Palm Oil in the Spotlight: HSBC Stops Lending to Companies Involved in Deforestation

Feb 27, 2017 1:30 PM ET
Palm Oil in the Spotlight: HSBC Stops Lending to Companies Involved in Deforestation

HSBC recently pledged to cut ties with companies connected to deforestation for palm oil in major production zones. The decision followed a report from Greenpeace that highlighted HSBC’s connection with palm oil companies involved in the destruction of rainforests.

The pledge will align HSBC with the “no deforestation, no peat, no exploitation” standards that leading palm oil growers adhere to, such as Wilmar International. Furthermore, HSBC has stated that it will end relationships with companies that don’t meet sustainability standards. The UK Bank said that it won’t “finance unacceptable impacts in this potentially high-risk sector…” HSBC has demonstrated its commitment to sustainability before when it dropped 104 clients in 2014 who weren’t following the principles set forth by the Roundtable on Sustainable Palm Oil.

As pressure to adhere to environmental standards continues to expand beyond palm oil growers and buyers, more banks are expected to follow HSBC’s example. Sustainable environmental and labor practices are becoming increasingly more important to investors, as rating agencies have begun to label non-compliance with sustainability standards a risk factor.

Read our whitepaper to learn why consumers care about sustainable palm oil sourcing, what the main issues are, and what certifications companies pursue to communicate their commitment to sustainable sourcing.

HSBC’s new policy will require its customers to commit to the protection of natural forests and peat by June 30, 2017. Prior to starting development in new plantations, customers of HSBC will also be required to identify and protect existing forests and peat.

A recent study from the Center for Global Development indicated that without these new forest conservation policies, 289 million hectares of rainforest would be cleared between 2016 and 2050. Greenpeace campaigner, Annisa Rahmawati has stated, “Our rainforest is being carved up at a frightening rate, and high street banks all over the world are funding this destruction. HSBC’s commitment to break its ties to destructive palm oil companies is a good first step and Greenpeace will be watching closely to make sure it delivers. This also sends a clear signal that other global banks must follow suit.”