Big moves by international investors this week clearly demonstrate the potential risk of investing in contested land. HSBC Malaysia could be the first foreign bank to scale down operations in the Malaysian province of Sarawak. Chain Reaction Research previously analyzed what we term the “Sarawak Boomerang” effect, in which Sarawak commodity producers saw their own stock prices fall after openly criticizing responsible sourcing policies from commodity traders.

HSBC, Manulife Financial, and other financial institutions recently came under fire for connections to the Taib family, a political family in Sarawak accused of multiple accounts of cronyism and illegal logging. In response, HSBC it would no longer do business with Taib family and possibly all of Sarawak. Sarawak-based commodity producers will likely continue to struggle with sustainability and financial risk due to the unclear governance of their land.

Meanwhile, consumer companies continue to adopt no-deforestation commitments. This week, Johnson & Johnson announced that palm oil suppliers must meet no-deforestation criteria, starting now. Traders sourcing from places like Sarawak or other areas with contested land may face problems with market access.