Is IFC palm oil investment a foregone conclusion?

18 June 2010

The World Bank is currently undertaking a major review of its controversial engagement in palm oil production, but critics warn that consultation has been inadequate and that the Bank seems to have already decided to continue investing in the sector.

Following a World Bank Group wide suspension of investment in the palm oil sector in September 2009, the International Financial Corporation (IFC), the Bank’s private sector lending arm, has launched a wide-ranging strategic review of the industry (see Update 67). In July the review process will culminate in the announcement of a new global strategy for the sector, outlining a set of principles to guide future Bank engagement.

The review’s consultation process with stakeholders includes the private sector, affected communities, governments, and NGOs that have been campaigning against the negative environmental and social effects of palm oil production. The breadth of issues outlined in the IFC stakeholder outreach papers, which summarise the consultation discussions, underlines the extent of concern around deforestation, biodiversity loss, land disputes, discrimination against indigenous peoples, and contributions to climate change.

the meeting lacked genuine dialogue and there was no significant discussion of alternatives

Discussion has also focussed on the inadequate application of performance standards, including those of the Roundtable on Sustainable Palm Oil (RSPO), the international group responsible for palm oil industry certification, which includes the IFC. After continued pressure from a Greenpeace campaign highlighting the weak enforcement of RSPO standards, Swiss chocolate giant Nestlé has recently bypassed the RSPO by employing the NGO Forest Watch to audit their suppliers. Additionally, Unilever has unilaterally ceased purchasing from Indonesian suppliers who have breached performance standards, including firms who are also RSPO members.

Genuine dialogue?

Some consultation participants are already voicing concerns over the effectiveness of the review. Andrew de Sousa, of the Gunung Palung Orangutan Conservation Program, attended the consultation in Pontianak, Indonesia. He observed that, “Rather than a genuine consultation, the organisers were lobbying participants to sign off on minor reforms which would allow the IFC to continue investing in palm oil. Despite many participants calling for the World Bank to stop supporting palm oil, the meeting lacked genuine dialogue and there was no significant discussion of alternatives.” Furthermore, the Indonesian NGO Sawit Watch, in collaboration with 13 other NGOs, have issued a discussion paper warning that, “the compressed timeline now allowed for development of the strategy… will not allow for the kind of iterative engagement over the policy that we have been led to expect.”

Meanwhile, a June statement from the IFC country manager for Indonesia and Malaysia indicates that despite the review, the IFC has already decided to continue investment in palm oil, and was merely trying to establish how this should take place. “The IFC has held several discussions with palm oil stakeholders … to formulate a global strategy, which will be used as a guideline for the company in lending to the sector,” he said. “The IFC is interested in providing lending for [the] palm oil sector in Indonesia because it has provided jobs for up to 6 million people and supports about 36 million rural people with low incomes,” he added.