Palm oil is used as an ingredient in a range of products, from products like toothpaste and soap, to food items like crisps and biscuits. But its wide-scale use raises environmental and social concerns.
The growing demand for palm oil across global supply chains raises questions about the environmental and social sustainability of palm oil plantations. Some of the more common concerns include potential deforestation, loss of biodiversity and wildlife, unethical labour practices and the displacement of local communities.
On the other hand, it’s generally accepted that alternative oil crops need seven to nine times more land. As a result, replacing oil palms with another type of oil crop would increase the demand for agriculture land.
ING does not finance palm oil plantations. We provide general finance or trade finance to a select group of palm oil companies that undergo enhanced environmental and social risk due diligence. This select group of clients have a diversified agribusiness portfolio. In total we finance less than ten clients that earn 10% or more from palm-oil-plantation-related activities.
We do not foresee growing the number of palm oil companies we are willing to finance. Mainly because we prefer to focus on engaging with existing clients to improvements in their businesses. After all, these are the bigger players in the market and therefore those with the biggest potential to make a difference. More than 85% of our clients currently have a “No Deforestation, No Peat, No Exploitations” policy in place. Furthermore, all of them have committed to 100% RSPO (Roundtable on Sustainable Palm Oil) certification by 2030, with some of them committing as early as 2020.
ING’s approach to engagement and collaboration is consistent with the recommendations of the International Union for Conservation of Nature (IUCN) - the international organisation for nature conservation and sustainable use of natural resources.
In a statement, the IUCN Oil Palm Task Force warns that “banning palm oil would most likely increase the production of other oil crops to meet demand for oil, displacing rather than halting the significant global biodiversity losses caused by palm oil.” Many members of civil society share this view.
As recently as April 2019, the World Wildlife Fund (WWF) released a statement calling on banks and institutional investors to address deforestation, climate change and human rights abuses in the sector. According to WWF, “divestment is not the answer”.
We at ING believe in addressing challenges in an open and collaborative way. We can’t always prevent environmental and social issues in our clients’ operations, but we can discuss and collaborate in finding solutions based on our environmental and social risk policies, the Equator Principles and the IFC Performance Standards.
We’ve been a member of the not-for-profit RSPO since August 2015. We leverage our membership to continuously improve our understanding of the sector and support clients across the value chain in addressing the challenges and opportunities in the palm oil industry.
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Mail to: Sustainability@ing.com