A
meeting in Europe with bankers about pulp mills and finance
The entrance to the bank has nothing
to do with human scale. Built of steel and glass, the building
towers over visitors like a spotlessly cleaned, giant machine.
A machine for swallowing people and making money, perhaps.
I visited the bank headquarters last
week as part of a meeting organised by the German NGO Urgewald
to discuss banks' financing of the pulp industry. Up on the 50th
floor, where the meeting took place, the view is spectacular.
The sun was shining, glistening off the river as it curves through
the city. It didn't feel like being in the belly of the capitalist
beast. About a dozen bankers, from seven major banks, turned up
to listen to presentations from six NGOs. (The meeting took place
under the "Chatham House Rule", which means that I can
use the information from the meeting, but I can't tell you who
said what, or who else was at the meeting.)
Before the meeting, I'd calculated that
the pulp industry has plans to build about 25 million tonnes of
new capacity over the next five years. The vast majority is planned
for Brazil, Uruguay, Russia, China, Australia and Indonesia. Even
allowing for more closures of pulp mills in the North, this is
a dramatic increase in capacity. Over the past decade, the industry
has expanded at about one million tones a year. It is now planning
to expand at five times this rate. During the meeting it became
clear that my figure of 25 million tonnes was an underestimate.
Three new pulp mills are planned in Russia and one in Malaysia,
none of which I'd included in my calculations.
The pulp industry's boom and bust cycle
is directly linked to the industry's overcapacity. The industry
expands when the price of pulp is high. When all the new capacity
comes on stream the price collapses. It's happened before (repeatedly)
and it looks like it's about to happen again.
During the meeting, the bankers heard
about the promises given 20 years ago in Indonesia. The pulp industry
would bring prosperity. It would provide jobs and it would save
the forests, by providing an economic use for wood. The reality
is that the industry has brought pollution, few jobs, social conflicts,
land rights conflicts and destruction of vast areas of forests.
Even where plantations have been established they have replaced
forests. Today, pulp companies in Sumatra are clearcutting peat
swamp forest and draining the swamps to establish plantations.
In the process they are releasing large amounts of carbon stored
in the peat to the atmosphere.
The pulp industry's reliance on wood
as a raw material means that large areas of industrial tree plantations
are required to feed today's million tonnes-a-year pulp mills.
This inevitably leads to land rights conflicts, because such large
tracts of land are not simply lying around unused. Land rights
conflicts in Brazil are increasing, and the Movement of Landless
Peasants (MST) has repeatedly targeted the pulp industry's
eucalyptus plantations in its land occupations.
The bankers heard about the impact of
industrial tree plantations on water. How wells dry up, ground
water levels fall, seasonal streams become permanently dry, swamp
areas dry out, water sources for washing and drinking water dry
out, and how it becomes impossible to grow staple crops such as
rice in fields that are surrounded by plantations.
The bankers also heard suggestions for
how they could draw up standards in order to avoid investing in
the worst pulp and plantation projects. They heard about a mapping
project which delineates old-growth forests. They heard about
the range of mechanisms under international law that could be
applied in cases of human rights abuses linked to pulp mills,
for example. They heard how several commercial banks in the US,
the Netherlands and the UK have drawn up forest policies, partly
as an attempt to avoid getting involved in destructive projects
such as those of APP and APRIL in Indonesia. ABN Amro is working
on applying its forest policy to all bank activities and not just
project financing – which is crucial in the pulp sector, because
most pulp mills are financed through bonds, shares, equity and
general corporate loans.
The banks told us they don't have enough
capacity to develop their own forest policies. Even carrying out
due diligence, it seems, is difficult. Some of the banks said
that if a project is covered by the German credit insurer Euler
Hermes, they'd invest without too much further analysis. This
is extremely worrying news to the NGOs who have campaigned for
years to get Euler Hermes to develop meaningful standards to exclude
socially and environmentally destructive projects. In 2004, Euler
Hermes provided export credit insurance for APP China despite
the problems APP has caused in Indonesia. Greenpeace China has
documented how APP China has illegally logged forest in Yunnan
and established tree plantations inside protected areas in Hainan.
We pointed out the problems with relying
on Euler Hermes. Well, there's the World Bank's forest policy
replied the banks. Or there's the OECD's common approaches for
export credit agencies. Or the Equator Principles. Anything, it
seems, rather than the banks admitting that they must look critically
at their involvement in the massive problems caused by the pulp
industry and its industrial tree plantations. Coming from banks
that employ tens of thousands of people and generate billions
of Euros profit each year, this is a little difficult to take.
By Chris Lang, http://chrislang.org
