On February 4, 2017 Chain Reaction Research published a report analyzing the bank financing – loans as well as debt and equity underwriting – of 16 major palm oil companies from 2006 to 2015. The analysis concludes that banks are more important financiers of palm oil companies than debt or equity. Banks therefore face more environmental, social and governance (ESG) risks from palm oil production than do bond or equity investors.
Key findings of the report include:
- “More loans, more bonds and less shares.
- Loans are becoming more important than bonds over time.
- SE Asia banks are the most important lenders to these palm oil companies, closely followed by East Asian and European banks.
- Malaysian and U.S. banks dominate underwriting.
- Companies which improved their sustainability performance 2010-2015 may have attracted more loans and issued more bonds.
- Of the 17 most important banks, only three have adopted strong ESG policies on the palm oil sector. Another seven have a policy, which needs further improvement, while seven banks have a weak policy or no policy at all.
- The stronger the ESG policies of banks, the more their loan portfolio focuses on companies which appear to have improved their sustainability performance, 2010-2015. Banks thus seem to bring their policies into practice.
- It appears companies that have not improved their sustainability performance, increasingly rely on loans from banks that have weak ESG policies.”
On the reports page of the Chain Reaction Research internet site you may read more and download the report.