As Billions in finance have flowed to the Royal Golden Eagle Group, deforestation connected to the giant conglomerate continued
August 27, 2024 – San Francisco, CA – Today, Rainforest Action Network (RAN) is releasing fresh evidence that questions the credibility of so-called “sustainability linked loans” issued to Indonesia’s Royal Golden Eagle (RGE) Group, most notably by Japanese megabank Mitsubishi UFJ Financial Group (MUFG). Despite RGE’s public commitments to zero deforestation, new evidence reveals that the conglomerate’s palm oil and pulp & paper operations have persistently been connected to the clearance of forests in Indonesia, casting serious doubt on the credibility of the billions of dollars funneled to the group under the guise of “sustainable finance”.
Key Findings:
- RGE’s palm oil and pulp & paper businesses have received over $4.9 billion in so-called sustainability-linked loans since 2021.
- MUFG alone has contributed approximately US $630 million in financing since 2016 and acted as a lead arranger and sustainability advisor on recent deals.
- RGE has repeatedly violated its commitment to halting deforestation, with over 1,475 hectares (3,645 acres) of forest cleared within its concessions and supply chain since adopting its No Deforestation, No Peatland, No Exploitation (NDPE) policy in 2015.
- Sustainability finance has failed to address these deforestation impacts, as shadow companies tied to RGE have continued to be among the leading drivers of deforestation in Indonesia.
- Major global brands, including Mondelēz, Unilever, PepsiCo, Kao and Nestlé, continue sourcing palm oil from RGE, despite its ongoing social and environmental violations.
“This report highlights critical flaws in the growing Sustainability-Linked Loans market ” said Alex Helan, a spokesperson with Rainforest Action Network. “MUFG and other banks taking part in these deals appear keen to bolster their own sustainability credentials, but less interested in scrutinizing the real-world impact of RGE group’s operations.”
The evidence we’ve gathered shows that deforestation and land conflicts persist across RGE’s operations, contradicting the very principles these loans are meant to uphold.
Despite public commitments to “zero tolerance for deforestation” and “radical traceability and transparency,” RGE’s subsidiaries, Asian Agri and Apical, have continued to be tied to the clearance of forests in their operations or supply chains. Satellite analysis commissioned by RAN reveals that forest loss across RGE’s concessions has actually increased in recent years, with deforestation rising from 64 hectares in 2019 to 165 hectares in 2023. RAN’s Carbon Bomb Scandals report exposed Apical for sourcing illegally-produced palm oil that was grown on deforested peatlands in a nationally protected area that is the Orangutan capital of the world. Moreover, RGE is connected to a number of other ‘shadow companies’ in the pulp & paper sector that are among the leading drivers of deforestation in Indonesia. The report calls for an immediate suspension of new financing of RGE by all financial institutions. The report showcases risks to companies that continue doing business with RGE as it is operating in violation of the European Union’s Deforestation-Free Regulation (EUDR), which prohibits products linked to deforestation and illegal operations from entering EU markets.
“MUFG and other financiers must be held accountable for their role in enabling deforestation under the guise of sustainable finance,” added Helan. “The financial sector has a duty to ensure that sustainability-linked loans are not just more greenwash but actually stop bankrolling destruction and start to drive genuine positive change.”
RAN’s report serves as a call to action for governments, financial regulators, and consumer brands to scrutinize the true environmental and social impact of their investments and supply chains, and to take urgent measures to uphold human rights and protect the world’s rainforests.
About Rainforest Action Network:
Rainforest Action Network (RAN) challenges corporate power and systemic injustice to protect forests, the climate, and human rights. RAN uses nonviolent direct action, grassroots organizing, and strategic campaigns to pressure some of the world’s most powerful corporations to stop destroying forests, polluting our planet, and driving climate change.