JAKARTA, Indonesia - September 11 - Friends of the Earth International welcomed today's announcement by the IFC, the World Bank's private sector arm, that it will stop all palm oil investments.

"Investments in large-scale oil palm plantations lead to deforestation and human rights violations", said Torry Kuswardono of Friends of the Earth Indonesia/WALHI. "We are encouraged that the World Bank Group is finally recognizing the problems, and we hope that other banks will follow suit."

The World Bank Group statement was unveiled on September 9 in a letter from its president Robert Zoellick, responding to an appeal from Indonesian and international NGOs. [1] The 28th August letter, which became public yesterday, announces suspension of all World Bank private sector arm funding for palm oil until a revised strategy for the financing of this troubled sector is in place.

A coalition of local and international NGOs, spearheaded by the UK organization Forest Peoples Program, [2] had previously filed a complaint at the IFC's internal watchdog, the Compliance Advisory Ombudsman office (CAO) about a series of loans to palm oil giant Wilmar International.

A joint report by three NGOs (Friends of the Earth Netherlands, Kontak Rakyat Borneo and Gemawan), which examined Wilmar's plantations in Sambas, West Kalimantan, Indonesia, found that the company is working with dubious licenses, and is entangled in land rights conflicts and illegal logging activities. [3]

The complaint triggered an audit by the CAO, which concluded that the IFC had violated its own procedures, and that commercial interests had overruled the IFC's environmental and social standards. [4]

In his letter, World Bank Group President Zoellick states that "until we have a new strategy in place, IFC will not approve any new investments in palm oil. I have also asked IFC to review the environmental and social performance of all portfolio investments in palm oil." [5]

"This assessment should be applied to other monoculture agrofuels plantations. We encourage other banks to follow the World Bank's step and review such investments," said Friends of the Earth International's Torry Kuswardono.

This was the second blow to the agrofuels sector this week. On Wednesday, Friends of the Earth International welcomed the banning by the UK Advertising Standards Authority of an advert by the Malaysian Palm Oil Council claiming palm oil is "sustainable". This was the result of an earlier complaint filed by Friends of the Earth International. [6]

A note on agrofuels

Friends of the Earth groups from Indonesia to Colombia have fought for years for an end to destructive large- scale palm oil plantations and their financing. The large- scale expansion of palm oil plantations is responsible for the destruction of forests and peatlands, high carbon dioxide emissions, and land grabs from indigenous peoples.

Palm oil is prominent not only in the food and cosmetics industry, but is increasingly used as a biodiesel, despite its substandard environmental record. European and US mandatory targets for the use of biofuels are a major driver behind the unsustainable expansion of oil palm plantations.

Friends of the Earth International strongly opposes the use of edible oils for energy purposes, and denounces agrofuels such as palm oil as a false solution to climate change.