Malaysian financial services group CIMB Group Holdings Berhad (CIMB) has set science-based targets for the palm oil sector as part of its decarbonization plan, as reported by Eco-Business.
Southeast Asia's fifth-largest bank aimed to reduce emissions from its palm portfolio by 16%, to 1.52 tonnes CO²/tonne of certified palm oil (CPO) by 2030, as indicated in the November 28 report.
This would be equivalent to a 2% reduction in emissions per year, according to the bank.
CIMB's target was based on guidance from the Science-Based Targets Initiative (SBTi) for forests, land and agriculture, including Scope 1 and 2 emissions from planting and milling customers, and Scope 3 emissions from customers who acquire fresh fruit bunches (FFBs) from suppliers, as described by Eco-Business.
CIMB sets targets for sustainable financing in the palm oil sector
The palm sector covers approximately 3% of the CIMB group's total gross loans and mainly involves the bank's clients in Malaysia and Indonesia, the world's two largest palm oil producing countries, according to the report.
CIMB's new targets are aligned with its No Deforestation, No Peat and No Exploitation (NDPE) commitment launched in 2022. This commitment involves clients with new plantations conducting a High Conservation Value (HCV) assessment and committing to conservation of HCV and peat areas before clearing land for planting, as reported.
The company has committed to switching to certified sustainable palm oil (CSPO) and adopting better agricultural practices. It also seeks to reduce greenhouse gas emissions and improve emissions reporting. The company emphasized that its palm oil customers have a responsibility to protect the rights of local communities, workers and smallholder farmers.
However, it is worth noting that none of CIMB's clients are smallholder farmers, representing 40% of the sector by production volume in Malaysia and Indonesia, according to the report.
Smallholder farmers have struggled to access affordable finance to farm more sustainably, as highlighted by Eco-Business.
Banks in Asia explore alternatives to support small palm oil producers in sustainability certification
Carolyn Lim, senior corporate communications manager at Musim Mas, a palm oil company, told Eco-Business her hope. She wants banks to consider microfinance to support small farmers in their replanting efforts.
CIMB told Eco-Business that smallholders typically work in rural areas and are “generally not part of our current customer base”. As a result, the bank's only contact with smallholders is through its large corporate clients who purchase FFBs from them, as reported.
The bank is in the early stages of engaging with its palm oil customers. They seek to support smallholders in obtaining sustainability certification. Additionally, the company explores ways to drive certification through sustainability-linked supply chain financing for smallholder corporate suppliers.
Aida Greenbury, sustainability consultant at the Indonesian union SPKS, suggested that banks support smallholders with subsidies and low-interest impact investments. This assistance, in partnership with the bank's large palm oil clients, can make it easier for smallholders to adopt best practices.
Source: Oils & Fats International
