Why Your Money May Be Driving the Palm Oil Industry's Human Rights Abuses and Environmental Destruction
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To be clear, that’s seven and half million acres of forest that might be spared the axe if it were not for bank financing.
Moving toward sustainability?
Many industry boosters and NGOs believe, against all reason, that such expanding demand can be met “sustainably.” The HSBC report predicts that, due to growing awareness and civil society pressure, banks will begin to demand stronger sustainability standards. But the report notes that, for the moment, the supply of RSPO-certified palm oil exceeds demand by about 50 percent —and RSPO criteria themselves are increasingly considered too weak, even by WWF itself.
The HSBC report’s view that sustainability is becoming more important to investors in evaluating risk is reflected in growing concern among responsible financiers about the sector’s abuses. Early in 2013, the Government Pension Fund of Norway divested from 23 palm oil companies, including Wilmar, and last month a group of institutional investors from the U.S. and Europe, representing approximately $270 billion in assets, called for the development of transparent, traceable, deforestation-free palm oil supply chains.
On December 5, bowing to pressure civil society, Wilmar International, the company that dominates the palm oil market, announced a new policy to ban deforestation and exploitation from its operations and its supply chain. The announcement comes with a timeline to turn the company around by the end of 2015. Given the scale of Wilmar’s operations, it could signal a sea change in the palm oil industry.
But a policy on paper — essentially a voluntary commitment by a corporation with an extremely checkered history— is no substitute for strong national legislation, international norms to govern financing, and the empowerment of local communities and community-based organizations to determine the best use of their lands.
At worst, and in the absence of deeper changes, Wilmar’s new policy could serve as a smokescreen to allow the company’s rapacious practices to continue, and much like the RSPO, to provide a green sheen to an industry built on exploitation. At best, though, it could send a signal to governments and financial regulators that unless they put the reins on the financial actors, banks and investors that are driving the industry’s unchecked expansion, palm oil companies will continue to be financially motivated to reduce the world’s last rainforests to a sea of stumps.