The World Bank has agreed to suspend International Finance Corporation (IFC) funding of the oil palm sector pending the development of safeguards to ensure that lending doesn't cause social or environmental harm, according to a letter by World Bank President Robert Zoellick to NGOs. A recent internal audit found that IFC funding of the Wilmar Group, a plantation developer, violated the IFC's own procedures, allowing commercial concerns to trump environmental and social standards. The audit's findings were championed by environmental and indigenous rights' groups who have criticized World Bank support for industrial oil palm development which they say has driven large-scale destruction of forests in Indonesia, boosting greenhouse gas emissions, endangering rare and charismatic species of wildlife, including the orangutan, and displacing forest communities.
Writing to Marcus Colchester, Director of the Forest Peoples Programme, Zoellick said the IFC has suspended new investments in palm oil projects and ordered a review of existing projects, including the Wilmar Group, on social and environmental grounds.
"I have directed IFC management to take all necessary steps to ensure that the problems identified in the CAO audit are not repeated. Furthermore, until we have a new strategy in place, IFC will not approve any new investments in palm oil," wrote Zoellick. "I have also asked IFC to review the environmental and social performance of all portfolio investments in palm oil. We are committed to ensuring that positive development outcomes-including environmental and social sustainability-remain at the core of IFC's development business."
The Forest Peoples Programme last month demanded that the IFC suspend its support for the palm oil sector in Indonesia until it determines how a long list of violations, ranging from deforestation to land grabbing to human rights abuses, were allowed to continue. The group noted that many private banks "look to the IFC for leadership in their lending procedures and use the Performance Standards to guide them."
The letter from Zoellick follows.