22 October 2015, Central Kalimantan: Peatland fire in Kapuas district. ©rante/greenpeace d <strong>DIRTY</strong> <strong>BANKERS</strong>
PALM OIL: A RISK FOR THE ENVIRONMENT, PEOPLE, COMPANIES AND BANKS THE FINANCIAL SECTOR IS FAILING TO SUPPORT ACTION TO TACKLE DEFORESTATION Over the last two decades, the plantation sector has laid waste to Indonesia’s forests and peatlands. Millions of hectares have been destroyed for pulp and oil palm concessions. This destruction created the volatile conditions for the forest and peatland fires that burn across Indonesia every year at great cost to wildlife, the climate and people. 1 A Harvard and Columbia University study estimates that during the 2015 forest fires crisis, more than 100,000 adults in the region died prematurely as a result of the pollution from the haze of burning forests and peatlands. 2 The financial toll has also been enormous. The World Bank estimates the cost of the 2015 fires to Indonesia at US$16 billion – twice the estimated value added from Indonesia’s 2014 gross palm oil exports – and admits that ‘adding in regional and global costs mean the actual figure is much higher’. 3 In September and October 2015, daily greenhouse gas (GHG) emissions from the fires regularly surpassed the daily GHG emissions of the United States. 4 This is indisputably a crisis – and companies in Indonesia’s plantation sector are at the centre. Greenpeace analysis shows that in the key palm oil production provinces of Riau and West Kalimantan, around half the recorded 2015 fire hotspots were in identified pulp or oil palm concessions. 5 In the frontier region of North Kalimantan, 48% were in oil palm concessions alone. 6 Plantation expansion also threatens biodiversity. For example, in 2016 the International Union for Conservation of Nature (IUCN) changed the classification of the Bornean orangutan from ‘endangered’ to ‘critically endangered’, citing ‘destruction, degradation and fragmentation of their habitats’, including conversion to plantations, as a main reason for the decline in population. 7 Some parts of the industry have also been implicated in exploitation, including child labour, as well as takeover of land without consent of local inhabitants and destruction of livelihood, for example through clearance of sago groves (see case studies). In recent years, many palm oil growers, traders and consumer companies have introduced policies attempting to free their supply chains from palm oil linked to rogue companies involved in destructive expansion and social exploitation. But it is questionable how effectively these ‘No Deforestation, No Peat, No Exploitation’ (NDPE) policies are being implemented. In September 2016, a Greenpeace report 8 showed how suppliers to some of the world’s largest palm oil traders are linked to deforestation, peatland destruction, exploitation of workers – including children – and community conflicts or oppressive measures such as use of state security forces. Similarly, in December 2016 Amnesty International reported that human rights abuses were endemic in plantations controlled by Wilmar, the world’s largest palm oil trader. 9 Nonetheless, there is at least a clear consensus that companies that use, sell or trade palm oil (and other high-risk commodities) should take meaningful action to ensure their supply chains are not driving deforestation or human rights abuses. The same cannot be said for the banks that continue to provide financial services to and invest in the palm oil sector. Although financial institutions have raised concerns about the environmental and social impacts of palm oil production, 10 in the banking sphere this has yet to translate into the comprehensive NDPE commitments adopted by other sectors. By providing financing without proper diligence on sustainability, banks enable the palm oil sector’s destructive practices to continue, while acquiring for themselves long-term financial risks (see ‘Forest destruction – a risky business’). It is difficult to measure the scale of banks’ funding for the palm oil sector, due to lack of disclosure by both the banks and the companies, but what evidence there is suggests it is significant. Data from Bloomberg and the companies’ annual reports show that since 2012, the 18 global banks listed in the diagram ‘Other banks’ links to case study companies’ have been involved in providing at least US$23.6bn in financing to the six companies profiled in this report in the form of loans and other credit facilities. With this level of exposure comes the responsibility for financial institutions to use their influence with the companies they finance or invest in to improve their environmental and social performance. This report primarily focuses on the role of banks as the providers of credit facilities and other financial services to the companies whose damaging practices are outlined here. It also sets out principles for institutional investors to adopt in the closing section, ‘Model for responsible banking’. <strong>DIRTY</strong> <strong>BANKERS</strong> 1
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- Page 3: CONTENTS PALM OIL: A RISK FOR THE E
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Commissioner of PT Indofood CBP Suk
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In February 2013, when the Centre f
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18 September 2013, PT Ladang Sawit
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15 May, 2012 Palm fruit ©greenpeac
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BANK POLICY REQUIREMENTS FOR PALM O
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the potential for greatest influenc
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2013, East Kalimantan: A young oran
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kelapa sawit PT KBAS 1 dan KBAS 2 y
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terhadap kehidupan masyarakat adat
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METHODOLOGY Mapping analysis: Mappi
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15 July 2013, Manokwari: A tree in
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savages HSBC’s Noble intentions
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http://www.thisisnoble.com/corporat
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16 July 2013, Manokwari: A black-ca