Six banks financing the Indonesian palm oil industry are fuelling deforestation and human rights violations, according to a new report by the Rainforest Foundation Norway (Regnskogfondet).

The ‘Nordic investment in banks financing Indonesian palm oil’ report published in May said that loans from the six banks could be linked to nine palm oil companies whose operations caused deforestation, peatland destruction and violations of human rights.

Additionally, the report alleged that some activities funded by the banks could “be in contravention with Indonesian policy, regulations and law.

The palm oil companies mentioned in the report included Ganda, Tunas Baru Lampung, BEST Group, HPI Agro, Korindo, Sampoerna Agro, IndoAgri/Salim, Darmex Agro/Duta Palma and Sawit Sumbermas Sarana.

The six banks listed by the NGO as funding these companies include Indonesia’s four largest banks – Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI) and Bank Central Asia (BCA) – in addition to Singapore’s two largest banks, Oversea-Chinese Banking Corporation (OCBC) and DBS Bank.

“These banks are a major part of the palm oil problem because they are funding destructive and unethical palm oil ventures while their narrow financial interests, which favour rapacious producer over more responsible companies, undermine efforts to make the industry more sustainable,” said Vemund Olsen, senior policy advisor at Regnskogsfondet.

The four Indonesian banks had, by the end of 2016, a total of US$12.5bn of outstanding loans to the Indonesian palm oil sector. Since the beginning of 2014, their lending had increased by 70%.

The Singaporean banks did not publish details of their loans, but Regnskogsfondet cited “several indicators, such as their lending to companies listed on the Indonesia Stock Exchange” as pointing to them being among the largest lenders to the palm oil sector in Indonesia.

The report noted that several Indonesian palm oil producers had committed to No Deforestation, No Peat, No Exploitation (NDPE) policies, but the costs of compliance with the sustainability regulations had provided a competitive advantage to “more unscrupulous” companies and the banks were fuelling their operations due to having no requirements regarding environmental damage or human rights.

In addition to highlighting the Indonesian and Singaporean banks, the report called into question the investments of several Nordic banks and funds – including the Norwegian Government Pension Fund (GPFG), Nordea, AP-fonderna, Swedbank and Handelsbanken.

According to the report, the Nordic banks had invested more than US$2bn into the banks funding the palm oil industry, which Regnskogsfondet said was at odds with the good environmental reputation the Nordic countries had built up.

“Evidence that Norwegians and Swedes are indirectly supporting an industry that has destroyed huge tracts of rainforest is hard to square with this region’s reputation as a global leader in the fight against deforestation,” said Olsen.

“It’s a sobering reminder of the powerful economic forces propelling Indonesia’s palm oil industry and rewarding companies that adopt a scorched earth approach to palm oil production,” he added.

None of the Nordic investors’ policies were fully aligned with NDPE policies nor had they engaged with the Southeast Asian banks, but most expressed interest in doing so, the report read.

Regnskogsfondet has called on the Southeast Asian banks to adopt and enforce NDPE financing policies, and on the Nordic financers to require their Indonesian clients to have these policies enacted as a prerequisite for continued investment.

Additionally, the report urged the Asian banks to conduct “robust” due diligence on the sustainability of credit proposals from the agriculture commodities sector and the Nordic banks to create a partnership with other asset managers for engaging with the six listed banks.