Investigating one of the world’s largest pulp producer’s approach to biodiversity
ISSUE
The issuer is one of the world’s largest producers of pulp, which is a key component for paper packaging as well as consumer goods such as tissues.
Pulp producers can potentially make a positive contribution to sustainability issues because trees sequester carbon and downstream pulp products could displace carbon-intensive alternatives or those with pollution/recycling problems, such as plastics.
However, pulp plantations typically consist of a single species, also known a monoculture, and in South America, eucalyptus trees are favored for their growth and fiber characteristics.
Monocultures can lack the plant and animal species diversity that’s of foundational importance to local ecosystems. Biodiversity is gaining prominence as a sustainability focus area, and this issue is especially pertinent for Brazil given its history of deforestation and habitat loss. It’s likely that pulp producers’ end customers will begin to require higher biodiversity standards.
For these reasons, we believed that it was important to engage with the issuer on this topic.
ACTION
To assess the company’s biodiversity efforts, our investment team participated in a dedicated call with members from the issuer’s sustainability team.
Having consulted with 50 outside experts, the issuer’s flagship commitment is to connect half a million hectares of priority areas for the conservation of biodiversity by 2030.
Our investment team wanted assurance that the issuer was taking steps to honor this commitment and, more generally, operate in a way that respected local biodiversity.
Since engagement on efforts to preserve and restore biodiversity is relatively new, this was also an opportunity for us to learn about biodiversity reporting. Companies and investors need to decide which biodiversity metrics are important for certain industries and be aware that there are limitations on the tools and data currently available.
OUTCOME
Through this engagement, our investment team gained a better understanding of the biodiversity issues confronting pulp producers.
The issuer was able to demonstrate that a considerable amount of thought informed its approach to biodiversity and its impact on the environment. Having identified connectivity as a key area where they could positively contribute, the issuer has begun to create biodiversity corridors and is trialing several different ways to best achieve the 0.5 million hectare commitment while operating its commercial forest operations.
Through various means (e.g., satellites, drones, sound recorders), the issuer will be collecting data on connectivity and other biodiversity indicators such as local animal populations and has assured our investment team of continued disclosure efforts. Our team will monitor the progress being made on the issuer’s various commitments and continue to engage with the company.
Important disclosures
The ESG-related case studies shown here are for illustrative purposes only, do not represent all of the investments made, sold, or recommended for client accounts, and should not be considered an indication of the ESG integration, performance, or characteristics of any current or future Manulife Investment Management product or investment strategy.
Manulife Investment Management conducts ESG engagements with issuers but does not engage on all issues, or with all issuers, in our portfolios. We also frequently conduct collaborative engagements in which we do not set the terms of engagement but lend our support in order to achieve a desired outcome. Where we own and operate physical assets, we seek to weave sustainability into our operational strategies and execution. The relevant case studies shown are illustrative of different types of engagements across our in-house investment teams, asset classes and geographies in which we operate. While we conduct outcome-based engagements to enhance long term-financial value for our clients, we recognize that our engagements may not necessarily result in outcomes which are significant or quantifiable. In addition, we acknowledge that any observed outcomes may be attributable to factors and influences independent of our engagement activities.
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