World Bank Broke Its Own Environmental Rules to Lend to Palm Oil Corporation, Internal Audit Reveals

palm oil plantation photo

Though it may look like a forest, a palm oil plantation is no more ecologically diverse than a monoculture corn field. Photo: Cheng via flickr.

Unchecked conversion of forest to palm oil plantation in Indonesia is an environmental and social problem of vast proportions -- so serious that the World Bank's International Finance Corporation's internal rules should prevent it from lending to palm oil projects. Except, when IFC staff ignore those rules and lend to Wilmar International anyway. That's what the Forest People's Programme and two Indonesian NGOs are saying:In a letter sent to World Bank president Robert Zoellick, the groups highlight an internal IFC audit revealing "shocking and systematic compliance failures in making loans and investment guarantees to one of the world's largest transnational palm oil trading companies."

IFC Staff Chose to Ignore the Rules
Mongabay quotes Marcus Colchester of the Forest People's Programme:

IFC staff knew of the environmental and social risks in the palm oil sector, including unresolved land disputes and non-compliance with its social and environmental standards, but chose to ignore the rules.

It is clear to us, and the audit confirms this, that IFC suffers a systemic problem whereby the pressure to lend and to support business interests overcome prudence, due diligence and concern for social and environmental outcomes.

Investments Called Low Risk to Avoid Scrutiny
Specially the letter says the audit confirms that:

IFC investment staff overrode IFC procedures and the warnings of environment staff in order to speed investments;

IFC staff miscategorized investments as low risk to avoid safeguards and to avoid applying their own performance standards;

IFC staff failed to assess the impact of investments in terms of the whole supply chain;

IFC failed to assess the Wilmar Group's operations for compliance with national laws, even though lack of compliance has since been admitted by Wilmar.

There are more, so check out the original letter [PDF].

Suspend Lending to Palm Oil Until Issues Are Addressed
Without a clear strategy to address these issues, the letter calls on IFC to suspend its support of the palm oil sector in Indonesia until such time as "an effective strategy for investment in line with IFC's mission and its performance standards, open to input from the public, civil society organizations and indigenous peoples" is developed.

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