Drax denies ‘harvesting’ ancient forests in Canada to burn at UK power station
One of its largest investors, Schroders, said it had sought “assurances” from Drax “that its pellets and woodchips are from legal and sustainable sources”.
BlackRock, Invesco and Schroders – the three biggest shareholders in Drax, the operator of the UK’s largest renewable power station – have refused to say whether they will consider divesting from the company, following a BBC Panorama investigation.
Drax is facing questions about its operations in Canada after the BBC’s Panorama, in an episode titled ‘The Green Energy Scandal exposed’, filmed what it claims is evidence the company is cutting down primary, or protected, forest to produce wood pellets for burning, to generate electricity in the UK.
A Drax spokesperson told Net Zero Investor: “Drax does not harvest forests and has not taken any material directly from the two areas the BBC has looked at. The forests in British Columbia are harvested for high-value timber used in construction, not the production of biomass.”
It reiterated that “the areas of forest the BBC has identified are part of the annual allowable cut”.
Combined, the three asset management firms account for approximately 25% of Drax’s ownership.
When contacted for comment, Schroders confirmed it has “conducted in-depth research on the investment case and engaged with Drax extensively – including meetings with management on its business model and sustainability credentials and over the acquisition of Pinnacle”.
Schroders stated: “Our engagements have included encouraging the business to make greater assurances that its pellets and woodchips are from legal and sustainable sources. It is important that audits are carried out independently to ensure a closed loop system is in place – ie that forests are in good health.
“Our investors and active ownership team will continue to monitor developments in this area.”
Schroders added it is “committed to engaging on ESG risks we believe could prove material for our clients” and to “challenge companies to improve their behaviour and governance”.
A spokesperson for Invesco said: “We note the concerns reported by the BBC in its Panorama investigation. We continue to meaningfully engage with the company on a range of environmental, social and governance matters.”
BlackRock responded to a request for comment by stating: “As a matter of policy, we do not comment on specific companies.”
Our engagements have included encouraging the business to make greater assurances that its pellets and woodchips are from legal and sustainable sources.
Drax in Canada
According to Drax, 15% of the biomass used at its power station near Selby, North Yorkshire, in 2021 came from Canada.
It states that 80% of the material used to make its wood pellets in Canada is sawmill residues, such as sawdust, wood chips and bark left over when timber is processed, while the rest is waste material collected from the forests which “would otherwise be burned to reduce the risk of wildfires and disease”.
Alan Knight, group director of sustainability at Drax, told Panorama’s Joe Crowley: “Our business model works on taking sawdust and diseased and rotten wood. We stand by the notion that we only use wood that can’t be used for timber.”
On Panorama, Michelle Connolly, an ecologist at volunteer-run community group Conservation North, defined primary forest as “a natural forest of any age that has never been industrially logged”.
“Primary forests are where the carbon is, where the wildlife habitat is – they are, by definition, non-renewable,” Connolly told Crowley on the programme.
On the programme, Panorama’s Crowley referred to Drax’s own records about the quality of the trees it had logged, with some recorded as “Grade 1 or 2 – that’s quality saw logs”.
“Only 11% are grades 6 or Z, that’s the small, diseased, rotten wood Drax told us it uses,” Crowley added.
Emissions from burning wood exceed coal
The Drax renewable power station in North Yorkshire is the UK’s biggest single source of electricity and has received around £6bn in green subsidies from the UK government.
In the Panorama episode, Crowley explained that the station used to burn coal but that now it burns wood pellets, which the UK government classes as renewable energy.
However, Crowley revealed that burning wood pellets emits more greenhouse gases than coal.
A spokesperson for Drax added: “Drax uses sustainable biomass to produce 12% of the UK’s renewable electricity and plays a critical role in keeping the lights on for millions of homes and business across the country.”
“The United Nations’ IPCC, the world’s leading climate authority, says sustainable biomass will play a critical role in meeting global climate targets. Drax’s own world-leading sustainable sourcing policies are aligned with the rigorous regulatory frameworks set by both the Canadian and UK governments, ensuring that our operations provide benefits to nature, the climate and people.”
Connolly added: “It’s a shame British taxpayers are funding this destruction with their money.”
The UK government is due to publish a new biomass strategy later this year.
