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New Report Uncovers One of the Largest Cases of Illegal Rainforest Clearance in Borneo for Palm Oil Development

Major international banks and brands connected to a company controlled by notorious Indonesian business tycoon, knowingly clear-cutting tropical rainforests.

A report, based on research of Aidenvironment, exposes one of the largest cases in recent years of ongoing, illegal clearance of tropical rainforests in Borneo. The report commissioned by Rainforest Action Network (RAN), Rainforest Foundation Norway (RFN), and SumOfUs looks at the deforestation activity of two palm oil plantation companies operating in the Sintang District, on the island of Borneo, Indonesia.

Currently, approximately 10,000 hectares of peat forest have been cleared illegally for future palm oil plantations, despite Indonesian regulations and company commitments against further peat development and deforestation. Two palm oil plantation companies are responsible for the clearance, and both are controlled by or associated with business tycoon Mr. Anthoni Salim. Mr. Salim heads Indonesia’s largest conglomerate, The Salim Group. A broad network of companies, The Salim Group most notably includes Indofood, the joint venture partner of major snack food companies PepsiCo and Nestle, and First Pacific, the joint owner of Goodman Fielder.

 “This report provides clear evidence of shady business dealings and inaction at the highest levels of business, all while tropical rainforests continue to fall for Conflict Palm Oil,” said Gemma Tillack, Forest Policy Director with Rainforest Action Network (RAN). “Meanwhile, The Salim Group’s financiers and business partners––like PepsiCo––are complicit in the illegal deforestation, as they continue to do business with Salim without issue. PepsiCo, Nestle and Wilmar must bring their business partner into compliance with Indonesian law and sustainability norms of deforestation-free development or exit their business relationships.”  

The Salim Group companies are marred by ongoing conflict. Major banks, including Citibank and Rabobank, are connected to the illegal deforestation through their financing of the Salim Group, despite having policies against it. “Billions of dollars in corporate loans, and finance from bonds and shares, have all flowed to the Salim Group companies despite Mr. Salim’s connection to ongoing illegal deforestation,” said Vemund Olsen from Rainforest Foundation Norway. “This report exposes the failure of large banks––including those that have been repeatedly warned about the Group’s environmental, social and governance risks––to address their role in facilitating carbon-intensive peat destruction. Banks need to step up their commitments to climate change and stop bankrolling peat destruction.”

The report shows how the business dealings of Mr. Salim have come into question. The business empire is split into publicly listed companies controlled by The Salim Group that have declared, although failed to uphold, commitments to transparency and sustainability, and Salim-related shadow companies––or “business-on-the-side” companies as they are known in Indonesia––that continue to clear tropical forests and drain protected peatlands.

“This isn’t the first time that companies in the Salim Group have been exposed for destructive practices,” said Kiki Taufik, head of Greenpeace’s Indonesian forests campaign. “The Salim Group is one of the worst offenders and has gone out of its way to keep its destructive operations separate from the public face of the Indofood empire. That’s why companies need to take responsibility for ensuring that they only use palm oil from responsible producers that protect rainforests and respect human rights.”

 “Consumers around the world are demanding deforestation-free products and are calling for urgent action from banks and brands,” said Fatah Sadaoui with SumOfUs. “We cannot stand by and watch the continued deforestation and growing climate chaos caused by banks’ investments or brands demand for Conflict Palm Oil.”

By maintaining their joint venture partnerships without clear time-bound requirements for change, PepsiCo, Nestlé and Wilmar remain complicit with the deforestation and peatland destruction in the Ketungau peat forests caused by palm oil operations controlled by the Salim Group, or associated with Mr. Salim.

A summary of the findings of this report was sent to Mr. Salim, members of his management teams and the executive director of PT Indofood Agri for their response. PT Duta Rendra Mulya (PT DRM) has sent a response to report authors stating that it has a commitment to best business practices and compliance with the laws and regulations of The Republic of Indonesia. Rainforest Action Network has responded requesting for the public disclosure of relevant evidence to support such comments. The banks and investors named in this report were also given an opportunity to comment on the findings of this report, and responses have been incorporated in the body of the report. Citigroup later advised that it is cancelling its loans to IndoAgri and its subsidiaries, with immediate effect, and was assessing its exposure to the palm oil companies named in this report.

 

If you have any questions, please contact Arnoud Keizer.