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November 19, 2001
Dutch Banks Act to Save Tropical Rainforest
by Susan Wennemyr
Three major Dutch banks have announced they will restrict loans for palm oil plantation development
in Indonesia that results in tropical rainforest destruction.
SocialFunds.com --
Three of The Netherlands' four major banks recently agreed to impose social and environmental
requirements on loans for the Indonesian crude palm oil (CPO) industry. The decision of the three
banks - ABN AMRO (ticker: ABN), Rabobank, and Fortis Bank - marks a breakthrough in the sustainable
banking movement.
 Expansion of the palm oil industry in
Indonesia has had negative environmental and social impacts. In 1997 and 1998, 10 million hectares
of forest (an area larger than Indiana) were burned, creating a haze that covered much of Indonesia
for months and compromised the health of some 70 million people throughout Southeast Asia. Between
46 and 80 percent of the biggest fires were in plantation areas, where fire is used as a cheap,
fast method of clearing land.
Under permits already granted to palm oil and other tree
crop companies, the Indonesian regions of Kalimantan and Sumatra are at risk of being cleared in
their entirety. These areas host numerous endangered species of plants and animals.
The
new lending policies of the three banks will put pressure on the palm oil industry to conserve
rainforests. Palm oil plantation companies submitting proposals to these banks now should: (1) not
burn forest land; (2) not clear tropical rainforest; (3) respect the wishes of local communities;
and (4) respect Indonesia's law and pertinent international conventions.
The banks'
adoption of the new lending criteria is the result of a four-year joint campaign of Sawit Watch
Indonesia, Milieudefensie (Friends of the Earth Netherlands), and Greenpeace Netherlands. Sawit
Watch is an Indonesian network of NGOs working to curb large-scale expansion of palm oil
plantations in the country. The group has called on banks around the world, including Indonesian
banks, to comparably restrict financing of the industry.
Of the three banks that agreed to
adopt the NGOs' suggested lending criteria, ABN AMRO has imposed the broadest requirements. It is
extending its regulations to all sectors that affect forests, most notably logging, pulp and paper,
and oil and gas development.
Erik Wakker of AIDEnvironment, who co-authored a 2000
Greenpeace Netherlands study of the oil palm industry, said the NGO campaign was not the sole
reason for the banks' decision.
"Banks were already in a process of developing more
responsible investment policies," he noted, and added that palm oil was proving less profitable
than financiers had hoped.
He also said "The economic chaos in Indonesia started a
process of cleaning up bank portfolios anyway. The plantation companies are the first to go as they
are usually linked to natural resource and human rights issues as well as corruption, collusion and
nepotism. All this is bad for business."
Mr. Wakker predicts that other European banks and
possibly some US banks will follow in the footsteps of the Dutch lending institutions. Already NGOs
are pressuring British and Swiss companies to clean up their portfolios in the Indonesian pulp and
paper industry, which share responsibility with palm oil manufacturers for destructive forest
practices.
A European NGO meeting in Zurich this week is addressing investments in
Indonesia. Within Indonesia, WWF is joining Sawit Watch in applying continued pressure. In the US,
Citibank (ticker: C) has been targeted by Rainforest Action Network for its Indonesian plantation
investments.
The three banks will now move on to the job of enforcement. Rabobank
reports that a staff member visits every site affected by any investment proposal, adding that it
consults on every financing decision with the Centre de Cooperation Internationale en Réchèrche
Agronomique pour le Développement (CIRAD) in Montpélier (France).
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