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The conglomerate Sinar Mas Group also received the most financing of any company in the forest-risk commodity sector, receiving USD 20 billion in credit (2015-Q120)
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San Francisco –– New analysis reveals that International brands and banks play a critical role in fueling the annual fire and haze crisis in Indonesia by heavily financing the Sinar Mas Group (SMG), which has the largest exposure to fires of any corporate group in Indonesia. The group has received USD 20 billion in credit (2015-Q120), the largest amount of financing of any forest-risk commodities group in Indonesia –– USD 14.3 billion was for its pulp and paper operations and 4.5 billion for its palm oil operations.
SMG is a major supplier of palm oil and paper products to many of the world’s largest consumer goods companies, including Procter & Gamble, Colgate-Palmolive, Unilever, Mondelēz, Mars, Nestlé, PepsiCo, and Kao. The largest financiers have been Indonesia’s Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI), neither of which have public policies that prohibit development on peat or use of fire by clients. Japanese megabanks Mizuho Financial Group and Mitsubishi UFJ Financial Group (MUFG) have also been significant financiers over recent years, despite their adoption of environmental and social policies for financing since 2018.
“In the midst of an escalating climate crisis, tropical rainforests — one of our best defenses against climate catastrophe — are being senselessly burned for commodities like beef, soy, palm oil, pulp and paper,” said Robin Averbeck, Forest Program Director with Rainforest Action Network (RAN). “International brands and banks are driving these fires by pouring billions of dollars into the corporate groups behind the burning, like Sinar Mas Group.”
“It is far past time banks and brands acknowledge and end their culpability in fueling this crisis. They must immediately halt all new deals with Sinar Mas Group until it can prove the implementation of longstanding, supposed commitments to ‘No Deforestation, No Expansion on Peatlands, and No Exploitation of Communities and Workers’. Sinar Mas Group must remedy the social and environmental harm caused by its plantations and those of its suppliers,” Averbeck said.
SMG is one of the largest conglomerates in Indonesia and is controlled by the family of the late oligarch Eka Widjaja. Its pulp and paper business (known as Asia Pulp and Paper or APP) and palm oil business (listed in Singapore as Golden Agri Resources or GAR SGX:E5H) are Indonesia’s biggest pulp and paper and palm oil producers. Despite APP and GAR publishing sustainability policies over five years ago, the group has deep-rooted environmental, social, and governance risks associated with its operations.
Greenpeace analysis of burn scar data estimates that Asia Pulp & Paper (part of SMG) subsidiaries, partners, and suppliers had a total burned area of over 250,000 ha (2015-2018), or roughly three-fifths the size of the state of Rhode Island. There is also recent evidence that there was burning in the plantation of PT Arara Abadi, an SMG pulpwood subsidiary on June 28 2020. The fires came soon after the company had cleared and drained flammable peatland, including areas designated as a priority protection and restoration zone by the Indonesian government in 2016. This is illegal and also violates the group’s sustainability commitments.
SMG’s pulpwood division continues to expand into new areas of flammable peatland, greatly increasing fire risk. Satellite analysis shows that three subsidiaries/exclusive suppliers to APP cleared more than 3,500 ha of peatland August 2018-present. Satellite analysis and imagery also shows that SMG’s palm oil business, Golden Agri Resources (GAR) experienced fires in its plantations in West Kalimantan and Jambi in August-September 2019. The total affected burned area is over 2,500 ha. GAR has also been connected to numerous third party suppliers who have deliberately started fires to clear land in the globally important rainforests of the Leuser Ecosystem.