The Chain: Mizuho and Mandiri Replace Rabobank, Citigroup and Standard Chartered for Indofood Credit Facilities


August 2, 2019

Indofood Sukses Makmur’s (Indofood) financial statements for 1H19 show that Citigroup, Standard Chartered and Rabobank no longer offer credit facilities to the company. Both Rabobank and Citigroup have reportedly cut ties with Indofood because of sustainability concerns at its subsidiary Indofood Agri Resources (IndoAgri) and related entities. Combined, the three banks provided credit facilities of USD 118 million. This amount represents approximately 3 percent of all credit facilities available to Indofood in the first quarter of 2019.

Indofood’s half-year figures suggest that the company has been able to secure additional credit lines with Japanese Mizuho Financial and Indonesian Bank Mandiri, both of which have longer-standing ties to the company. Mizuho added approximately USD 44 million to its existing credit lines, and Mandiri approximately USD 41 million. Contrary to Citibank, Standard Chartered and Rabobank, these two replacement lenders do not have adequate forest-risk sector policies.

*Figures presented in INR and JPY converted to USD using exchange rate of 1 August 2019. Source: Indofood 1H19 interim consolidated financial statements

The change in Indofood’s financing structure comes months after it withdrew its membership of the Roundtable for Responsible Palm Oil (RSPO). The withdrawal was a direct response to the suspension of Indofood’s subsidiary PT Salim Ivomas Pratama (SIMP) over violation of RSPO standards and Indonesian labour laws. The complaint against SIMP was filed by the Indonesian Labour Rights Association (OPPUK), the International Labour Rights Forum (ILRF) and Rainforest Action Network, which has been running a long-standing public campaign on Indofood.

With the RSPO withdrawal, Indofood no longer complied with Citigroup’s Environmental and Social Policy Framework or Rabobank’s Palm Oil Policy. Citigroup’s Palm Oil Standard requires all its palm oil clients to “become members of the RSPO and commit to a time-bound action plan to achieve RSPO certification within 5 years.” The termination of Indofood’s credit facilities may have been a direct result of Indofood’s non-compliance with these policies.

Rabobank has confirmed to CRR that it stopped financing Indofood, but refrains from commenting further on individual clients. Under its Palm Oil Policy, Rabobank  expects its clients to “commit to achieving compliance with the principles and criteria of the RSPO; commit to achieving RSPO certification or verification against the RSPO principles and criteria based on a time bound plan; not be involved in palm oil operations in areas designed as primary forest, national or international legally protected or preserved areas or in any area required to maintain high conservation values since 7 October 2001; commit to achieving No Deforestation, No Peat, No Exploitation (NDPE).”

Standard Chartered, meanwhile, has not commented publicly on Indofood, but the bank requires clients to be members of the RSPO. In its sustainability policy, the banks says, “We will only provide financial services to clients who have RSPO membership at the parent or subsidiary level, and achieve 100 percent RSPO certification of owned or managed units of production, within 5 years – applicable to Producers.”

The withdrawal of these three banks are a continuation of a longer trend of companies disassociating themselves from Indofood, IndoAgri and related entities. PepsiCo suspended both direct and indirect purchases of palm oil from IndoAgri in 2018, including volumes sourced by its joint venture with Indofood. Nestlé ended its joint venture with Indofood in September 2018. Other brands such as Hershey’s, Kellogg’s, General Mills, Unilever, and Mars have also stopped sourcing palm oil from IndoAgri, although both Unilever Indonesia and Procter & Gamble Operations Indonesia are reported as clients of Indofood. Palm oil traders/refiners including AAK, Apical, Bunge, Golden Agri-Resources, Louis Dreyfus, Musim Mas,  and Wilmar also report suspending sourcing from IndoAgri. The Norwegian Government Pension Global Fund, the largest sovereign wealth fund in the world, divested from Indofood in 2016 amid concerns about the production deforestation-linked palm oil.

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