www.bioenergy-business.com
09 September, 2009
The World Bank's International Finance Corporation (IFC) has stopped investing in palm oil projects pending the development of a new strategy to address environmental and social practices associated with the material. The IFC will conduct a six-month review of its involvement in the sector, which produces oil that is used as a biodiesel raw material and in many food and other sectors. The IFC will also review the environmental and social performance of all its existing investments in palm oil, said the World Bank president, Robert Zoellick.
Some countries and companies have in the past rejected the use of palm oil for biodiesel and other uses because of concerns about sustainability and associated social impacts. Zoellick announced the World Bank move in a letter to a group of environmental and other campaigning organisations, which had raised concerns about IFC investments in the Singapore-based company Wilmar and Indonesia's palm oil sector. Indonesia and Malaysia are believed to account for about four-fifths of global production of palm oil.
The Forest Peoples Programme, Save Our Borneo and the other complainants had claimed that the IFC's funding of Wilmar had violated its own procedures "and commercial concerns had been allowed to override the IFC's environmental and social standards". An audit by the IFC's independent Compliance Adviser/Ombudsman agreed: "IFC did not meet the intent or requirements of its own performance standards for its assessment of the Wilmar trade facility investment.
"Incorrect assumptions were made about the impact of certain types of financial products (trade facilities) without proper consideration of the sector and country context of the investment. As for the Wilmar refinery investment, IFC failed to assess the supply chain plantations or other companies and suppliers linked through the Wilmar Group, as required by its performance standards." Zoellick said that the IFC will make no further investments in the palm oil sector until a new strategy is in place. The IFC would also work with the Roundtable on Sustainable Palm Oil, although Zoellick said that IFC's own performance standards would still be applied.
Other measures include: development of an advisory services programme; a revision of IFC's environmental and social review procedure to ensure that the categorisation of single-commodity, single-company investments in environmentally and socially sensitive sectors is based on potential impacts; and the strengthening of the existing prohibition against clearing critical habitat. Zoellick said that he did not believe that IFC staff had committed systematic policy violations in the case of Wilmar, but added: "Nonetheless, it is clear that we must have higher levels of due diligence and clearer guidance to staff."
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