Oatly is facing a consumer backlash with some pledging to boycott the brand after it sold a stake to a group of investors led by a private equity consortium Blackstone.
The investment was part of a $400 million funding package – half was secured through a green-deal bank loan which commits Oatly to ensure that all of its investments are in sustainable solutions.
The rest – a 10 percent stake for another $200 million – came from Blackstone, which has made headlines in the past due to its alleged involvement in Amazon deforestation, and because its founder Stephen Schwarzman has donated to Donald Trump and the Republican Party, and briefly served as chairman of Trump’s strategic and policy forum in 2016.
According to reports, other Blackstone executives have different political affiliations, with president and COO Jon Gray donating to Democratic presidential candidate Joe Biden, and executive vice-chairman Tony James and Gray holding virtual fundraisers for the Democrats.
‘Nuanced thought process’
The Swedish oat milk giant told Plant Based News it knew the investment would generate controversy, but while the choice to work with the consortium ‘may seem like an unexpected one’, Oatly believes it was ‘required for the advancement of the plant-based movement’.
According to Oatly, the decision to work with Blackstone involved an ‘intense thought process that was nuanced’. Through the partnership it wants to ‘shift the focus of massive capital towards sustainable approaches’ describing this as ‘potentially the single most important thing we can do for the planet in the long-term’.
The conversation around the deal was announced in July, but only picked-up speed in recent days after social media users highlighted the two controversial issues around Blackstone.
Climate activist Laura Young tweeted that Blackstone ‘part-owns two companies [Hidrovas do Brazil and Pátria Investimento] who are responsible for Amazon deforestation’, and said that for this reason, she will be ‘putting a pause’ on buying Oatly’s products for now.
Her comments were likely inspired by a 2019 report by The Intercept, which said Blackstone owns a large part of Hidrovias do Brasil, and another ‘Blackstone company, Pátria Investimentos, owns more than 50 percent of Hidrovias’.
“In the spring of 2019, the government of Jair Bolsonaro, elected in fall 2018, announced that Hidrovias would partner in the privatization and development of hundreds of miles of the B.R.-163 [road]. Developing the roadway itself causes deforestation, but, more importantly, it helps make possible the broader transformation of the Amazon from jungle to farmland,” the report said.
‘Erroneous claims and mischaracterizations’
Some months after the publication of The Intercept’s report, and other reports which said Hidrovias do Brasil paid for a feasibility study on a 10-year concession of B.R.-163, Senator Elizabeth Warren and several other senior Democrats wrote to Blackstone raising concerns about its involvement with Hidrovias.
While the Democrats conceded that the ‘road remains publicly owned’, they said: “Hidrovias has consulted with and helped finance the Brazilian government’s efforts to develop and find funding mechanisms to pave BR-163, maintain the road, and reduce congestion to accelerate its shipments.”
Blackstone has denied the accusations of deforestation, releasing a statement saying ‘the erroneous claims and mischaracterizations were blatantly wrong and irresponsible’.
It added: “Hidrovias does not own, control or have any interest – direct or indirect – in the road in question (BR-163). This road has been operated by the Brazilian government since 1976. The company did not build this highway, nor are they paving it.”
But debate around the subject rages on, with Less Waste Laura writing: “It’s frustrating when our limited choices are made harder by companies making poor investment choices, that bring financial gain to people with no environmental or ethical standing in this world.”
‘A new level of change’
Discussing the deforestation reports, Ishen Paran, general manager at Oatly UK, told PBN: “We don’t condone any practices that compromise the climate, and our approach is to focus on our work and our sustainability goals. When it comes to those discussions, it is not about Oatly and Blackstone.”
He added that Oatly understands this reaction, and that the company is taking time to respond to all comments, and is ‘inviting customers into deeper conversations’.
“We know some people may see this as unexpected, but it was very purposeful. We’re at a stage where we need to scale up. Scale requires investment and big investment. If we’re able to change mainstream capital into greener projects, we will start to see a new level of change,” he said.
“As long as people have those conversations, and listen to both sides of the story, that’s all we can ask for, and then people can make their minds up. We know that some people will still disagree with it, and that’s absolutely fine.
“I’m confident that over time, more information and data will show that the choice we’ve made is the right one. You can’t judge us on the decision today, but in the coming years. Change happens by raising the conversations and moving forward. It doesn’t happen by closing the door on things. So for us, that’s how we’ve always done things and that’s how we will continue.”
One of the criticisms leveled at Oatly is that it must have been able to find other investors, instead of getting involved with Blackstone with its controversial reputation. But rather than settling for the consortium, the oat giant revealed it had ‘been working for a long time to secure this specific investment’.
Explaining its rationale in a statement, the company said Blackstone is ‘like the biggest supermarket of the private equity sector’, saying that by ‘if it could convince Blackstone that it’s as profitable (and in the long-term even more profitable) to invest in a sustainability company like Oatly, then all the other private equity firms of the world would look, listen and start to steer their collective worth of 4 trillion US dollars into green investments’.
Oatly added: “Today, only a tiny fraction of all that venture capital ends up in sustainable investments. Had we chosen a specialized green investor for funding, we would have become a fractional part of that tiny fraction, ultimately remaining off the radar of major investment companies and having zero impact on influencing a transfer of investment to green companies.”
In other words, as Paran explained: “The evaluation of Blackstone was based on the scale of their resources, their capital base, and expertise in the global market. It was a purposeful decision because we know with them it will have the biggest influence over the overall financial market, and that is important for the advancement of the plant-based market.”
One of the major concerns of consumers is that money they spend on Oatly will now directly go into the pockets of organizations they see as environmentally-destructive or otherwise unethical. How can Oatly address those concerns?
“In the short term, we’re in a hyper-growth period, we’re not making any profit, so our investors aren’t making profit,” said Paran. But, he conceded, the long-term aim is to ‘deliver investment and profits to our investors’ – and he firmly believes that this positive.
“What we’re saying is that if investments made into green initiatives are a success, it is more likely that companies like Blackstone and the financial world will continue to invest in those areas above other areas. That’s the way we can genuinely make change,” he said.
“Greenpeace and the U.N are talking about the need for a shift in capital from brown to green investment. My opinion is that the system is built on old money, on big corporations and huge institutions. Do I see a world where perfect companies – and I don’t even know what a perfect company is – replace imperfect companies with no support from major private equity? I don’t.”
‘Incredibly important step
For now, Oatly accepts that people may choose to eschew its products – but it hopes to change minds as investments in green companies increase in the future.
“If we’re successful here, the financial world will recognize that, and that’s an incredibly important step for the plant-based movement. If we fail, then there’s no change. But I’m confident we’re going to succeed. People have called us naive to think we could change the world, and maybe we were,” said Paran
“But honestly, I don’t think we have time to debate this: we have to take action now. Reaching the climate goals and cutting greenhouse emissions by 50 percent by 2030, it’s imperative we make big change and it’s imperative the plant-based movement goes at a rapid pace – way faster than people are comprehending and that’s the decision behind all of this. We hope this will shine a light on how investments can be made, and how beneficial and profitable they can be, so more people do those investments.”