Environmental groups raced to the scene in West Kalimantan province, on the island of Borneo, to find a charred wasteland: smoldering fires, orangutans driven from their nests, and signs of an extensive release of carbon dioxide into the atmosphere.
“There was pretty much no forest left,” said Karmele Llano Sánchez, director of the nonprofit International Animal Rescue’s orangutan rescue group, which set out to save the endangered primates. “All the forest had burned.”
Fingers pointed to the Rajawali Group, a sprawling local conglomerate known for its ties to powerful politicians like Malaysia’s scandal-plagued prime minister. But lesser known is how some of the world’s largest banks have helped Rajawali — and other global agricultural powerhouses — expand their plantation empires.
The year before the clearing of trees in West Kalimantan, Rajawali’s plantation arm secured $235 million in loans — funds that the Indonesian company used to buy out a partner and bolster its landholdings — from banks including Bank of America , according to an examination of lending data by The New York Times.
The deal forms part of at least $43 billion in loans and underwriting to companies linked to deforestation and forest burning in Southeast Asia alone, according to a tally compiled by the California-based Rainforest Action Network , the Dutch consultancy Profundo and the Indonesian nongovernmental organization TuK Indonesia. More than a third of that sum comes from American, European, and Japanese banks, many of which have sustainability pledges that specifically mention deforestation.
That figure is almost certainly incomplete because not all financing is made public. It also excludes loans made by the same banks to forestry projects outside Southeast Asia, or financing provided to other, more global players. And it contrasts with efforts by companies like Nestlé and Procter & Gamble to distance themselves from suppliers linked to deforestation.
And while there has been a growing movement among endowments and pension funds to divest from the fossil-fuel industry — and banks have started to back away from financing coal projects — any move away from deforestation has been slower to catch on, experts say. The role of banks has come under the spotlight in recent weeks after environmentalists called out banks like Bank of America and Goldman Sachs for financing the contentious Dakota Access oil pipeline project.
The money is aiding a process that scientists say destroys ecosystems, displaces indigenous communities, and covers the region each year in a thick, suffocating smog that stretches from Jakarta to Hong Kong.
Deforestation — and the fires that frequently accompany it — also generates one-tenth of total global warming emissions, making forestry loss one of the biggest single contributors to global warming, according to the Union of Concerned Scientists.
“Destroying the world’s forests makes fighting climate change almost impossible,” said Andrew W. Mitchell, executive director of the Global Canopy Programme, a forestry think tank. “The finance sector is really lagging behind in realizing that.”
The Palm Oil Boom
In funding Rajawali’s palm oil plantations, the banks appear to have violated their own sustainability policies. In its forestry and agribusiness policy, adopted in 2008, Credit Suisse says it will not finance or advise companies with operations in “primary tropical moist forests” like those of West Kalimantan. Bank of America says in a banking policy, adopted in 2004, that it will not finance commercial projects that result in the clearing of primary tropical moist forests.
Read more at How Big Banks Are Putting Rain Forests in Peril
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