The Rainforest Action Network (RAN) has issued a report that says a forthcoming multi-million dollar share rights offering by the Indonesian palm oil firm BW Plantation (BWPT) carries serious environmental and financial risks.

RAN says the 900 million US$ offering was approved by BWPT last week. According to RAN, it is part of the company’s bid to finance its merger with Green Eagle Holdings (GEH).

“The deal expands BWPT’s holdings from just under 100,000 hectares to more than 400,000 hectares, making it Indonesia’s third largest palm oil company listed on the Indonesian Stock Exchange,” RAN said today.

“Seventy-five percent of the new land bank is unplanted and likely includes large tracts of primary forests, indigenous and local community lands, and areas of carbon-rich peatlands.”

Tom Picken from RAN said: “The last thing Indonesia needs is a near-billion dollar injection of cash that will simply fuel Conflict Palm Oil production. We encourage potential investors to steer clear of this controversial deal until BWPT discloses the true extent of risks, and publicly commits to no deforestation, no exploitation, and no peatland expansion across its entire operations.”

RAN says in its briefing that the share offering hopes to attract new investors to help finance the consolidation of the Rajawali group’s palm oil interests across BWPT and GEH, enabling a “back-door” listing of the significantly larger land holdings of the privately held GEH.

“New stock not purchased by existing shareholders will be traded on the Indonesian Stock Exchange from December 8.”

BWPT is already lagging behind its competitors who have committed to zero-deforestation policies, RAN says, “and has failed to declare to investors the serious environmental, social and financial risks involved with deforesting and planting over its massive new land bank”.

RAN says that publicly available information about GEH plantations should raise alarm bells for investors. “A basic review of available satellite data and local media reports indicates aggressive clearance of High Carbon Stock (HCS) forest since 2010, orangutans needing to be rescued from a Kalimantan concession two weeks ago, at least one case of serious labour rights violations this year in Papua, as well as a number of community conflicts.”

Non-compliance with RSPO standards

Picken says BWPT – which has holdings in Papua, Sulewesi, West, East and South Kalimantan and Sumatra – is failing to comply with New Planting Procedures established by the Roundtable on Sustainable Palm Oil (RSPO).

“Adding the Green Eagle operations into the mix may seriously jeopardise BWPT’s eligibility to remain a member of RSPO. Aside from being a disaster in the making for the climate, local communities and the environment, this deal is a risky gamble for investors. This offering completely ignores the changing business climate.”

Picken points to the raft of no-deforestation commitments that have been made by multinational companies. “These include BWPT’s two largest buyers of Crude Palm Oil (CPO) – Wilmar International and Golden Agri-Resources (GAR) – which make up almost half of BWPT’s sales.

“Unless BWPT gets into line with these improved palm oil standards, then it will lose its biggest clients while investors could see their stock plunge.”

BWTP and some GEH subsidiaries have been members of the RSPO for more than six years, RAN says, but none of the companies have obtained RSPO certification for any of their plantation holdings.

Demand for disclosure

Potential investors should have greater disclosure of the potential environmental, social, and legal risks related to BWPT’s offering, RAN says.

According to RAN, the available satellite data on BWPT group operations suggests that aggressive forest clearance is happening, including development on peatlands.

“The full extent and location of peatlands and HCS forests on BWPT’s unplanted land bank have not been disclosed. The RSPO has protocols for measuring and reporting greenhouse gas emissions from plantations and associated Crude Palm Oil mills. As of November 18, 2014, BWPT has neither publicly reported nor committed to report on its GHG emissions as per RSPO protocols.”

Indonesia is reported to be the world’s third largest emitter of greenhouse gas emissions, and 85 percent of its emissions are said to result from deforestation and the drainage of peatlands.

Indonesia’s peatlands cover less than 0.1 per cent of the Earth’s surface, but their destruction is causing four percent of global greenhouse gas emissions every year.

According to Greenpeace, the annual clearing of Indonesia’s peatlands releases some 1.8 billion tonnes of greenhouse gases and some put the figure at 2 billion.

The RAN briefing document: Conflict Palm Oil Case Study

Chain Reaction Research analysis

Changing Times contacted BWPT for a response, and a spokesman for the company said it would not be responding directly to either of the above reports. He added that the company does communicate directly with RAN, had been doing so for two years as BWPT, and planned to continue in the future.