(Updates with Munich Re comment)
German reinsurance giant Munich Re has been thrown out of the Global Challenges Index, the German sustainability index, for agreeing to insure the construction of the controversial Belo Monte hydroelectric dam project in the Brazilian rainforest.
Oekom Research, which runs the index with the Hanover stock exchange, said Munich Re – a signatory to the United Nations Principles for Responsible Investment (UN PRI) – violated the index’s strict environmental rules.
Environmental groups and representatives of the indigenous population are staunchly against the project, claiming it will destroy half the rainforest. Their fears were recently broadcast in a documentary on German public television.
“The index is based on a best-in-class principle,” said Oekom spokesman Rolf Häßler. “We don’t know what motivated Munich Re to get involved the project, which has been controversial from the start. It is so much so that several banks have decided to pull out of it.”
Munich Re’s removal from the index comes just three months after it said it would invest around €2.5bn in the next few years in renewable energy assets such as wind farms, solar projects and new electricity grids.Replacing Munich Re in the 50-constituent index is UK retailer J. Sainsbury. Oekom praised the company for ensuring that social standards were adhered to in the supply chain, reducing carbon emissions in its transport and promoting fair trade.
Other prominent members of the index, in operation since September 2007, include Advanced Micro Devices, Lloyds Banking Group, Dassault Systems, Renault and SAP.
According to Häßler, the index has attracted around €95m in investment from two institutional funds and one bank. One of the funds was set up by German regional bank NordLB.
Munich Re defended Belo Monte as sustainable. “One important consideration is that it will provide a renewable energy source,” a spokesman told Responsible Investor.. “Brazil has decided to invest €50bn in the mid-term to build water works and thereby support its fast economic growth. This policy is widely supported by the population.” He added the firm would work to be re-included in the Global Challenges Index.