MALAYSIAN financial institutions are the third-largest financier of companies linked to Indonesia’s forest fires that seasonally leave the region shrouded in smoke, having provided loans amounting to US$2.3billion (RM9.6 billion) between 2015 and August this year, said a report.

The report, A Review of Sustainable Finance Reforms in Indonesia was co-authored by Rainforest Action Network (RAN), Tuk-Indonesia, Jikalahari, Walhi, and Netherlands-based Profundo.

The research revealed that corporations implicated in the 2019 fires have been recipients of loans and underwriting services amounting to at least US$19 billion (RM79.04 billion).

The largest sources of funding came from banks in China, Indonesia, Malaysia, Taiwan, Singapore and Japan.

Of that amount Malaysian banks provided some US$2.3 billion (RM9.57billion) in loans and underwriting services to the 17 corporates implicated in the 2019 fires, between 2015 and August this year.

This makes it the third largest source of financing behind China (US$ 5.8 billion) and Indonesia (US$4.5 billion), the researchers said in an accompanying press release.

“Maybank provided US$1.12 billion in finance and CIMB Group provided almost US$750million finance,” they said.

“CIMB has indicated its intention to align with international standards and initiatives. It is a founding member of the UN Principles for Responsible Banking (UNPRB) which includes a commitment to end financing of any deforestation activities no later than 2020.

“CIMB has not disclosed environmental, social and governance (ESG) policies that would align it with this goal,” the report added.

It also has the largest institutional investor presence in the companies suspected of starting forest fires, with three public funds accounting for 21% of the institutional money invested in the 17 groups.

Public-listed companies in Indonesia, Malaysia and Singapore were among those implicated, the report said.

Some of these companies are repeat offenders who were responsible for fires on their concession land between 2015 and 2018, the report stated.

Indonesian authorities estimated that 80% of these fires were deliberately lit to clear land for oil palm plantation and that 83 plantation companies have had their land sealed off.

TuK-Indonesia executive director Edisutrisno said Malaysian banks had extremely weak ESG policies and safeguards when it came to the forestry and plantation sector.

“As it stands, companies may regularly be implicated in using fire in their concessions, and have plans to continue developing flammable peatland thereby perpetuating fire risk.

“Yet banks continue to offer these clients vast sums of credit without conditions for legal or sustainable operations. This indiscriminate financing ensures companies have no real incentive to change.

“Banks need to have strong covenants built into loan agreements with plantation companies, that condition financing on their sustainability performance,” Edisutrisno said.

This, he said, would include eliminating fires from concessions as well as restoring critical peat ecosystems to prevent further fires.

Banks, said Edisutrisno, should stop financing clients who have violated these conditions.

“When you follow the money, you can see that the countries worst affected by the crisis – Indonesia, Malaysia and Singapore – are financing the disastrous status quo” said Alex Helan, who analysed the data for RAN.

Malaysian palm oil group firm Kuala Lumpur Kepong Bhd admitted in September that there was a fire in its PT Adei Plantation and Industry land in Riau, Indonesia. However, the fire was put out the same day it was discovered, it said in a statement.

Meanwhile, IOI Corp and Sime Darby denied that land on their subsidiary plantations had been sealed off.

The Malaysian Palm Oil Association has said that local oil palm companies, especially members of the Roundtable Sustainable Palm Oil, stopped the practice of open burning on their plantations in 1985. – December 11, 2019.