IFC to suspend funding for palm oil sector

Photo: Achmad Rabin TaimWorld Bank has agreed to suspend IFC funding of the oil palm sector in Indonesia in response to an appeal by a global coalition of NGOs and a highly critical audit by the IFC’s independent ‘complaints advisory ombudsman.’

The audit had shown that, as claimed by the NGOs, IFC (International Finance Corporation) funding of the Wilmar Group had violated the IFC’s own procedures, and commercial concerns had been allowed to override the IFC’s environmental and social standards.

Oil palm has become synonymous with widespread clearance of forests and peatlands, massive CO2 emissions and the theft of indigenous peoples’ lands.

In the letter responding to the NGOs, dated August 28, 2009, World Bank/IFC President Robert Zoellick accepted that IFC procedures need tightening and that socially and environmentally sensitive projects in the sector need to be re-categorised to ensure that staff apply due diligence.

He also announced an intensive six month review of how the IFC should engage in the palm oil sector in the future which should be developed through open and extensive consultations.

This review would look at the broader legal and institutional barriers to good practice in Indonesia.

An assessment will be carried out of the Wilmar Group’s social and environmental procedures.