Photo Credit: Agence France-Presse (AFP)

American-based financial giant Citigroup has reportedly canceled all financing to Indonesian food giant and agribusiness company Indofood following the company’s decision to drop off from the Roundtable on Sustainable Palm Oil (RSPO) scheme early this year, media reports said.

Indofood’s palm oil subsidiaries pulled out from the RSPO after failing to address over 20 alleged violations of the RSPO standard, all concerning Indofood-owned palm oil plantations. Citigroup’s cancellation of $140 million represented the loss of Indofood’s second largest source of funds from a Western bank.

Both Indofood and Citigroup representatives in Indonesia declined to give their comment to The Palm Scribe.

An investment banking source in Jakarta told The Palm Scribe that several investors might have asked banks such as Citigroup not to give loans to businesses that damaged the environment. Such move, the source added “is unfair because in a country like Indonesia, where  dollar revenue sources are limited, how could they offset the loss (of such funding).”

Banks might not have a choice but to bow to the pressure from these major investors. “If they still want to do business (give out loans) involving CPO-based companies, investors may pull out their money and move it to another bank that would ban those CPO”, the source said.

Indofood is the largest food company in Indonesia, with a market cap of $4 billion and is a core company of the Salim Group, which has a large oil palm land bank in Indonesia. The RSPO investigation of palm oil plantations operated by Indofood’s subsidiaries was sparked by a complaint made by Rainforest Action Network (RAN), International Labor Rights Forum (ILRF) and Indonesian labor rights organization OPPUK in October 2016. Multiple investigations by RAN, OPPUK, and ILRF, as well as the RSPO and its accreditation body, confirmed the presence of exploitative labor practices, media reports said.

In April, 56 investors with approximately $ 7.9 trillion in assets under their management, highlighted their support for the RSPO and called on companies across the palm oil value chain, including banks, to publicly adopt and implement a No Deforestation, No Peat and No Exploitation (NDPE) policy.

 

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