Schwarzenegger owns about 5% of Dimensional Fund Advisers, which manages a total of US$338 million.
Global Witness and Profundo have chosen 50 of the world’s logging or pulp and paper companies operating in tropical forests and studied loans, bonds and shareholdings connected to these companies for the period 2010 to 2013. Dimensional Fund Advisers holds a total of US$174 million in 20 of these 50 companies, including Sinar Mas, Ta Ann, Barito Pacific, WTK, DLH and Rimbunan Hijau. Global Witness points out that,
All of these companies have been linked to highly destructive operations while some, including WTK, DLH and Rimbunan Hijau, have also been implicated in illegal activities.
The Norwegian Government Pension Fund Global has invested in but subsequently blacklisted four of these companies: Barito Pacific, Berjaya Corporation, Ta Ann and WTK.
Global Witness produced the following animation, featuring a great impersonation of Schwarzenegger:
There’s an obvious contradiction between Schwarzenegger’s promotion of the The Governors’ Climate and Forests Taskforce which was supposed to reduce deforestation, while simultaneously investing in companies that destroy forests. As Oliver Courtney of Global Witness told The Guardian:
“He is a very prominent environmental champion in his public life while profiting from some of the most egregiously notorious companies operating in the forestry sector, and in our view that is deeply hypocritical.”
As Global Witness points out though, this goes deeper than hypocrisy. Eugene Fama is a director and consultant to Dimensional Fund Advisers. Last year, Fama won the Nobel Memorial Prize in Economic Sciences for his work on the “efficient markets hypothesis”.
In November 2007, Fama played down the threat of sub-prime mortgages damaging the economy:
Housing markets are less liquid, but people are very careful when they buy houses. It’s typically the biggest investment they’re going to make, so they look around very carefully and they compare prices. The bidding process is very detailed.
(Fama preceded this answer to the question are housing markets efficient, by saying “I don’t know” and added that “we have no data” on real estate.)
In 2009, economist Paul Krugman wrote an article in The New York Times about the economic crisis titled, “How Did Economists Get It So Wrong”. Krugman put at least part of the blame on the “efficient market hypothesis”:
In short, the belief in efficient financial markets blinded many if not most economists to the emergence of the biggest financial bubble in history. And efficient-market theory also played a significant role in inflating that bubble in the first place.
Prominent investors in Dimensional Fund Advisors include Kellogg’s, Boeing and Pepsi as well as a wide range of public sector investment funds. Global Witness recommends that clients of Dimensional should divest unless the investment company “commits immediately to implement robust forestry policies”.