Rating Sustainability in Palm Oil Financing: Developing a Risk Assessment Framework

Chain Reaction Research (CRR), a partnership between Aidenvironment, Profundo and Climate Advisers, is assessing the sustainability and financial risks associated with the operations and expansion plans of oil palm plantation companies. By publishing and proactively promoting six in-depth analyst reports that go beyond the sustainability risk perspective, CRR aims to influence mainstream analysts in their thinking about the risks associated with investing in company groups that expand their oil palm plantation land banks in contested landscapes.

CRR’s target group includes analysts working for investors that have adopted “beyond the financial bottom-line” sustainability policies, as well as those that are still primarily interested in the bottom line. “Rating Sustainability in Palm Oil Financing” is supported by a grant from the David and Lucile Packard Foundation, granted in 2013 for a period of 18 months.

The CRR team has prepared a Risk Assessment Framework for use at two levels: at the generic level it is applied to a Top 20 Watch List of company groups, and at a detailed level to produce six analyst reports on individual company groups or closely associated groups. The framework assesses the risks of the operations of the company or group to the climate, biodiversity, local communities and other sustainability issues. While it is recognized that not all sustainability risks identified may translate into tangible financial risks, a strong effort is made to deepen the understanding of the linkages between sustainability and financial risks.

The first report was released in December 2013 and can be found on the CRR website. The second CRR report is expected in May 2014.

For more information contact Eric Wakker.