Several well-known European banks and pension funds have financed a palm oil project in Uganda that has caused land grabs and deforestation, a new research paper has found.
Household banking names such as HSBC, BNP Paribas, Deutsche Bank and Rabobank have offered over €1 billion of financial assistance worth to Wilmar International, a Singapore-based agribusiness company, according to the research commissioned by Friends of the Earth (FoE).
The report says that a palm oil project on Uganda’s Kalangala Island led by Wilmar has displaced local communities, increased food insecurity, rendered local water sources unusable, and caused 3,600 hectares of deforestation.
“Investors need to push Wilmar to clean up its act, or put their money elsewhere,” said Anne van Schaik, a finance campaigner for FoE. “Wilmar and its subsidiaries, backed by European money, are forcing communities from their land in Uganda.”
The palm oil project in Uganda is operated by Oil Palm Uganda Limited (OPUL), a joint venture in which Wilmar owns at least 39% of the shares. The project has also received $12 million from Uganda’s government.
In 1998, Kampala initiated the project’s umbrella organisation, the Vegetable Oil Development Project (VODP), with the World Bank and International Fund for Agricultural Development.
But the World Bank pulled out six years later, over fears that the project would not comply with its internal forestry safeguards policy.
According to the research, the expansion of the Wilmar palm oil plantations has violated several national land laws, including:
- Section 26 of the Ugandan Constitution which prevents land from being compulsorily acquired.
- The Land Acquisition Act, which lays out compensation procedures for land acquired by the government.
- The National Environmental Act of 1988, which the project violates by not respecting a 200 metre buffer zone between the plantation and Lake Victoria.
A Wilmar representative contacted by EURACTIV declined to comment on the allegations.
The company is worth €34.5 billion and, FoE says, has received loans or investments in the last three years of: €921 million from HSBC, €241 million from BNP Paribas, €24 million from Deutsche Bank and €222 million from Rabobank, as well as investments from Dutch pension funds ABP and Pensioenfonds Zorg en Welzijn.
The majority of Wilmar’s Western backers have sustainability principles that are supposed to guide their investments, but FoE complains that they are slow to act on them.
“These violations are not new,” van Schaik said. “Wilmar has been involved in land rights conflicts and the violation of environmental standards for many years.”
“Investors and financiers need to put their money where their mouth is,” she added.
For the last two years running, Newsweek magazine has ranked Wilmar the world’s worst company for environmental performance, out of the 500 largest publicly-traded firms.
As governments attempt to move away from fossil fuel-based power, they are increasingly looking at biomass, as new technologies now allow it to be converted competitively into liquid fuels and electricity.
However, in the search for cheap land, suitable climates and competitive transport costs, investors increasingly focus on Africa and south-east Asia, where many countries suffer from food insecurity and weak land rights.
Such plantations could displace poor and marginalised communities from land they have looked after for generations but have no formal claim over.