HSBC to curb palm oil lending, review oil sands

Reuters - December 02, 2008

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Environmental concerns have caused HSBC to scale back lending to forestry schemes in Malaysia and Indonesia and review links with Canadian oil sands, the British company told Reuters. HSBC will cut ties with a third of forestry clients such as palm oil, soy and timber companies, operating in countries where illegal logging and social conflicts are a problem, including Malaysia and Indonesia, the bank said. 

 

The bank was criticised recently by a development group, the Forest Peoples Programme, for not disclosing the names of its palm oil banking clients. Some indigenous peoples in Indonesia have said that logging companies and palm oil developers take forested land where tenure is disputed without compensating them. HSBC will terminate relationships by the end next year with clients where there are suspicions they are involved in illegal or unsustainable logging, for example destroying pristine rainforest.

 

"We're planning to exit 30% of client relationships in the forest land and forest products sector in high-risk countries, including Malaysia and Indonesia, (because) they don't meet our forestry policy," said Francis Sullivan, the bank's adviser on the environment. The bank's forest products sector includes logging, timber, pulp and paper, palm oil, soy and rubber. 

 

HSBC will also review lending to Canadian oil sands developers, on the grounds that tougher climate regulations may make such energy-intensive activities commercially unviable, it said on the day several banks signed up to a series of climate principles. "The policy is under review," said Sullivan, referring to the bank's energy sector policy. "We continue to review it. A carbon price can radically change the viability of oil sands projects. We look at carbon, water, biodiversity and social aspects." Extraction of oil from sand requires high-pressure injection of steam, and so involves more energy and higher carbon emissions, as well as water use, compared to conventional oil drilling.