HSBC, the world’s third largest bank, continues to lend to companies linked to deforestation despite a policy explicitly prohibiting such practices, alleges a new report from the London-based Environmental Investigation Agency (EIA).
The report, published last week, looks at two Indonesian palm oil companies that recently received finance from HSBC: Bumitama Agri and Triputra Agro Persada.
In the case of Bumitama Agri, EIA found that the plantation giant cleared more than 3,200 hectares (8,000 acres) of forest in West Kalimantan without a high conservation value (HCV) assessment as required as a member of the Roundtable on Sustainable Palm Oil (RSPO), an eco-certification body. The area was known to house endangered orangutans, several of which were rescued from Bumitama’s concession area.
Land preparation in PT Trieka Agro Nusantara, in violation of the RSPO’s New Planting Procedure (NPP). Photo courtesy of EIA’s report.
According to the report, Bumitama has received nearly $420 million in loans and financial services from HSBC since 2010.
In the case of Triputra Agro Persada, HSBC led a $470 million financing round in July 2013 despite the palm oil developer’s plan to convert tens of the thousands of hectares of forests to plantations without adhering to the RSPO’s rules for new planting. These rules aim to avoid destruction of high conservation value forests and other sensitive areas.
In both instances, HSBC appears to have made loans that violate its own forest policy, which prohibits lending to projects and companies that involve conversion of high conservation value forest to plantations. HSBC is also a charter member of the RSPO, whose standards the bank uses to help determine compliance with its forest policy.
HSBC – Banking on Extinction from EIA.
EIA says the findings reveal shortcomings with both HSBC’s policy as well as the RSPO.
“In principle the RSPO is a good fit for HSBC’s forest policy as it also bans the clearance of HCV forests and mandates an HCV assessment by its members prior to any land clearance,” states the report. “However, the system relies almost entirely on self-reporting – the RSPO itself carries out no oversight prior to full certification. As a result, HSBC is financing members of the RSPO on the assumption that they will abide by its forest policy but without any prior scrutiny or ability to determine whether they have.”
Deforestation for palm oil production. Photo courtesy of EIA.
The report goes on to say that neither Bumitama nor Triputra should have received financing from HSBC.
“Because neither Bumitama nor Triputra were compliant with HSBC’s forest policy, project finance should only have been extended to them on the condition that they were ‘on a credible path” to certification’. Beyond their membership of the RSPO, however, there remains no evidence that either company was on such a path.”
Th report calls on HSBC to “engage with Bumitama and Triputra to ensure no further clearance takes place in any concessions prior to HCV assessments being carried out, and without compliance with other all Principles and Criteria of the RSPO.” It adds that HSBC should commission an audit of all customers who are planning to expand land holding in potentially sensitive areas and “update the forest policy to prohibit financing of deforestation or exploitation of peatlands.”
EIA’s report comes only days after another report published by a coalition of groups led by Down to Earth tied HSBC to loans that are funding destructive coal mining in Indonesian Borneo.
CITATION: Environmental Investigation Agency. BANKING ON EXTINCTION: Oil Palm, Orangutans and the Certified Failure of HSBC’s Forest Policy. November 2013