The Palm Scribe

Financial Institutions Have Responsibility in Achieving Sustainability of Palm Oil Sector: Activist

A number of environmental organizations are reminding financial institutions that they had the responsibility of assuring sustainability in the palm oil sector and should therefore not provide loans to those palm oil companies that do not manage their operation sustainably, including in the respect of the rights of individuals and communities.

Banks and non-bank financial institutions should set down the requirement that companies seeking financial assistance should adhere to the No Deforestation, No Peat Development, and No Exploitation (NDPE) policy, the organizations said in a joint press release received by The Palm Scribe on Tuesday (15/10).

“How banks and non-bank financial institutions can take an active part in the application of sustainable financing in Indonesia, is by applying the NDPE principles in awarding financial loans to palm oil companies, especially those supplying CPO for the production of sustainable biodiesel in Indonesia,” the groups said.

Bayu Sediantoro from Link-AR Borneo said in the same release that a 2017 regulation of the Financial Services Authority (OJK) required banks to apply sustainable policies, including in the social and environmental aspects, but this requirement was still often ignored.

“The OJK should be able to ascertain that the big banks who lend their money to palm oil plantation companies, implement sustainable policies. The OJK should also come out with special regulations on this sustainability aspect, containing measurable standards and indicators so that the forest and ground fires do not happen again in the future,” the release said.

Ismail from Padi Indonesia said that the OJK must be serious in applying the NDPE policy, by dealing firm sanctions on palm oil companies involved in the forest and ground fires that have ravaged thousands of hectares and posed health hazards to thousands of people.

He also said that the OJK should be capable of making sure that firm sanctions be also imposed on violations of rights, in palm oil concessions.

The environmental organization cited date from the National Disaster Mitigation Agency (BNPB) that said the forest and fires in Indonesia had ravaged 328,722 hectares of land in the first eight months of 2019 and caused respiratory diseases to 919,516 people in the past eight months to and including September.

“Financial institutions must give attention to environmental and social issues when providing financing to palm oil plantation companies,” their release said, adding those financial institutions which burned the forest and ground public fund they managed and channeled to those companies.

Hadi Jatmiko from the Indonesian Green Circle (LHI) said that extraordinary law enforcement was needed in dealing with forest and ground fires and financial institutions must participate by providing sanctions on companies behind the forests and ground fires.

“If banks do not deal with those sanctions, then we are calling on the public to boycott the funds of banks known to finance the perpetrators of the forest and ground fires,” Hadi said.

Inda Fatinaware, Executive Director of Sawit Watch said that based on her organization’s observation, there were at least 14 corporations which were members of the Roundtable on Sustainable Palm Oil (RSPO) that had fires in their concessions in the January-October period, and some even had the fires repeatedly since 2015.

“The RSO certification body should assure that its members which have fires in their concessions receive firm sanctions. Besides that, the government, palm oil companies, the OJK and the financial institutions backing the palm oil industry also need to be held accountable,” Inda added,

Muhammad Busyro Fuad from Elsam said that the fact forest and ground fires continued to take place this year, provided an important indication that whatever the government had been doing was not yet able to reduce if not halt the burning of forest and ground.

“Besides the restitution of the rights of the victims, there should also be other preventive measures to bring a halt to the forest and ground fires, among others, through the funding sector,” Busyro said.

The banking sector, he said, should have a firm commitment to not fund companies involved in forest and ground fires and also in rights violations.

The environmental organizations also said that besides coming out with policy standards for the palm oil industry that abides by the principles of sustainable finance, the OJK should encourage financial institutions to integrate comprehensive human rights tests s part of their mechanism in issuing permits and in supervising all business entities,

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