Dutch banks ABN AMRO, ING and Rabobank are failing to inform their customers that investment funds they offer include shares in palm oil companies damaging the environment in Indonesia, according to a new report by Milieudefensie (Friends of the Earth Netherlands).
Some of these funds have been labeled as “sustainable,” despite having shares in companies with a track record of misconduct, according to the report, titled “Investment Funds: The untold story about the link between Dutch banks and industrial palm oil companies.” The report examines the links between the three Dutch banks and a selection of mostly Indonesian palm oil companies and conglomerates.
“Although not all of the 81 selected palm oil companies have similar social and environmentally abusive practices,” the researchers write, “the industrial palm oil industry as a whole remains rife with controversy and human rights violations in the production chain.”
These problems, such as deforestation, environmental degradation, pollution and the exploitation of workers, were described in another report published recently by Friends of the Earth Netherlands, titled “Draw The Line: A black book about the shady investments of Dutch Banks into palm oil.”
Pungkat in Sumatra is an example of a village that suffers from the effects of the palm oil industry, activists say.
“Before, the villagers could drink water and eat fish from the river. Now the water has become polluted by the chemical fertilizers the palm oil company uses. The people have to buy expensive bottles of mineral water and there are hardly any fish left,” says Devi Indriani, an advocacy and campaign manager at WALHI (Friends of the Earth Indonesia) via Whatsapp video from the nearby city of Pekanbaru.
Several years ago, a company called PT Setia Agrindo Lestari (SAL) was granted a permit to use 170 square kilometers to create a palm plantation in and around Pungkat. The community has complained to the government, Devi says, but little action has been taken.
PT SAL is an indirect subsidiary of First Resources, one of the largest palm oil producers in Indonesia. The three aforementioned Dutch banks offer funds that include shares in First Resources. In addition to customers in the Netherlands, ING customers in Australia and Germany can also buy funds with shares in palm oil companies. Investment funds cluster the shares of dozens, hundreds and sometimes thousands of companies.
“Most banks only share information about the ten companies that hold the most shares in the investment fund,” explains senior researcher Myriam Vander Stichele from the Centre for Research on Multinational Corporations (SOMO), who carried out the research. “If you really want, you can find more information, but you need to know where to look and have some prior knowledge about it.”
According to the report, most individual customers have no idea whether palm oil companies are part of their investment fund, since the bank does not share this information with them. This is particularly true when banks offer to make investment decisions on behalf of their customers.
There is plenty of information available to customers, says Angélique Laskewitz, executive director at VBDO, a Dutch association of investors that aims to make the capital market more sustainable.
“If you can’t find the answers you’re looking for or if something’s not clear, ask your bank. And if your bank doesn’t offer the sustainable funds you want, there are plenty of sustainable options elsewhere. In the end, the consumers decide.”
The banks’ websites give the impression that Rabobank, ABN AMRO and ING take sustainability seriously.
“This is an example of the enormous greenwashing that’s going on,” says Vander Stichele, “because the banks have weaker sustainability criteria for their investment funds, especially for the majority of mainstream funds, than for their loans.”
According to Laskewitz, however: “The Dutch banks are not consciously investing in companies with a track record of misconduct. On the contrary, they have been looking for ways to improve and offer more and more sustainable options lately. The necessity is clear.”
A legislative proposal for a more sustainable investment policy is now being discussed by the European Union.
“The Dutch banks have been talking about offering more sustainable options for seventeen years,” says Rolf Schipper, spokesperson for forests at Friends of the Earth Netherlands. “Apparently this is not going to happen voluntarily. Hopefully, the European politicians will vote in favour of it next year.”
Mongabay asked the three Dutch banks to respond to the report.
“Calling for a boycott of palm oil is not realistic, as it is used in a multitude of products,” says ABN AMRO’s press officer Karen de Vries. “To date, no alternative is available that is more sustainable.”
She points out that palm oil companies are not included in ABN AMRO’s sustainable investing portfolios.
“We are investigating how we can impose our sustainability criteria on external asset managers. We see this as a next step in making our investment portfolios more sustainable, both those we manage ourselves and those we only advise on.”
According to ING, dialogue is of greater influence than excluding certain sectors.
“Exclusion means that no influence can take place and therefore does not open a window of change,” says press officer Christoph Linke. “If eventually change cannot be achieved, we will withdraw, as we have done in the past in sectors like tobacco and coal.” Rabobank has not taken the opportunity to comment.