustainable Fundsincludes the above chart demonstrating that, over the last five years, these four companies that Dimensional has divested have underperformed the MSCI World Index.