Banks cautioned to examine high risks in palm oil finance
WASHINGTON, D.C. – Credit Suisse, Oversea-Chinese Banking Corporation and Mitsubishi UFJ Securities are acting for Golden Agri-Resources — one of the world’s largest palm oil companies and a part of the Sinar Mas Group — in a new bond offering worth up to USD $400 million, according to a Debtwire report last week. As the syndicate begins meetings with credit investors this week in Hong Kong and Singapore, Friends of the Earth and environmental human rights groups sent a global alert to the banks on the risks of such investments. The alert aims to make potential financiers aware of the extreme and outstanding social conflicts in the palm oil agribusiness sector.
The alert sent yesterday from the Banktrack Network says: “Banks and investors must examine the full range of environmental, social, reputational, legal and market risks prevalent in the palm oil sector and ensure that they undertake enhanced, robust due diligence procedures to identify, understand and screen these risks prior to any financing.”
Golden Agri-Resources, or GAR, has been among the early adopters in a wave of company policies that pledge to protect forests, peatlands, and human rights, indicating the company’s commitment to become a more responsible business. However, detailed field studies of GAR operations in Indonesia show numerous violations of national and international law.
Another recent study into GAR’s palm oil operations with its Liberian subsidiary Golden Veroleum Liberia Inc. shows that the company’s social engagement is seriously flawed in both policy and practice, leading to vague, inadequate and potentially unenforceable promises of development benefits, while risking the permanent loss of, and damage to, community lands, natural resources, livelihoods and cultures.
“At this moment, an investment in Golden Agri-Resources is an investment in forest destruction and human rights violations,” said Jeff Conant, international forests campaigner at Friends of the Earth. “Like other companies in the palm oil sector, GAR is talking a good game on paper, but all evidence shows that their destructive practices continue. Any bank that involves itself with GAR should be prepared for managing a high-risk client under the scrutiny of civil society watchdogs.”
Investigations by Rainforest Action Network have shown that GAR may be sourcing from growers that have destroyed forests and peatlands in the Leuser Ecosystem, a global hotspot for biodiversity on the island of Sumatra, where critically endangered Sumatran orangutans, elephants, tigers, and rhinos are found together in the wild.
GAR’s parent company — the Sinar Mas Group — has come under scrutiny following the brutal murder of Indra Pelani — an Indonesian farmer and land rights activist killed by security guards contracted by Sinar Mas’s Asia Pulp and Paper. The company has condemned the killing but the incident points to the severity of risk associated with long-term conflict between Indonesia’s plantation sector and local communities.
Banks and investors must ensure that GAR actively addresses these problems prior to providing financial services or investment, the groups say.