A month after environmental campaign group Greenpeace accused British bank HSBC of providing loans and financial services to palm oil companies that are destroying Indonesian rainforests, the bank has unveiled a new policy for deforestation-free palm oil financing.
Announced on Monday, HSBC’s ’No Deforestation, No Peat, No Exploitation’ policy is an enhanced version of its previous sustainability guidelines for lending to companies in the agricultural commodities sector.
It follows the launch of a report, Dirty Bankers: How HSBC is financing forest destruction for palm oil, by Greenpeace in mid-January, which claimed that HSBC had helped arrange US$16.3 billion in loans and credit facilities to six errant palm oil firms, and raised US$2 billion in bonds for these companies.
Annisa Rahmawati, forest campaigner, Greenpeace Indonesia, said in a statement that “HSBC’s commitment to break its ties to destructive palm oil companies is a good first step and Greenpeace will be watching closely to make sure it delivers.”
“This also sends a clear signal that other global banks must follow suit,” she added.
Plugging the gaps
HSBC’s previous policy for lending to agricultural commodity firms, issued in March 2014, required all of its palm oil customers to be members of the Roundtable on Sustainable Palm Oil (RSPO) by the end of June 2014, and have at least one management unit or facility certified by the industry association by the end of that year.
The policy also mandated companies to have their entire operations RSPO certified by the end of 2018.
In January, Greenpeace had noted that this policy had several loopholes that allow HSBC customers to continue unsustainable practices—for example, RSPO membership does not guarantee that all of a company’s palm oil is sustainably grown—but the bank wasn’t enforcing this weak policy.
This was evident in its links to companies with documented environmental violations such as Malaysian firm IOI, Indonesian outfits Bumitama Agri and Salim Group, Singapore incorporated Goodhope Asia, Hong Kong-headquartered, Singapore-listed Noble Group, and Korea’s Posco Daewoo Corporation.
Greenpeace’s exposé of these linkages and subsequent campaign mobilised 120,000 people in the United Kingdom—30,000 of them HSBC customers—to petition the bank to stop financing deforestation.
In a statement, HSBC group chief executive officer Stuart Gulliver said: “HSBC agrees with Greenpeace and the thousands of people who have contacted us…that rainforests need to be safeguarded from destruction, with protection for local people and the rare species dependent on them.”
He added that the company had “no interest” in financing environmentally or socially harmful practices, and that “HSBC is committed to supporting sustainability in the palm oil sector and to continuously improve our approach”.
HSBC’s commitment to break its ties to destructive palm oil companies is a good first step and Greenpeace will be watching closely to make sure it delivers.
Annisa Rahmawati, forest campaigner, Greenpeace Indonesia
The bank’s resulting policy update maintains all the requirements of the 2014 version, but addresses two key gaps created by accepting RSPO certification as a proxy for sustainable palm oil: the lack of protection for high carbon stock forest, and a failure to ban development on peat.
Now, HSBC customers will have to make a public commitment to protect high carbon stock (HCS) and peat areas by the end of June 2017, and produce evidence that these commitments have been independently verified by December 2018.
These rules are consistent with the adoption of ’No Deforestation, No Peat, and No Exploitation’ policies adopted by palm oil giants such as Golden Agri Resources, Wilmar, Cargill, and Musim Mas.
HSBC customers must also publish records of their due diligence processes showing that any new plantation development plans do not take place on HCS forest or peat.
And while the old policy was mainly applicable to growers, HSBC has now extended the policy to palm oil refiners and traders as well.
Also, where HSBC a month ago insisted that it could not comment on specific companies due to client confidentiality concerns, it now insists that in order to obtain financing, new clients have to allow HSBC to comment publicly on whether a company is a customer of the bank.
Greenpeace’s Rahmawati noted that an immediate and critical test of the company’s commitment to its policy was whether it would cut ties with Posco Daewoo, whose palm oil unit is currently preparing to clear about 4,000 hectares of rainforest in Indonesia’s Papua province.
HSBC does not directly fund the palm oil company, but Greenpeace noted that the bank can use its financial clout to pressure the parent company to stop clearing forest.
This will be a “critical test” for HSBC, said Rahmawati. “It cannot in good conscience continue to fund Posco Daewoo if it continues to carve up Papua’s rainforest,” she added.
Greenpeace said it would also write to other banks exposed in its investigation, such as Japan’s Sumitomo and Tokyo Mitsubishi banks, Singaporean bank DBS, and the Australia and New Zealand Banking Group (ANZ), to ask them about their efforts to ensure they are not financing deforestation.