Banking on Biodiversity Collapse Report (2024) & Oil Palm in Malaysia
We would like to draw attention to the “Banking on Biodiversity Collapse: Tracking the Banks and Investors Driving Tropical Forest Deforestation 2024” report by Forest & Finance that highlighted several Malaysian banks & institutional shareholders for the period 2018-2024. We share several highlights from the report below.
Caveats
Given the complexity of the topic, we thought it’s important to provide the following caveats:
Investment and owning shares in in forest-risk commodities do not directly translate into supporting additional deforestation since financing can be used for activities such as replanting on existing plantations.
Hutanwatch is not demonizing oil palm as a crop. We are highlighting the widely-recognized deforestation risk that is associated with oil palm plantations in the region. This reputation is largely due to the commonly observed pattern of clearcutting good-quality forests followed by the establishment of oil palm plantations even when environmental risks have been highlighted via EIAs and left unaddressed – often with links to well-connected individuals.
Banks That Provided Most Loans and Underwriting to Forest-risk Commodities Covering SEA, South America, West & Central Africa.
CIMB Group (USD4.0b) & Maybank (USD3.8b) ranked 16th & 17th in providing loans and underwriting to 159 forest-risk commodity sector companies for the study period.
Table 1 League Table for the top 30 largest banks providing loans and underwriting to 159 forest-risk commodity sector companies (pp. 16-17).
The two Malaysian banks trended downwards after peaking in 2022.
Largest Institutional Shareholders for the 300 Largest Forest-Risk Commodity Sector Companies Covering SEA, South America, West & Central Africa.
Table 2 League Table for the top 30 largest institutional shareholders for the 300 largest forest-risk commodity sector companies covering SEA, South America, West & Central Africa (pp. 26-27).
The top 2 spots were taken up by PNB & EPF. Out of the highlighted Malaysian investors, only Lembaga Kemajuan Tanah Persekutuan (FELDA) & Malaysian Hajj Pilgrims Fund (Lembaga Tabung Haji) trended upwards. As a Malaysian, do you think Malaysian GLCs & GLICs should be de-risking their portfolios from forest-risk commodity sectors in general? Anticipating the argument that certification ensures risk-free supply chains, the report also highlights the ineffectiveness of certification schemes like RSPO, FSC and the like. GDP continues to be the single metric for growth as socioenvironmental costs are externalized.
The report also highlighted that in Southeast Asia, the oil palm sector received by-far the largest investments in the region compared to other forest-risk commodities. PNB & EPF led investments while SD Guthrie was the largest investee (USD5.8b), receiving about 3x more investment in forest-risk commodities than the next largest investee (Batu Kawan Group; USD1.9b). PNB is also the controlling shareholder of SD Guthrie (55.1%), followed by EPF (15.2%).
HAS MALAYSIA KEPT ITS WORD ON OIL PALM?
TL;DR, it’s a hard “no” but let’s get into it.
There have been at least 4 instances where Malaysia has claimed it will stop clearing new forests for oil palm plantations, first in 2008 by Pak Lah’s government, followed by 2018 by then Minister of Primary Industries Teresa Kok, 2023 by Deputy Prime Minister Fadillah Yusof, and then 2024 by Plantation & Commodities Minister Johari Abdul Ghani. We’re not going all the way back to 2008 because that’s too much work – let’s start with MPOB’s yearly numbers on oil palm planted areas for the period 2018-2023, the same period as the Forest & Finance (2024) report.
Table 1 Planted area for oil palm for the period 2018-2023.
From the national level trendline, total planted area is indeed trending downward, as is the case for all states except Perlis and Sarawak. While this may seem like Malaysia kept its word, the hantu is in the perincian.
For instance, in the downward-trending state of Pahang, Bukit Ibam Forest Reserve alone lost at least 8,500 ha of forest that was intended for conversion into oil palm by YP Olio (western side of the highlighted Bkt Ibam FR in the video), as documented in detail by Macaranga in their 3-part series. The video shows tree cover loss for the period 2018-2023, indicating clearly that forest was still being converted for oil palm after Kok’s announcement in 2019. It is unclear if the YP Olio plantation carried on with planting post-exposé. The 8,500 ha excludes the other 5,000 ha of forest cleared on the northeastern side, and another 3,000 ha down the middle of the same reserve – it is still actively being cleared in 2024 (indicated by the pink areas appearing above the green forest reserve layer in the video). Bukit Ibam FR is probably one of the worst offenders, but is indicative of a greater trend. Other notable conversions to oil palm plantations include Ulu Sedili Tambahan Timur and Relai (ex?) forest reserves in Johor & Kelantan respectively. Considering that Pahang actually trended downward, I wonder what we’d find in Sarawak, which actually trended upward.
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