Malaysian financial services group CIMB Group Holdings Berhad (CIMB) has set science-based targets for the palm oil industry as part of its decarbonisation plan, Eco-Business reported.
Southeast Asia’s fifth largest bank was aiming to reduce the emissions from its palm portfolio by 16%, to 1.52 tonnes of CO²/tonne of certified palm oil (CPO) by 2030, the 28 November report said.
According to the bank, this is the equivalent to a 2%/year reduction in emissions.
CIMB’s target was based on the Science-Based Targets Initiative (SBTi)’s guidance for forest, land and agriculture, which includes Scope 1 and 2 emissions from plantation and milling clients, and Scope 3 emissions from clients’ sourcing fresh fruit bunches (FFBs) from suppliers, Eco-Business wrote.
The palm sector covers around 3% of CIMB’s total group gross loans, and almost exclusively covers the bank’s clients in Malaysia and Indonesia, the world’s two largest palm oil producing countries, the report said.
CIMB’s new targets are in line with its No Deforestation, No Peat, and No Exploitation (NDPE) commitment launched in 2022, which involves clients with new plantations conducting a High Conservation Value (HCV) assessment and committing to the conservation of HCV and peat areas before clearing land for planting, according to the report.
The company was quoted as saying it would engage with its clients to shift production towards certified sustainable palm oil (CSPO), adopt better agricultural practices to boost yields and reduce operational greenhouse gas (GHG) emissions, and improve the quality and coverage of emissions reporting. It added that its palm oil clients were also responsible for safeguarding the rights of local communities, workers and smallholder farmers.
However, none of CIMB’s clients are smallholder farmers, which make up 40% of the sector by production volume in Malaysia and Indonesia, according to the report.
Smallholders have struggled to access affordable financing to farm more sustainably, Eco-Business wrote.
Carolyn Lim, senior manager of corporate communications for palm oil company Musim Mas, told Eco-Business she hoped that banks would consider microfinancing for smallholders’ replanting efforts.
CIMB told Eco-Business that smallholders typically work in rural areas and are “generally speaking not within our existing base of clients”.
As a result, the bank’s only contact with smallholders was through its large corporate clients who purchased FFBs from them, the report said.
The bank said it was in the early stages of engaging with its palm oil clients on how they could support smallholders to work towards sustainability certification.
In addition, the company said it was exploring how it could boost smallholder certification through sustainability-linked supply chain financing for corporates’ smallholder suppliers. Such facilities would give preferential rates to small- to medium-sized enterprises that could demonstrate they met increasing sustainability goals.
Aida Greenbury, sustainability advisor to Indonesian independent smallholders’ union SPKS, said banks could provide better support to smallholders with a mix of grants and low-interest impact investments, in partnership with the bank’s large palm oil clients, to enable smallholders to adopt best practices.
