A leading British investor today joins the chorus of concern about a headlong flight into biofuels as a solution for global warming by saying companies involved in the sector could jeopardise future profits by not carefully considering the long-term impact of what they are doing.
Sustainability criteria must be built in to the supply chain of any green fuel project to ensure that there is no adverse effect to the surrounding environment and social structure, Co-operative Insurance (CIS), the investment arm of the Co-op, says in a report.
CIS plans to approach all companies it invests in to ensure that they are aware of the potential pitfalls if they are engaged in the biofuel sector.
Production of corn and soya beans has increased dramatically in recent years as an eco-friendly alternative to traditional fossil fuels but environmental and human rights campaigners have voiced worries about encroachment on rain forests.
There are fears that food prices could also increase as crops that were once only destined for the dinner table are processed for sale on the forecourt at a time when governments around the world are putting pressure on oil companies to put biofuels into the traditional petrol they sell.
"Biofuels are not a panacea for climate change but can play their part if governments and companies start thoroughly managing the social and environmental impacts," said Sam Lacey, responsible shareholding analyst at the CIS and author of Biofuels: Risks and Opportunities of an Emerging Industry.
"The current growth of the industry is happening without paying attention to the long-term impacts. It must be pushed in a more sustainable direction and complemented by fuel-efficiency measures and reducing our use of fossil fuels."
The United Nations warned last week that biofuels could have dangerous side effects and the CIS report emphasises that steps must be taken to ensure that land converted to grow biofuels does not cause environmental damage or civil unrest.
The Co-op has already encouraged companies involved in the palm oil supply chain to join a special round table to look at the issues of concern in this sector. Palm oil is a key ingredient in margarine and crisps as well as some forms of biofuel.
