Palm oil is widely used for cooking, in food products, healthcare, detergents, cosmetics, and increasingly, biofuels. It is also a very productive crop and the palm oil sector provides a livelihood to millions of people in developing countries. Indonesia and Malaysia are the largest producers and exporters of palm oil globally. However, its production, if not integrated with good ESG practices, can result in negative impacts to the environment, economy and people.

While our credit exposure to growers and processors of palm oil is not material, accounting for <1% of total loans and advances to customers as at end 2018, we recognise that we can play a role in promoting a sustainable palm oil sector by being discerning in our lending practices to this sector. In this regard, we seek to support responsible companies in the palm oil sector that undertake good ESG practices including complying with existing national and international certification standards such as the Indonesian Sustainable Palm Oil (ISPO), Malaysian Sustainable Palm Oil (MSPO) or Roundtable on Sustainable Palm Oil (RSPO). We will not consciously finance companies that we know are violating local or national regulations or engaged in unlawful land clearance by burning, adversely affect high-conservation value forest, involved in new planting on peatland or violate rights of workers or local communities.

Going forward, we will require new lending relationships in the palm oil sector to be able to additionally demonstrate alignment with no deforestation, no peat and no exploitation policies or equivalent that are increasingly being adopted in the palm oil sector. We will also consider new customers who have achieved RSPO certification or are able to demonstrate that they are working towards achieving RSPO certification within a satisfactory timeframe. For avoidance of doubt, these commitments are in addition to compliance with local or national regulations and must include zero burning policy. These requirements for new lending relationships in the palm oil sector will be integrated into our existing ESG risk assessment approach for the palm oil sector. We recognise that responsible financing is a journey and seek to support customers that are able to demonstrate commitment or are taking positive steps towards responsible and sustainable practices. We will not onboard new lending relationships who do not meet these requirements.

We will continue to monitor the sector closely and ensure that our policies reflect changes in societal expectations and new standards in the sector.

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