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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.

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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