HSBC criticised over financing palm oil companies

HSBC has been criticised for supporting environmental destruction by providing financing to palm oil companies alleged to have been behind deforestation in key production regions.

In a report published on Tuesday, Greenpeace, the environmental group, said the UK-based bank, the biggest in Europe by market capitalisation, had extended financial support to companies “associated with the most unsustainable aspects of palm oil development”.

The report challenges HSBC’s claims of being environmentally aware with detailed policies on deforestation and climate change. Stuart Gulliver, the bank’s chief executive, has recently made a high-profile push into green bonds, which finance environmentally-friendly projects.

Palm oil is a key ingredient in many supermarket goods ranging from shampoo and toothpaste to ice cream and fish fingers, and demand has been growing over the past few decades. Greenpeace highlighted HSBC’s relationship with palm oil companies as examples that it was providing services to companies that allegedly breach its deforestation policy.

HSBC said its deforestation policy prohibited the financing of operations that were illegal, damage high conservation value forests or violate the rights of workers and local people.

Brendan McNamara, head of global NGO engagement at HSBC, questioned some of the data in the report: “HSBC does not knowingly provide financial services which directly support palm oil companies which do not comply with our policy.”

He added that the bank was not aware of any instances where customers were alleged to be operating outside its policy and where it had not taken, or was not taking, appropriate action.

The bank revised its policies on palm oil financing in 2014. It said it subsequently dropped 104 clients that were not respecting the banks’ rules, which are based on the principles of the Roundtable on Sustainable Palm Oil (RSPO), an industry standards body.

Greenpeace said that compared with the large international consumer groups, such as Nestlé and Unilever, banks lagged behind in adopting stricter policies preventing deforestation. “The finance sector needs to take up the standards of the big traders and food producers,” said Richard George, forests campaigner at Greenpeace.

While HSBC is a member of the RSPO, many environmental experts and NGOs do not regard the basic principles as being stringent enough to halt environmental destruction. The Council of Ethics for Norway’s state pension fund in 2013 said “membership of the RSPO does not in itself guarantee that high conservation values will be identified, protected and managed”.

The Greenpeace report mentions the following companies:

• Indofood, which is part of Indonesia’s Salim Group, is facing an ongoing RSPO complaint around allegations of deforestation and labour exploitation. Mark Wakeford, chief executive, said the company had policies against planting on peat, deforestation and use of child labour. The company has asked RSPO to convene a meeting with the complainants.

• Goodhope faces an outstanding RSPO complaint. Goodhope did not respond to a request to comment.

• IOI’s RSPO palm oil certification was suspended in 2016. The suspension was later lifted but many of the leading consumer groups that cut ties with the company as a result have yet to resume trading with it. Unilever and Nestlé said they had yet to restart business with the company. IOI said the report’s claims of deforestation, drainage of peatland and clearance of forested orangutan habitat in 2008 were incorrect.

• Norway’s Council of Ethics, which advises the state’s oil fund, warned both Noble and Posco Daewoo be excluded from investments because of concerns over “severe environmental damage” at the companies’ palm plantations.

Posco Daewoo, which is not a member of the RSPO, said Greenpeace’s details of loans from HSBC were inaccurate and refuted claims of slash and burn practices and conflict with the local community. Noble, whose palm oil plantations were not included in the sale of its agricultural arm to Cofco completed in 2016, declined to comment.

• Based on Bumitama’s 2012 IPO prospectus, for which HSBC and DBS Bank were bookrunners, Greenpeace alleges that it had illegally developed plantations without the proper permits. The NGO reckons that the company only held government permits for about 37 per cent of the land it had planted. Bumitama said it had launched its new sustainability policy in 2015 and had since updated it twice.