HSBC Strengthens “No Deforestation” Palm Oil Pledge After Greenpeace Expose

22 Feb 2017 --- HSBC has strengthened its “no deforestation, no peat, no exploitation” policy promising not to fund palm oil companies involved in rainforest destruction following a Greenpeace investigation earlier this year which linked the bank to companies destroying large areas of land. 

The ‘Dirty Bankers’ investigation exposed HSBC’s funding of palm oil companies and prompted thousands of people to join the campaign to change the bank’s policies, including 30,000 HSBC customers.

HSBC has had an official policy requiring customer to have independent certification that their business operates sustainably, but since the Greenpeace expose, the bank has now reaffirmed its commitment to safeguard rainforests from destruction, protect the rare species within them and support local communities.

HSBC says it wants to “stay involved in the palm oil sector to support companies moving to good standards, and to to close relationships with those that do not do so in a timely manner.”

In a video, HSBC Group CEO Stuart Gulliver says: “HSBC agrees with Greenpeace and the thousands of people who have contacted us and replied to, that rainforests need to be safeguarded from destruction with protection for local people and the rare species dependent on them.”

“We support customers making credible efforts to meet high sustainability efforts but we close relationships with those who are not.”

“We take our policy commitments seriously. We have not breached out policy. We are not complacent about the need to implement them properly or the need to continually review our approach.”

He goes on to say how HSBC recognizes how the financial sector plays a greater role and that the wider market participants - growers, processors, consumer goods companies, NGOs and banks - can work together more successfully to create a more sustainable palm oil sector. He promised HSBC will “play our part”. 

After he met with Greenpeace, Gulliver said HSBC decided to strengthen its policy “by expanding our prohibitive business commitments. And making them consistent with no deforestation, no peat, no exploitation standards which are increasingly common in the palm oil supply chain. 

Now Greenpeace says this is “the first step towards sustainable palm oil finance” and is urging all other banks to follow suit.

“Our rainforest is being carved up at a frightening rate and high street banks all over the world are funding this destruction. 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,” says Annisa Rahmawati, Forest Campaigner for Greenpeace Indonesia.

The new policy will require HSBC customers to: commit to protecting natural forest and peat by 30 June 2017, identify and protect forests and peat in new plantations prior to commencing new development and provide independent verification of their No Deforestation, No Peat, No Exploitation commitments by 31 December 2018.

According to Greenpeace a shift towards making palm oil financing more sustainable is long overdue as the rate of deforestation in Indonesia has overtaken Brazil. Last year, orangutans were moved from ‘endangered’ to “critically endangered” on the IUCN’s listings. 

Research by Greenpeace Indonesia showed that in the past five years, 13 banks – including HSBC, BNP Paribas and Standard Chartered – have been involved in providing POSCO Daewoo and its subsidiaries with loans totaling nearly US$3.6 billion and bonds totalling over US$5 billion. 

A first critical test for the banking sector will be its response to South Korean conglomerate POSCO Daewoo, which is preparing to clear an area of Papuan rainforest. New satellite images of PT Bio Inti Agrindo (a subsidiary of POSCO Daewoo) taken on 13 January 2017 show an estimated 4,000 hectares of rainforest crisscrossed by newly constructed roads, a key indicator of imminent plantation development, according to Greenpeace. 

“It is clear from these shocking images that HSBC’s client POSCO Daewoo intends to destroy a vast area of rainforest. This is the critical test for HSBC. It cannot in good conscience continue to fund POSCO Daewoo if it continues to carve up Papua’s rainforest,” said Annisa.

HSBC’s statement continues: “HSBC does not and will not knowingly provide financial services which directly support palm oil companies which do not comply with our policy. We will always investigate credible evidence that companies may not comply with our policies, but we are not aware of any current instances where customers are alleged to be operating outside our policy and where we have not taken, or are not taking, appropriate action.”

Olam Breakthrough 

Meanwhile, global campaign organization, Mighty Earth, says there is a “breakthrough agreement” with Olam following its 2016 report, “Palm Oil’s Black Box”. 

Mighty Earth and Olam met in Washington D.C. and agreed to move forward on two imperatives: enabling models for responsible agricultural development that support forest conservation whilst addressing poverty reduction and job creation in Gabon and other high forest cover countries; and the need for palm oil traders to collectively strengthen incentives for suppliers in Southeast Asia to avoid deforestation and exploitation of workers or communities.

The meeting was called to discuss the impact of the palm oil and rubber plantations developed by Olam with its joint venture partner, the Republic of Gabon, as well as Olam’s third party palm oil sourcing in Southeast Asia. The World Resources Institute moderated the meeting.

As a result Olam has agreed to suspend further land clearing of forest in Gabon for palm and rubber plantations for a year (a period that can be extended). During this time, Mighty Earth and Olam agreed to support a multi-stakeholder process to develop further specific criteria for responsible agricultural development in countries that have most of their land covered by forests.

Olam will continue to implement its time-bound plans to map and disclose more information about its third-party palm oil supply chains in Asia and require its third party suppliers to adhere to the High Carbon Stock Approach as per its updated Palm Oil Policy.

The company will also publish its procedures to address supply chain risks, including independent verification of compliance of high-risk sources and issue a revised grievance procedure that includes Olam’s third-party palm oil suppliers and protects the anonymity of those providing input. Olam will continue to routinely investigate and work to remediate any complaints received from indigenous or local communities.

On top of that, Olam will supplement its current sustainability policies with explicit references to protecting peat and ensuring no exploitation of workers or local communities.

In return Mighty Earth agreed to suspend its current campaign targeting Olam’s oil palm and rubber operations for a year, including its complaint to FSC (a period that can be extended) and work with the Gabonese government, civil society, and international experts and stakeholders to advance conservation and responsible development.

“Olam remains committed to best practice in forest conservation, sustainable agricultural development, poverty reduction and job creation,” says co-founder and Group CEO, Sunny Verghese. 

“We hope these actions can help sovereign countries like Gabon set their own pathways to sustainable development.”

“Mighty Earth welcomes the opportunity to help Gabon develop in a responsible way, and provide a model for conservation in high forest cover countries,” added Mighty Earth chairman, former Congressman Henry Waxman.

“While this agreement focuses on palm oil and rubber, we hope it creates momentum for action across commodities. World Resources Institute provided important assistance in reaching this agreement by facilitating this negotiation, and helped spur valuable dialogue to advance broader forest-friendly development.”

by Gaynor Selby

To contact the editor of this article gaynor@cnsmedia.com