On August 17, four companies were excluded from the Norwegian Government Pension Fund due to a risk of the companies being responsible for severe environmental damage. Based on recommendations from the Council on Ethics, Norges Bank, which is responsible for the management of the Fund, decided to divest from Genting Berhad, IJM Corporation Berhad, Daewoo Corporation and its parent company POSCO.
The companies are involved in the conversion of tropical forests to oil palm plantations in different parts of Indonesia. The Council has assessed impacts on biodiversity and ecosystems associated with the conversion, emphasizing the scale of conversion, the consequences of conversion in terms of loss of biodiversity – including consequences for threatened species and their habitats – and the measures the companies are implementing to reduce the damaging effects.
The plantation operations of the excluded companies are all in Indonesia, but differ with regard to size, location and number of estates. Daewoo’s 30,000 ha concession area lies in Papua, and is largely covered by dense, continuous forest which the company describes as rainforest. It falls within the Southern New Guinea Lowland Forests Eco-region, which is considered to be a region of particularly rich and unique biodiversity, and is home to numerous threatened and protected flora and fauna species. Many species are only found in this region, which is considered critically endangered by logging, the conversion of forests to plantations and other activities. Daewoo’s subsidiary PT Bio Inti Agrindo began forest clearing towards the end of 2012, and this activity is still ongoing.
Genting and IJM also have plantations that lie within important ecoregions, such as the Borneo Lowland Rainforest Ecoregion, also regarded as threatened. In its natural state, the Bornean lowland rainforest is considered particularly species-rich, being home to numerous bird and plant species, and a high proportion of endemic and endangered species such as the Bornean orang-utan. Genting has 10 license areas in Kalimantan covering in total more than 150,000 ha where plantation development is ongoing. In the period 2008-2012, the Council’s findings indicate that close to 40,000 ha of forest has been cleared. The converted forest was generally secondary forest in good condition likely to have featured rich biodiversity and important ecological functions. Moreover, five of Genting Plantations’ license areas are located on lands which have been mapped as potential orang-utan habitat and possibly other endangered species. Most of these habitats have already been converted, except for one license area where the clearing is ongoing. Four of the license areas, which are currently being converted, include large areas of peatlands, including deep peat.IJM’s four concessions under development in East Kalimantan are comparably small, covering 35,000 ha in total. The company appears to have converted around 10,000 ha of lowland rainforest into palm oil plantations in the period 2008–2012. Conversion appears to be ongoing. There are also indications that the company has cleared forest in buffer zones outside the concession boundaries in one of the concession areas.
These companies are carrying out high impact operations in ecologically sensitive areas, but have implemented very few measures if any, to mitigate the environmental impact of their operations. Neither Daewoo nor IJM seem to have surveyed flora, fauna and ecosystems within the concession areas, and so-called High Conservation Values (HCV) area assessments have not been carried out. HCVs are biological, ecological, social or cultural values which are considered outstandingly, significantly or critically important. Identifying, managing and monitoring HCVs can be an important tool for reducing impacts on biodiversity and ecosystems if applied properly.
Daewoo’s measures have focused on safeguarding protected species by establishing three limited buffer zones along waterways in the concession area. The company does not detail which species these actions are designed to protect, and it is not clear to the Council how narrow strips of forest in a large plantation landscape will help to preserve important ecological values in the concession area. There is no information available about the condition of the forests, biodiversity or ecosystems in the 30,000 hectares of forest slated for clearing, and hence it is not known which species and ecosystems that will be lost as a result of the conversion of forest to plantations. It is likely that endemic and threatened species and ecosystems are present throughout the concession area.
IJM has not provided any information on the steps it is taking to reduce the loss of biodiversity in connection with the development of plantations in Indonesia.
Genting has carried out HCV assessments, but only made summaries of its HCV assessments available earlier this year. Important biodiversity conservation values were found in all of its concessions. The areas the company has set aside for conservation are limited in size and almost exclusively in buffer zones along waterways and in steep terrain – areas which the company is required to set aside anyway under Indonesian requirements. This raises the question of whether the HCV assessments have provided an adequate basis for preventing severe environmental impacts in connection with plantation development.
The companies were given the opportunity to provide information to the Council and to comment on the draft recommendation to exclude the company. Only Daewoo responded.
The Council found that the scale of conversion particularly regarding Daewoo and Genting, and the probability that important biodiversity and ecological values will be lost as a result of conversion present an unacceptable risk that conversion will cause severe environmental damage. The lack of data and transparency on part of the companies reinforces this risk further, while the measures proposed by the companies were deemed insufficient to reduce the risk.
The Council on Ethics has evaluated companies in the GPFG involved in environmentally destructive logging of tropical forest or the conversion of such forest into plantations since 2011. During these enquiries, the Council has assessed more than 40 companies in the portfolio. To date, eight recommendations to exclude companies due to the risk of severe environmental damage from logging and the conversion of tropical forest into plantations have been published. These are available on our website (www.etikkradet.no).
The Council conducts an individual evaluation of each company to assess the risk of severe environmental damage in connection with forest conversion. For every company, the Council seeks to clarify the level of biodiversity loss that the clearing of forest will involveand whether companies give sufficient consideration to species diversity and ecosystems.
Although all of the investigated companies state that they are focused on reducing environmental damage resulting from forest conversion, this is frequently inconsistent with their efforts in practice. The quality of surveys of biodiversity in licence areas varies considerably. Often, surveys lack information on what biodiversity will be lost, and present deficient arguments as to which values are to be protected. On the other hand, various companies are making positive, systematic efforts to reduce the environmental damage associated with conversion, for example by commissioning technically reliable environmental impact assessments and biodiversity surveys, and by identifying important conservation values. When companies allow environmental values to determine which parts of a licence area are to be converted and which parts are to be set aside for conservation, and have a good management plan in place, the risk of severe environmental damage is reduced.
Hilde Jervan is Chief Advisor, Council on Ethics.
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