An environmental campaign group that has consistently called out Singapore-headquartered palm oil and paper company Royal Golden Eagle (RGE) for its alleged association with deforestation in its concessions, is now pushing for banks and financial institutions that “finance, do business with, or source from” the group to immediately suspend these business relations with the firm.
To continue reading, subscribe to Eco‑Business.
There's something for everyone. We offer a range of subscription plans.
- Access our stories and receive our Insights Weekly newsletter with the free EB Member plan.
- Unlock unlimited access to our content and archive with EB Circle.
- Publish your content with EB Premium.
In its latest study published on Tuesday, Rainforest Action Network (RAN) spotlighted Mitsubishi UFJ Financial Group, one of Asia’s largest banks, for lending millions of dollars in sustainability-linked loans (SLLs) to the resources company.
It also published updated satellite data analysis that tracked tree cover loss within palm oil concessions it said is connected to Asian Agri, identified in the report as a subsidiary of RGE.
Analysis indicates that there has been “persistent clearance of natural forests” totalling 1,475 hectares, particularly in Jambi and Riau provinces, said RAN.
RGE has denied any connection to the companies implicated in the deforestation highlighted in RAN’s report, or claimed that the tree loss occurred outside its concessions or was instigated by local communities.
SLLs give companies access to low-interest loans on the condition that they meet certain sustainability criteria. The SLL market has weakened since a surge in 2021 amid scrutiny from international regulators that such loans are prone to greenwashing harmful business practices. Demand has continued to grow in Asia, with Singapore among the biggest markets globally.
The environmental group’s report alleged that RGE has used US$4.9 billion in SLLs and derivatives raised since 2021 – the biggest chunk of which was financed by MUFG – while companies controlled by RGE have continued to clear natural forests.
It described the SLL deals as “sustainable finance greenwash”, since sustainability finance does not appear to address impacts across the wider RGE corporate group.
The allegations cast doubt over a commitment RGE made to no deforestation, peatland clearance or exploitation (NDPE) in its supply chain in 2015.
RGE asserts credibility of performance targets for loans
In its response to Eco-Business, RGE explained that its public commitment to ensure that the majority of its financing is through SLLs in 2022 was to allow the organisation to further “refine its sustainability parameters”.
It has been referencing a broader set of 2030 sustainability targets that have been publicly communicated for sustainability performance targets (SPTs) for the SLLs, and the targets are agreed to by the lenders, based on the provision of a Second Party Opinion (SPO) by an independent company which would “provide assurance on the materiality and ambition of the targets, verify the accuracy of the baselines, and confirm that the methodologies for data collection and calculations are fit for purpose”, said an RGE spokesperson.
The targets are also monitored and RGE’s performance validated through a third party audit on an annual basis, clarified the spokesperson.
Specific time-bound targets include increasing the number of suppliers carying out independent traceability verification to 100 per cent by 2025 and increasing the use of renewable energy to 12 per cent by 2025. “If the targets are met, the borrowers will be rewarded with lower loan rates, while failure to do so will trigger higher loan rates,” it said, referring to Asian Agri and its other subsidiary Apical.
However, RAN’s investigation claims that the SLLs lack detail on how the key performance indicators (KPIs) that underpin the loans are defined.
It said that RGE is light on detail in how it defines deforestation and NDPE non-compliance, allowing some companies within the group to raise SLL credit while other shadow companies drive “off the books” deforestation.
To mitigate the risk of greenwashing through SLLs, the Asia Pacific Loan Market Association recommends that borrowers disclose the details of its sustainability performance targets as well as underlying assumptions and methodologies. RGE has said that all information on its performance targets is presented to financial institutions in compliance with the association’s SLL principles.
MUFG did not comment on the structure of the loans, but said that when considering financing for business activities connected to palm oil plantations, it conducts a “rigorous” assessment of clients to ensure plantations are managed in an “environmentally and socially responsible manner.”
The bank said that it “encourages” its palm oil clients to become members of the Roundtable on Sustainable Palm Oil (RSPO) and make NDPE commitments.
“When relevant operations are not certified by RSPO or clients have not made their commitment to NDPE public, we will request clients to submit action plans to satisfy the conditions,” an MUFG spokesperson told Eco-Business.
Exporting to European markets
The RGE subsidiaries identified in RAN’s report are palm oil producer Asian Agri and palm oil trader Apical, which supply to consumer goods firms including Mondelēz, Nissin Foods, Unilever, Procter & Gamble, Nestlé and Ferrero.
Across 16 palm oil concessions it investigated that it said was connected to Asian Agri, little to no forest loss was found in 11 of the concessions, but some forest conversion was identified in five of them, including 448 ha cleared after December 2020.
RGE only confirmed that 14 of these are its plantations and said that two are suppliers to Apical.
The findings could mean that Asian Agri and Apical are no longer permitted to sell palm oil to European markets by the end of the year, because of the coming European Union Deforestation Regulation (EUDR), said the report. EUDR stipulates that any company linked to deforestation after December 2020 cannot sell its products to EU markets.
Map showing natural forest loss within Asian Agri’s palm oil concessions and Apical suppliers between 2016 and 2023 in Jambi and Riau, Sumatra, Indonesia. RGE has said that this deforestation occurred outside of its concession boundaries. Source: RAN
RGE: Allegations of deforestation are ‘incorrect’
RGE also refuted allegations on its association with deforestation.
The company said the forest loss identified in two concessions operated by Asian Agri, those of PT Inti Indosawit Subur and PT Dasa Anugerah Sejati, occurred outside of its concession boundaries.
RGE stated that deforestation in another two of its concessions, those of PT Mitra Unggul Pasaka and PT Rigunas Agri Utama, were areas occupied and cleared by local communities.
The clearance of forest highlighted as occuring between 2017 and 2020 in the concession run by PT Sawit Jambi Lestari – identified in the satellite analysis below, taken from RAN’s report – did not see secondary dryland forest or other indicative high carbon stock areas removed, the company said in response to the report.
RGE’s NDPE commitment stipulates that its plantation development will only take place on land that is not considered high carbon stock, an industry classification that assesses the carbon contained in vegetation, soil, and biomass, so that high-carbon areas can be conserved.
Satellite images appear to show deforestation in an Asian Agri palm oil concession run by PT Sawit Jambi Lestari between December 2016 and May 2017. The image on the left shows the plantation before tree clearance took place, the image on the right show the area post-deforestation. RGE has said that in this area, “there was no secondary dryland forest or other indicative high carbon stock areas”. In RGE’s NDPE commitment has Source: RAN
RGE has declined to share spatial data that proves where a revision to its concession boundaries has been made, stating that it is against Indonesian law to do so.
RAN’s satellite analysis is published five months after a report by a network of environmental groups found a spike in deforestation in West Kalimantan linked to a company allegedly affiliated to RGE. RGE has refuted any connection to the company in question, PT Mayawana Persada. Another RAN report found a spike in deforestation and illegal palm oil in RGE’s supply chain in the biodiverse Leuser Ecosystem in Sumatra.
