NGOs call out complicity of region’s largest financial institutions in bankrolling palm oil corporates implicated in forest fires crisis
The 2019 fires in Indonesia destroyed over 850,000 hectares of land and forest.
Financial institutions across
Asia have doled out $19 billion to palm oil, rubber and pulpwood firms in the past
four years despite many of the companies implicated in recent illegal fires
that ravaged Indonesia, a new NGO report has claimed.
Palm oil giants Korindo, Sinar
Mas Group (SMG) – owners of Golden Agri Resources – and The Salim Group, among
others, are named as recipients of significant sums from various banks even
though they were implicated in the fires and have faced separate allegations of
environmental abuses over the years.
produced by Rainforest Action Network (RAN), TuK Indonesia, Riau Forest Rescue
Network, Friends of The Earth Indonesia and Profundo, stated that 17 corporate
groups implicated in the 2019 fires have received at least $19 billion in loans and
underwriting services since 2015.
“The National Agency for Disaster
Management estimates that 80 per cent of fires were deliberately started to clear land
for oil palm plantations,” the report stated.
“The Ministry of Environment and
Forestry (KLHK) sealed off plantations owned by 83 palm oil, pulpwood and
rubber plantations due to this year’s fires. Of these, 17 corporate groups were
identified, including major conglomerates with listed entities on the Jakarta,
Kuala Lumpur and Singapore Stock Exchanges.”
Banks from China, Indonesia,
Malaysia, Taiwan, Singapore and Japan represented the largest sources of
finance by country of origin. Bank Rakyat Indonesia, Maybank and Bank Negara
Indonesia represented the three largest single creditors.
The 2019 fires in Indonesia
destroyed over 850,000 hectares (ha) of land and forest, an area ten times larger
“Companies are regularly
implicated in using fire in their concessions and have plans to continue
developing flammable peatland thereby perpetuating fire risk,” said Edi
Sutrisno, Executive Director of TuK-Indonesia.
“Yet banks continue to offer
these clients vast sums of credit without conditioning finance on legal or
sustainable operations. This indiscriminate financing ensures companies have no
real incentive to change.”
The report stated that SMG’s pulp
and paper concessions in Indonesia have been “major contributors” to recent
“Recent analysis shows that SMG’s
pulp and paper concessions are major contributors to the fires and haze crisis,
with a total burned area of over 257,000ha (2015-2018); the largest burned area
of any plantation group in Indonesia,” the report stated.
Meanwhile, KLHK ordered a
Singapore firm to pay $18 million in October after it was found to have burned almost
1,000ha of land at palm oil developments in Kalimantan.
The report came five years after
OJK, Indonesia’s Financial Service Authority, released an ambitious roadmap
designed to stem the flow of funds from international banks to corporate
businesses linked to illegalities and unsustainable commodity production.
“Banks continue to fall well
short of identifying and mitigating the range of ESG risks posed by their
clients,” the report added. “Many foreign and domestic banks continue to
obscure the risks connected to their lending, even where client operations
involve violations of laws and regulations.”
The role of financial
institutions in bankrolling businesses tied to environmental abuses and
deforestation has been under renewed scrutiny in recent months.
A July 2019 report by
Friends of the Earth Australia showed that the country’s four largest banks had
given $6 billion worth of funding to a slew of palm oil firms whose Indonesia
operations have been linked to illegalities.
The world’s largest palm oil firm
Wilmar along with Astra International, Goodhope Asia, Noble Plantations Pte,
Olam International and Triputra Agro Persada were all named in the FoE report.
Meanwhile, $44 billion of financing
from more than 300 banks and investors, including Barclays, HSBC and Santander
was awarded to six of the world’s “most harmful agribusinesses” between 2013
and 2019, according to a September 2019 Global Witness report.
Controversial Brazilian meatpackers JBS, Marfrig Global, and Minerva Foods and Cameroon rubber plantation owners Halcyon Agri were among those identified as recipients. The new RAN report called on OJK to implement measures to strengthen how funding given to such corporates is governed, including setting up monitoring and grievance systems to assess the compliance of financial institutions.