How the World Bank and HSBC are investing in deforestation

Posted by jamie — 29 August 2007 at 2:53pm - Comments

Timber being sawn up in Bandundu province, DRC

Back in April, at the World Bank's spring meeting, there was much talk about the plight of the Congo rainforest. We'd just published a big report detailing how in the Democratic Republic of Congo (DRC) logging titles were being granted in breach of a moratorium that the bank had been instrumental in establishing. The report launch was so high profile, we were able to force DRC's rainforest high onto the agenda of the World Bank meeting and have also managed to secure another session at the upcoming autumn meeting.

Given this, you might be surprised to learn that the World Bank is investing in a company that is dealing in illegal timber from the rainforest and has also obtained land in breach of the country's moratorium. But that's exactly what's happening.

Don't carve up the Congo

What role does the World Bank have in the DRC logging industry? Watch our animation or our film to find out

The World Bank's website says that "the Bank does not fund logging anywhere in Africa and our main advice to the Government of DRC is not to expand industrial logging". Yet the International Finance Corporation (IFC), part of the World Bank Group, has invested heavily in Singapore-based trading group Olam International to the tune of millions of dollars over the past four years - at the end of the financial year for 2006, IFC held US$11.2 million in the company's loans and guarantees.

Just two weeks ago, we heard that the DRC provincial authorities had seized illegal timber shipments from Olam due to non-payment of local taxes - the barges were carrying $500,000 of illegally-logged rainforest timber. The area's forest minister CoCo Pembe accused the company of trading in illegal timber, cut by local companies whose logging permits have expired. Yet the World Bank denies that IFC is doing anything wrong.

In addition, we have clear evidence that Olam has purchased logging titles in breach of the 2002 moratorium which expressly forbids the allocation of more land for logging.

It would seem that the left hand of the World Bank doesn't know what the right hand is doing, and it's not just this distant and impersonal institution exhibiting double standards - some high street banks are also funding forest trashing activities. Take HSBC, whose recent advertising campaign would lead you to believe it was the greenest bank around. Its 'Forest Land and Forest Products Sector Guidelines' (pdf) state that it "will not provide facilities and other forms of financial assistance [for] logging operations that are in violation of local or national laws in respect of illegal logging". And yet, along with the Royal Bank of Scotland, they provide financial services directly to Olam.

When questioned by our campaigners about the relationship with Olam, HSBC CEO Stephen Green said that he was unable to comment further on the relationship for "legal and regulatory reasons" although he was keen to reassure us that "where issues are brought to my attention they are thoroughly investigated and acted upon if they are found to be in conflict with our environmental standards and policies."

All well and good, Stephen, but surely the point of having a sound environmental policy is to prevent HSBC getting into bed with dodgy companies in the first place. Especially companies like Olam, whose activities directly contradict HSBC's own forest policy. Mind you, it's not just HSBC - both Barclays and Prudential are shareholders in Olam.

If financial institutions put their money quite literally where their mouth is, they can force companies to adopt more responsible practices - without investment, companies like Olam can't continue to make vast profits from environmental destruction. The World Bank could look a bit more closely at its own guidelines and make sure its funds are used to increase forest protection and alleviate poverty instead of funding rainforest destruction.

Meanwhile, it's always worth looking more closely at what your own bank gets up to - without our hard-earned cash, they can't function either.

About Jamie

I'm a forests campaigner working mainly on Indonesia. My personal mumblings can be found @shrinkydinky.

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